Samruk-Kazyna National Welfare Fund Investment opportunities

Samruk-KazynaNational Welfare Fund

Investment opportunities

July 2010

Samruk-Kazyna Invest

Samruk-Kazyna

Overview

• National Welfare Fund consolidates key state assets in more than 400 subsidiary

companies

• Key player of the industrial and innovation development program

• Effective tool in implementation of the Anti-crisis program:

– primary role in stabilization of financial sector by means of direct participation in

4 largest commercial banks of the country

– primary role in stabilization of the real estate market

– direct support of the small and medium size businesses

– manages mortgage refinance program

Main objectives

• Achieving sustainable growth of state economy

• Promoting modernization and diversification of state economy

• Increasing the effectiveness of the holding and all of its affiliates

• Promoting and implementing large-scale investment projects

2


Samruk-Kazyna

Main assets

3

Sector Participation in companies DescriptionAssets, end of 2009

$ mln

Oil & Gas KazMunayGas National oil & gas company 34 100

Transportation Kazakhstan Temir Zholy National railway operator 6 650

Air Astana National carrier 211

Communications Kazakhtelecom National telecommunication company 2 316

KazPost National post operator 235

Power Samruk-Energy National power generating company 1 490

KEGOC National electricity grid operating company 1 282

Financial Development Bank of Kazakhstan Development bank 2 519

Kazyna Capital Management Equity funding 366

BTA, Kazkommertsbank, Halyk Bank, Alliance Bank

Commercial banks 53 179

Mining Kazatomprom Nuclear industry 2 614

Tauken Samruk Mining industry 8 000

Chemical & Pharmaceuticals

United Chemical Company National chemical company 16 433

SK Pharmacy National medicine and medical equipment distribution company

3 240


4

Oil & Gas

Overview• Oil and gas sector – 30% of Kazakhstan’ s GDP• Proved oil reserves - 6.5 bn tons• Gas reserves – 7 trillion cubic meters (3.9% of world reserves)• The production of oil in Kazakhstan has increased by 52% (2002-2009) while the

production of gas has increased by 37% in the same period

Samruk-Kazyna participation in the sector

KazMunayGas - vertically integrated national oil and gas company

Development perspectives

• Production growth due to field developments (Kashagan, Khvalynskoye, Block N etc.)

• Transport infrastructure development – launch of Trans-Caspian Transportation System, “Kazakhstan-China” pipeline’s extension, construction of “Beineu-Shymkent” gas pipeline, Aktau port’s development

• Development of local refinery capacities up to 17 mln tons / processing upgrading

• Development of petrochemical branch

Investment opportunities*

•Atyrau Oil Refinery - Oil deep processing Complex construction ($1.1 bn)

•Pavlodar Oil Refinery ($1 bn)

•Construction of petrochemical plant in Atyrau ($6.3 bn)

*More information about investment projects – in annex

KPO16%

KMG12%

Tengiz Chevroil

29%

Others28%

CNPC 8%

MMG7%

Major oil producers in Kazakhstan, 2009

2003 2004 2005 2006 2007 2008 2009

0

20

40

60

80

5159 61 65 67 71 76

Oil production in Kazakhstan, mln.-tons

2006 2007 2008 2009

0

5

10

15

2014

1719 18

Gas production in Kazakhstan, bn cubic meters


5

Power

Current trends

• Considerable gap in electricity supply between energy excessive northern regions of Kazakhstan and energy-dependent southern regions of the country

• Local production capacities are depreciated by almost 70%

Competitive advantage

• Access to low-cost fuel due to large local reserves of coal, oil and gas

• Opportunity to develop renewable energy resources

Development perspectives

• Construction of 6 new thermal power plants (coal or nuclear) until 2030

• Construction of new hydropower plants


Samruk-Energy - operates major power plants in Kazakhstan

KEGOC - operates the national power grid, owns and operates all main and

interregional transmission lines and master substations across the country


•Balkhash thermal power station ($2.4 bn)

2006 2007 2008 2009

66

68

70

72

74

76

78

80

82

72

76

8078

72

7679 78

Consumption Production

bn k

Wth

2010F 2015F 2020F 2030F

-

20

40

60

80

100

120

140

160

180

200

95 125

140 173

99 130

145 180

Consumption Production

bn k

Wth

Electricity consumption in Kazakhstan (forecast), bn kWth

+25%+60%+76%

Pessimistic

Basic

Optimistic

9878,4

125138

2009 2024


6

Overview

• Strategic geographical location

• High dependence of the economy on transport infrastructure


Kazakhstan Temir Zholy - national company, monopoly railway operator

Air Astana - leading domestic airline

Kazakhtelecom - major player on the telecommunication market

Investment opportunities• Production of passenger rail carriers ($60 mln)

• Construction of the railway Zhetygen – Korgas (border with China) ($1.1 bn)

• Construction of the railway Uzen – border with Turkmenistan ($433 mln)

Transportation & Telecommunications

Freight turnover in Kazakhstan, bn tkm

2007 2008 2009

320 330 340 350 360 370 380

350

370

337

Passenger turnover in Kazakhstan bn pkm

2007 2008 2009

120 122 124 126 128 130 132

124

127

130

Routes in KZ Length (thsd km)

Railway 14,2

Auto routes 93,6

Air ways 61

Water routes 3,9


7

Overview

• Large reserves of Uranium, Lead, Zinc, Gold, Coal

• 2008: production of ferrous metals - $4.5 bn

production of precious and non-ferrous metals – $ 4.4 bn

• Share of metals and mining sector in total industrial production of Kazakhstan – 20%

• Objective – production of high value added products


Tauken-Samruk - national mining company

Kazatomprom - national nuclear company, implements the industry development program of Kazakhstan aimed at creation of a vertically integrated complex of nuclear fuel cycle


• Upgrade of cast iron plant ($457 mln)

• Steel rails production ($309 mln)

• Polycrystalline production ($388 mln)

Metals & Mining

Natural resource

World Rank by

reserves production

Uranium 2 3

Lead 2 11

Zinc 2 8

Chromium 2 2

Manganese 3 6

Gold (ore) 4 10

Iron 5 12

Copper 5 10

Coal 8 10

Australia34%

Kazakhstan21%

Canada14%

South Africa 9%

Namibia7%

Russia5%

Brazil 4%

USA3%

Uzbekistan3%

World uranium reserves (shares)


8

Chemicals

Resources

• Kazakhstan is 11th in the world in mineral production

• Second largest proved supplies of sulfuric acid in the world

• Kazakhstan possesses 1/3 of proved phosphorite reserves in CIS and over 5% of world reserves

Current trends

• Growing demand for fertilizers in Russia and China

• Annual chemicals production grew 2,6 times in 2004-2008 years period

• Local companies produce phosphorus, sodium bichromate, phosphoric fertilizers, nitric fertilizers, chromic compounds, plastics, tires, general mechanical rubber goods

• There is a potential of products diversification (organic and nonorganic chemical products, special chemicals)


United Chemical Company - consolidates state assets in chemical sector


• Mineral fertilizers – Kok-Dzhon ($1.9 bn)• Construction of phosphorite fertilizers plant ($600 mln)• Sulphuric Acid production ($65 mln)

2004 2005 2006 2007 2008

0.00.20.40.60.81.01.2

Chemical sector’s share in the total volume of industrial production of

Kazakhstan (%)

2003 2004 2005 2006 2007 20080

1020304050607080

17.9

33.524.9

14.6

40.9

73.2

Export of mineral resources of Kazakhstan (mln $)


Pharmaceuticals

Current trends

• Market size – around $900 mln

• Growing local consumption – 20% average annual growth

• Local production is growing, but covers only 10% of domestic market

• 90% of consumed pharmaceuticals are imported


SK Pharmacy - national medicine and medical equipment distribution company

Key advantages

• Growth of domestic production

• Transparency in government purchases

• Demand for improved quality of products


• Construction of pharmaceuticals plant in Astana and expansion of production in Shymkent ($81 mln)

• National medicine and medical equipment distribution company ($80 mln)

9

2003 2005 2008 2009f

0

200

400

600

800

1000

Import Production

Medicines’ consumption in Kazakhstan, $ mln

2004 2005 2008 2009f

0

200

400

600

800

1000

Pharmacies Public purchases

Consumption structure, $ mln


Annex

Investment projects

10


Sector Project Cost, $ mln Investment opportunity Period/ launch

Oil & Gas Atyrau Oil Refinery Oil deep processing Complex construction

1 100 Debt financing 2011-2014

Pavlodar Oil Refinery 1 000 Debt financing 2011-2013

Petrochemical plant in Atyrau 6 300 Debt financing / equity 2009-2012

Power Construction of Balkhash thermal power station 2 400 Debt Financing 2010-2014

Transport Rail passenger carriers 60 Debt financing 2010-2012

Construction of the railway Zhetygen – Korgas (border with China)

1 100 Debt financing 2009-2012

Construction of the railway Uzen (Western Kazakhstan) – border with Turkmenistan

433 Debt financing 2009-2012

Metals & Mining Cast iron plant 457 Debt financing 2010-2012

Steel rails 309 Debt financing 2010-2013

Production of polycrystalline silicon 388 Debt financing / equity 2010-2013

Chemistry Mineral fertilizers (Kok-Dzhon) 1 900 EquityDebt financing

2018

Phosphorite fertilizers 600 Debt financing / equity / equipment / technologies

2010

Sulphuric Acid production 69 Debt financing 2010-2012

Pharmaceuticals Pharmaceutical plant 81 Debt financing / equity / technologies 2009-2011

National medicine and medical equipment distribution company 80 Debt financing / equity / expertise 2009-2010

Total 16273

List of projects for potential investors

11


Atyrau Oil RefineryOil deep processing Complex construction

Background

• Total project cost: $1.1 bn

• Capital structure: equity - $1 mln, debt - $1,099 mln

• Implementation period: 2011-2014

Key project advantages

• High value added production:

– Increase in processing depth up to 82%

– Production of high-octane refined products

•High ecological standards: Euro - V

•Domestic market’s share increase for high-octane oil products

• Manpower: construction – 2507, maintenance - 391

Investment Opportunities

• Debt financing

12


Pavlodar Oil Refinery

Background

• Reconstruction and modernisation of Pavlodar Oil Refinery to increase annual production capacity to:

– motor fuel – 2 million tons

– jet fuel – 132 thousand tons

– diesel fuel – 2 million tons

– fuel oil – 252 thousand tons

• Total project cost: $1 bn



• High value added production

– Production of high-octane refined products

• High ecological standards: Euro - III, IV

• Domestic market’s share increase for high-octane oil products

• Manpower: construction – 3100


• Debt financing

13


Petrochemical plant in Atyrau

Background

• Construction of a petrochemical plant with annual production capacity:

– 1 stage: polypropylene 800 thsd tons

– 2 stage: polyethylene 450 thsd tons


• Capital structure: 27% equity, 73% debt




• High profitability margins (over 50% EBITDA, over 20% net income margin)

• Manpower: construction – 12000, maintenance – 800


• Debt financing

• Equity

14


15

Balkhash thermal power station

Background

• Construction of one 1320 MWt module is under consideration

• Possible further extension up to 4000 MWt


• Capital structure: equity 30%, debt 70%

• Implementation period: 2010 – 2014


• Meet the demand for electricity in Almaty region

• Low production costs


• Debt financing


Rail Passenger Carriers

Background

• Production of rail passenger carriers

• Total project cost: $60 mln

• Quantity: 150 units per year



• Creation of carrier assembling line to meet the growing demand in passenger carriers on the domestic market


• Debt financing

16


Construction of the railway Zhetygen - Korgas

Background

• Construction of a railroad connecting Almaty region with the Chinese border in Korgas

• Total length – 293 km

• Passenger and freight transportation


• Capital structure: 45,8% equity, 54,2% debt



• Strategic infrastructure concession project

• Risks shared with public authorities


• Debt financing (45%)

17


Construction of the railway Uzen – border with Turkmenistan

Background

• Construction of the new railway road near Caspian sea (Uzen-Gyzylgaya-Bereket-Etrek-Gorgan) with further link with Russian railroad network

• Total length – 670 km, Kazakhstan’ s part – 138,5 km

• Passenger and freight transportation


• Capital structure: 47,2% equity, 52,8% debt



• Strategic infrastructure concession project

• Risks shared with public authorities


• Debt financing (31%)

18


Cast iron plant

Background

• Construction of metallurgy plant SBS Steel for production of cast iron in Aktobe region

• 500 thsd tons of granulated iron annually



Key advantages

• Strengthening export potential of Kazakhstan

• Production of high quality iron based on the unique patented KOBE Steel technology

• Manpower: construction – 1800-2300, maintenance - 500


• Debt financing

19


Steel Rails Production

Background

• Production of steel rails and rolled steel at KSP Steel metallurgy plant

• 200 thsd tons annually



• Implementation period: 2010 -2013

Key advantages

• Meet the growing local demand



• Debt financing $247 mln

20


Production of polycrystalline silicon

Background

• Creation of silicon cluster on manufacture of mono/poly crystal ingots and silicon plates:

– 2500 tons of polycrystalline silicon





• Well-positioned to supply European and Asian markets

• Competitive advantage via long-term access to low-cost raw materials


• High profitability margins (sales of $594 mln a year)

• Competitive advantage due to low transportation costs

• Advanced stage of project planning

• Feasibility studies and technical specifications completed by leading consultants

• Development Bank of Kazakhstan commenced $150 mln loan guarantee for plant construction


• Debt financing $50 mln

• Equity

21


Mineral Fertilizers Production

Background

• Construction of mineral fertilizers producing plant combined with Kok-Djon (Aral-Tobe and Kisik-Tobe sites) and Gimmelfarbskoe deposits

• Production of mineral fertilizers -1 mln tones

• Products: potassium phosphate, NPK fertilizers, yellow phosphorus, phosphoric acid, reactive compounds


• Expected launch: 2018


• Availability of natural resources

• Low production costs

• Meeting 100% local demand on mineral fertilizers of high quality and exporting

• Manpower: 5000


• Equity

• Debt financing

22


Phosphorite Fertilizers Production

Background

• Construction of phosphorite tails and low-grade ore processing plant

• Production capacity of 1 mln tons of phosphorite fertilizers annually


• Expected launch: 2010


• Availability of unique technology to produce phosphorite fertilizers from low-grade ore

• Large reserves (over 500 mln tons) of low-grade ore

• Proximity and access to markets in China

• Strong competitive advantage – the lowest production cost

• Ability to produce highly-enriched fertilizers and develop production of NPK fertilizers jointly with KazAzot


• Debt financing

• Equity

• Equipment & Technologies

23


Background

• Reconstruction of sulphuric acid plant on the base of SGHK Ltd aiming to provide Kazatomprom’s uranium producing entities with sulphuric acid

• 180 thsd tons annually



• Implementation period: 2010 - 2012

Key advantages

• Low cost of raw materials

• Manpower: construction – 300, maintenance – 141


• Debt financing

Sulphuric acid production

24


Background

• Construction of a pharmaceuticals plant in Astana and expansion of current production of ChimPharm (Shymkent)


• Capital structure: $30 mln- equity, $51 mln – debt

• Implementation period: 2009 - 2011

Key advantages

• Growing local demand

• Growing local production on the Kazakhstan’s pharmaceutical market from 10% to 25%

• Creating innovative, science intensive and export oriented production (turnaround)



• Equity

• Debt financing

• Technologies

Pharmaceuticals plant

25


Background

• Creation of integrated medicine and medical equipment distribution system

• Total project cost: $ 80 mln

• Expected launch: 2009–2010


• Growing market

• Development of local pharmaceutical industry

• Transparency in government pharmaceutics procurement, effective system of transport and logistics


• Debt financing for a logistics system construction

• Medications supply to Kazakhstan

National medicine and medical equipment distribution company

26


Contacts:

Republic of Kazakhstan

Astana , Orynbor street 10, «Kazyna Tower»

[email protected]

www.samruk-kazyna.kz

mailto:[email protected]

http://www.samruk-kazyna.kz/

Documents

Samruk-Kazyna National Welfare Fund Investment opportunities