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Almas Chukin

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Almas Chukin

  1. 1. Kazyna Capital Management Leveraging private equity opportunities in Kazakhstan Kazakhstan-US investment forum 23 November 2009, New York
  2. 2. Kazakhstan – one of the dynamic economies in the region Key macroeconomic indicators of Kazakhstan Source : IHS Global Insight (August 2009) , National Bank of Kazakhstan <ul><li>Development of petroleum, natural gas, and mineral extraction has attracted most of the foreign investment in Kazakhstan since 1993 growing in average on 20% yoy and accounts for majority of the nation's industrial output; </li></ul><ul><li>Kazakhstani economic growth slowed down due to the global economic recession, however analyst expect gradual recovery to pre crisis levels. </li></ul><ul><li>Kazakhstan has promising longer-term economic prospects, underpinned by a dynamic commodities sector, a relatively strong government fiscal position, and a trend of rising household wealth. </li></ul>Forecasted real GDP growth for Y2010 (%) Source : International Monetary Fund forecast, National Bank of Kazakhstan Source : IMF, Regional Economic Outlook database; and Microsoft Mapland 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real GDP (% change) 9,7 10,7 8,9 3,2 0,1 2,4 2,5 2,9 3,1 Nominal GDP (US$bln.) 57,1 81,0 104,9 132,2 101,3 114,6 126,4 138,3 151,6 Nominal GDP Per Capita (US$) 3 753 5 261 6 801 8 513 6 542 7 365 8 026 8 589 9 237 Consumer price Index (% change) 7,6 8,6 10,8 17,0 8,1 6,6 5,6 5,0 4,5 Exchange rate (KZT/US$, end of period) 133,7 126,8 120,3 120,8 149,9 144,1 142,5 142,8 142,5
  3. 3. Solid fundamental economic position of Kazakhstan Key facts Foreign Direct Investments to Kazakhstan (US$mln) Source : www.cia.gov, National Bank of Kazakhstan Source : National Bank of Kazakhstan <ul><li>Kazakhstan benefits from close economic ties with China, Russia and Central Asia; </li></ul><ul><li>Establishment of the Customs union between Kazakhstan, Russian and Belarus in 2010 creates a great potential market for investors in Kazakhstan; </li></ul><ul><li>Kazakhstan is a regional leader, and economic driving force in the Central Asia with 69.7% of GDP of the region. </li></ul>Regional Leadership International reserves $20.8 billion Market value of publicly traded shares $31.08 billion Oil reserves 1.429 million bbl/day (World rank 20th) Oil proved reserves 30 billion bbl. (World rank 11th) Natural gas production 33.38 billion cu m (World rank 24) Natural gas reserves 2.407 trillion cu m (World rank 13) Stock of foreig n direct investment (2008) 55.63 billion USD Industries O il, coal, iron ore, manganese, chromite, lead, zinc, copper, iron and steel; tractors and other agricultural machinery, electric motors, construction materials Unemployment rate 6.6%
  4. 4. Investment Opportunities in Kazakhstan <ul><li>great land resources – 20.8 million </li></ul><ul><li>hectares of farmland; </li></ul><ul><li>over 165 million hectares of </li></ul><ul><li>pastures ; </li></ul><ul><li>transport infrastructure in place for </li></ul><ul><li>efficient transportation. </li></ul>Agriculture Textile <ul><li>fundamental industry factors in </li></ul><ul><li>place – qualified labor, processing </li></ul><ul><li>factories and logistics; </li></ul><ul><li>full governmental support of the </li></ul><ul><li>industry through significant effective </li></ul><ul><li>tax breaks, customs tariff </li></ul><ul><li>preferences; </li></ul><ul><li>access to large markets for textile </li></ul><ul><li>products – Russia and E . Europe; </li></ul><ul><li>close to the major cotton producers- </li></ul><ul><li>Tajikistan, Uzbekistan, </li></ul><ul><li>Turkmenistan. </li></ul>Infrastructure <ul><li>growing volume of freight, fuelled by </li></ul><ul><li>increasing demand for oil and gas </li></ul><ul><li>and other metal products; </li></ul><ul><li>link between China and West </li></ul><ul><li>Kazakhstan will need to invest US$ </li></ul><ul><li>111 bn. in road, rail, ports and </li></ul><ul><li>airports by 2020. </li></ul>Telecommunications <ul><li>liberalization of telecom industry; </li></ul><ul><li>growing IT and internet </li></ul><ul><li>penetration in the Republic of </li></ul><ul><li>Kazakhstan resulting in increasing </li></ul><ul><li>demand for broadband ISP </li></ul><ul><li>services . </li></ul>Power generation <ul><li>as income/quality of life expectations </li></ul><ul><li>and infrastructure and hydrocarbon </li></ul><ul><li>projects increase, electricity </li></ul><ul><li>consumption will rise; </li></ul><ul><li>total of US$22 billion investment, by </li></ul><ul><li>2015, from public and private sources </li></ul><ul><li>expected; </li></ul><ul><li>US$13 billion to be invested in </li></ul><ul><li>expansion of generation capacity and </li></ul><ul><li>US$9 billion to be invested in </li></ul><ul><li>distribution and the national grid. </li></ul>Metallurgy <ul><li>vast quantities of world-class base </li></ul><ul><li>and precious minerals and metals; </li></ul><ul><li>developed industry infrastructure; </li></ul><ul><li>close to fastest growing economies, the major consumer of metallurgic products. </li></ul>
  5. 5. Source : National Bank of Kazakhstan Growth in volume of second-tier banks lending in Kazakhstan <ul><li>no access to international capital </li></ul><ul><li>markets has led to decline in lending to </li></ul><ul><li>companies of the real sector of the </li></ul><ul><li>economy; </li></ul><ul><li>decline of purchasing power, production volumes and, as a </li></ul><ul><li>consequence, low valuations for the Kazakh companies; </li></ul><ul><li>excessive debt limits companies in their further growth opportunities. </li></ul>IRR to LP by vintage years Capital raised by PEF in USA ( US$ billion ) Meltdown years PEF returns and capital raising in USA * IRR *- Internal Rate of Return Source : Cambridge Associates, Venture Economics and Asset Alternatives . <ul><li>companies were developing primarily by the means of bank loans (debt to equity ratio - 92%); </li></ul><ul><li>open IPO market and interest of foreign investors to Kazakhstan based companies ; </li></ul><ul><li>less than 5 private equity funds (PEF) in Kazakhstan ; </li></ul><ul><li>timely governmental policy for establishing private equity market infrastructure . </li></ul>before 2007 from 2007 and 2008 2009 Impact of global financial crisis on private equity industry in Kazakhstan Meltdown years <ul><li>liquidity problems forced Kazakhstan companies to attract investments in equity capital, using particularly PEFs; </li></ul><ul><li>IRR of PEF is cyclical, meanwhile the highest level of return is achieved in periods of economic recession; </li></ul><ul><li>despite the difficult economic situation all agreements of KCM with its partners regarding establishment of PEF oriented on Kazakhstan remain in force; </li></ul><ul><li>there are more than 10 PEFs in Kazakhstan, 5 of which were established with participation of KCM. </li></ul>
  6. 6. 1 2 3 4 5 5 1 2 KCM capitalization by SWF Samruk-Kazyna 2 2 Investment of foreign partners in proportion of 3 to 1 to KCM investments . KCM Investments 3 PEF investment in the real sector companies of Kazakhstan 5 PEF payback of investment 4 Securing additional leverage, which allows to increase investment in portfolio companies . Kazakhstan companies in non-extracting industries International Financial Institutions SWFSamruk-Kazyna Foreign private equity investments attraction mechanism <ul><li>Foreign investors : </li></ul><ul><li>Institutional </li></ul><ul><li>Private </li></ul>Private Equity Funds Kazyna Capital Management (КСМ)
  7. 7. Reasons for creation and areas of activity Diversification of Kazakhstan economy . KCM <ul><li>Investment in following groups of investment funds : </li></ul><ul><li>Kazakhstan oriented funds </li></ul><ul><li>Global funds </li></ul><ul><li>Regional funds </li></ul><ul><li>Financing of the companies in the following sectors : </li></ul><ul><li>Electric power ( including alternative </li></ul><ul><li>power generation ) </li></ul><ul><li>Infrastructure </li></ul><ul><li>Small and medium enterprise </li></ul>
  8. 8. <ul><li>Ratio of investment volume attracted to the Republic of Kazakhstan on the volume of KCM commitments reached 2 .2 USD . </li></ul><ul><li>Target capitalization of PEF in the KCM’s portfolio reached US$ 2,8 bln ; </li></ul><ul><li>Number of seminars on private equity investments were organized by KCM together with international experts for the PE professionals of Kazakhstan . </li></ul><ul><li>Foundation of КСМ </li></ul><ul><li>7 March 2007 </li></ul>Major stages of Kazyna Capital Management work <ul><li>Established Funds </li></ul><ul><li>Aureos Central Asia Fund L.L.C. </li></ul><ul><li>Falah Growth Fund L.P. </li></ul><ul><li>Kazakhstan Growth Fund L.P. </li></ul><ul><li>Kazakhstan-Tajikistan Private Equity Fund JSC </li></ul><ul><li>Established Funds </li></ul><ul><li>Macquarie Renaissance Infrastructure Fund L.P. </li></ul><ul><li>CITIC Kazyna Investment Fund I L.P. </li></ul><ul><li>Wolfensohn Capital Partners L.P. </li></ul><ul><li>KCM established relationships with international and regional financial organizations like: European Bank for Reconstruction and Development, International Finance Corporation, CITIC Group, Wolfensohn & Co, Vnesheconombank, Renaissance Capital, Macquarie Group, etc. </li></ul>Results
  9. 9. Investment Portfolio of Kazyna Capital Management Fund Name Target capitalisation (mln. USD) Investment volume in Kazakhstan ( mln . USD) Investors Target industries Aureos Central Asia Fund L.L.C. 7 0 35 KCM, IFC , CDC , FMO, EBRD , DBJ SME (incl.: processing and food processing industry, information technology industry, pharmaceutical and other) Falah Growth Fund L.P. 600 240 KCM, IPIC, Ordabasy Corporation Oil and gas, power generation, financial sector, IT and other Macquarie Renaissance Infrastructure Fund L.P. 1000- 1500 200 -300 KCM, IFC , EBRD, Vnesheconombank, Macquarie Group, Renaissance Group Transport and power generation infrastructure (incl.: automobile and railroads, airports, ports, power supply sources and other) Wolfensohn Capital Partners L.P. 250 - KCM and other institutional investors Alternative energy, financial sector, retail Kazakhstan Growth Fund L.P. 125 87,5 KCM and EBRD Food production industry (production and packaging), primary extraction equipment and services, metallurgy, wood processing, textile CITIC Kazyna Investment Fund I L.P. 200 100 KCM , CITIC Capital Holdings, CITIC Group Transport infrastructure, financial sector, heavy industry, IT and other Kazakhstan-Tajikistan Private Equity Fund JSC 80 - KCM and gov . investment and property management committee Electric-power industry, infrastructure, extraction and processing of mineral resources, consumer goods industry, processing of agricultural products, tourism Total : 2 325 - 2 825 662,5-7 6 2,5
  10. 10. <ul><li>Participation in investment funds </li></ul><ul><li>Kazakhstan Corporate Recapitalisation Fund ; </li></ul><ul><li>Kazakhstan - Russian venture fund of nanotechnologies; </li></ul><ul><li>Agricultural Fund. </li></ul><ul><li>Implementation of Islamic Banking principles </li></ul><ul><li>Establishment of an Islamic Bank in Kazakhstan with participation of partners from the Gulf Counties . </li></ul>Kazyna С apital М anagement Investment Plans
  11. 11. <ul><li>Kazyna Capital Management </li></ul><ul><ul><ul><ul><li>291/3a Dostyk, ave. 2 nd floor </li></ul></ul></ul></ul><ul><ul><ul><ul><li>0500 5 0 , Almaty, Kazakhstan </li></ul></ul></ul></ul><ul><ul><ul><ul><li>tel.: +7 (727) 334 14 17 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>fax: + 7 (727) 3341418 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>e-mail: [email_address] </li></ul></ul></ul></ul>

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