Category Archives: Uncategorised

Kazmunaigas and KMG EP

JULY 22 2016 (The Conway Bulletin) — Kazakhstan’s oil and gas sector seems to be in a muddle with the corporate battle between Kazmunaigas, owned by the country’s sovereign wealth fund Samruk-Kazyna (90%) and the Central Bank (10%), and its London-traded upstream subsidiary, KMG EP.

The power struggle between the two seems complicated, but it’s not. Kazmunaigas’ covert intention is to increase its 57% stake in KMG EP because it wants to take more control of its profitable upstream business, especially now that oil prices are low.

KMG EP’s independent directors, on the other hand, want other minority shareholders to resist Kazmunaigas’ pressure. The alternative, according to them, will be a de-listing from the London Stock Exchange, as independence would not be guaranteed.

Kazmunaigas has always said that its primary intention is not to buy out its subsidiary, but to change the terms through which the two companies interact, to smooth bureaucracy and make the businesses more agile.

But that’s not its real goal. If it was, it would have not have raised its initial offer to minority shareholders of $7.88/GDR to $9/GDR. And it would have not have made concessions on its corporate governance plans immediately after the first negative reaction from KMG EP’s independent directors.

If Kazmunaigas gets its way and buys out most of the minority shareholders, it may force independent directors to resign and the company to de-list from London’s GDR market.

For investors looking for a transparent sector to bet on, this won’t be good news.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Tajikistan confiscates Iranian products

DUSHANBE, JULY 15 2016 (The Conway Bulletin) — The authorities in Tajikistan have banned the import of dozens of Iranian products, an apparent retaliation for a visit made by Tajik opposition leader Muhiddin Kabiri to Tehran last year.

Mr Kabiri is the exiled leader of the Islamic Renaissance Party of Tajikistan which had once been the biggest opposition party in the country. It was hounded and broken up last year with most of its leadership imprisoned.

Tajk President Emomali Rakhmon has said that that he wants Mr Kabiri extradited from Europe, where he now lives. Instead, Iran’s leadership invited him to a theology conference last year in Tehran where he met with Iranian religious leader Ayatollah Ali Homanai.

Now, in a possible retaliation, Tajikistan’s government standards agency has said that many Iranian imports do not meet their health standards and don’t carry product descriptions in Tajik. They have been banned.

In Dushanbe, the Tajik Agency for standardisation, metrology, and certification said it had seized 664 tonnes of good from Iran this year.

Ibodullo Kubodiyon, the head of the agency, said at a news briefing that some Iranian companies have stopped importing products to Tajikistan.

“Food products imported by these companies did not meet the established TajikStandart requirements, the products also did not have proper labelling. In particular, there was no description of the goods in Tajik language,” he said.

Tajikistan and Iran have generally made awkward allies. They share cultural and linguistic similarities but their approach to religion differs.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kyrgyzstan-operated Centerra finalises investments

JULY 20 2016 (The Conway Bulletin) — Canadian miner Centerra Gold said it finalised a financing deal with three investment banks to partially fund its takeover of Thompson Creek, a US-based miner. Centerra will receive 185m Canadian dollars ($142) from BMO Capital Markets, Credit Suisse Securities Canada and Scotiabank. Centerra Gold’s main asset is the Kumtor gold mine in Kyrgyzstan.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Amsterdam court orders seizure of assets linked to Uzbek President’s daughter

JULY 20 2016 (The Conway Bulletin) — A court in Amsterdam ordered the seizure of €123m ($135m) of assets linked to Gulnara Karimova, the eldest daughter of Uzbek president Islam Karimov, as part of an ongoing global investigation into bribes paid by major telecoms firms looking to enter the Uzbek market.

Gibraltar-registered Takilant, the company linked to Ms Karimova that took bribes to award telecoms licences in Uzbekistan, had its assets frozen in Sweden in 2012/13 in a related court case but this is the first time a Western court has directly confiscated them.

The Dutch ruling targeted cash that Amsterdam-based Russian telecoms operator VimpelCom and Sweden’s Telia Company paid Takilant between 2004 and 2013.

In its decision, the court said that Takilant demonstrated “a way of doing business that is socially extremely destabilising.”

The latest ruling aggravates a corruption scandal that has sunk Uzbekistan’s already weak reputation as a place for Western businesses to operate.

It also deals another blow to Ms Karimova’s profile in Uzbekistan, where the self-styled fashion designer and diplomat was once touted as a potential president. She has been under house arrest in Tashkent for two years and her associates are in prison for various financial crimes.

With the confiscation of Takilant’s assets, the courts start to close in on reclaiming some of the millions of dollars paid to Ms Karimova. Previously, courts had only managed to fine European telecoms companies for their illegal practices.

In February, a US court ruled that VimpelCom, listed on the New York Stock Exchange, was guilty of bribing Takilant and fined it $795m. Another US prosecutor is currently trying to freeze $550m of Takilant’s assets.

Sweden’s Telia has also said at it has put aside millions of dollars to pay fines linked to bribery charges.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazakh court jails IS activist

JULY 19 2016 (The Conway Bulletin) — A court in Petropavlovsk, in northern Kazakhstan, sentenced a man to seven years in prison for joining the IS extremist group. According to the court, the man travelled to Syria in 2012. Warning of a growing IS recruitment drive, Kazakhstan’s security services have said they will intensify their clampdown on Islamic extremism.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Energy company in Azerbaijan loses revenues

JULY 15 2016 (The Conway Bulletin) — SOCAR Trading, the Geneva-based subsidiary of Azerbaijan’s state owned energy company, posted lower revenues in 2015 and warned that it expected a $9m loss from debt accumulated by Samir, the operator of Moroccan refinery Mohammedia. A Moroccan court declared Samir bankrupt for piling up billions of dollars of debt. SOCAR Trading revenues were down 42% in 2015 to $22.65b.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Tajikistan and Uzbekistan downgrade flights to Pakistan

JULY 19 2016 (The Conway Bulletin) — Both state-owned Uzbekistan Airways and Tajikistan’s Somon Air have downgraded their links to Lahore, in eastern Pakistan, citing security concerns and dwindling consumer interest.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Stock market: Tethys Petroleum, Olisol

JULY 22 2016 (The Conway Bulletin) — Tethys Petroleum’s share price has fallen steadily in the past four months, as the Olisol share buy-in becomes a reality. This week it closed at 1.63p/share in London on Thursday, down 6.9% on the previous week.

The Guernsey-based oil and gas company operates chiefly in Kazakhstan and Tajikistan. In May it reached a final financing agreement with Kazakhstan-based Olisol, which is poised to buy a 42% stake in the company once the deal becomes concrete.

Last week, the company announced the appointment of a new Chief Commercial Officer, Kazakhstan-born Alexander Skripka, who is also a director and shareholder of Olisol.

Mr Skripka had previously worked for state-owned Kaztransgas, the main gas distributor in the country. The link with a state-owned company is perhaps a sign of just how embedded Olisol is in the elite circles of Kazakhstan’s oil and gas sector.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Briefing: Region’s economies sputter into life

JULY 22 2016 (The Conway Bulletin) — >>Malaise, downturn recession. What exactly going on in Central Asia and the South Caucasus?

>>All countries in the region are either growing slower than last year or, in some cases, their economies are even shrinking. The crisis is regional, although each country has shown its own specific problems.

>>This is the region-wide problem. I can see but what caused it?

>>The US dollar strengthened so much in 2014 that it triggered a sharp drop in oil and commodity prices. This pulled dollars away from Emerging Markets, like our own patch. As commodity prices sank, Russia fell into a crisis that quickly turned into a recession. The depreciation of the rouble cut the value of salaries earned by migrant workers, triggering a slowdown in remittances to Central Asia and the South Caucasus.

>>Okay, but oil prices picked up again since the 13- year low point in January. Isn’t that good for energy exporters in Central Asia and the South Caucasus?

>>Higher oil prices have helped state-owned oil companies to relax their emergency mode, but they’re still too low to justify the region’s most expensive projects. Think of the Kashagan oil project in Kazakhstan’s sector of the Caspian Sea, or the upgrade of Azeri Chirag-Guneshli oil project in Azerbaijan. Plus there are negative signs for transparency over the re-organisation of government companies and structures in the energy sector in Kazakhstan and Turkmenistan.

>>And what about the other commodities, such as gold and aluminium?

>>Gold is a big component of Kyrgyzstan’s GDP as it depends on the performance of the Kumtor gold mine in the east of the country. This year, operational problems and corporate battles have slowed production, which has significantly hit Kyrgyzstan’s growth figures. It now could slip into a recession. Tajikistan, on the other hand posted a promising 6.6% GDP growth in the first half of 2016 and state-owned smelter TALCO increased aluminium production. But these numbers should be read with caution. TALCO also said that it is currently operating at a loss, as its production costs are 25% higher than market prices.

>>Right, so is it all bad?

>>Not necessarily. Dollarisation, as Georgia’s Central Banker said this week, is still a problem across the region and the currencies continue to be weak. But despite some devaluations and depreciations, most of them have kept steady in 2016, which is a sign that governments want to keep their economies stable and will spend their reserves to prop them up.

>>And for companies looking to do business in the region, how bad is it?

>>If in 2015 we saw scores of international companies running away from projects in Central Asia and the South Caucasus, this year we’ve seen promising developments, such as the final investment decision for the expansion of the Tengiz oil- field in Kazakhstan and the signing of the contract for the construction of the Rogun dam in Tajikistan, both multibillion-dollar commitments. French hypermarket Auchan has also opened up its long-awaited store in Dushanbe. Perhaps confidence is returning or at least a sense of “let’s just get on with it”.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Azerbaijan’s energy company production falls

JULY 18 2016 (The Conway Bulletin) — Azerbaijan’s state-owned energy company SOCAR posted a fall in oil and gas production data in June, in line with this year’s downward trend. In H1 2016, SOCAR produced 3.7m tonnes of oil and 3.2b cubic metres of gas, down 8.6% and 6.2% respectively. Sustained low oil prices, the sharp depreciation of the manat currency in December and a storm at a platform in the Caspian Sea which caused a fire and killed several people have all contributed to lower production.

ENDS

(News report from Issue No. 290, published on July 22 2016)