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KMG is selling out its assets and facilities

21 november 2012, 13:07
0
KazMunaiGas headquarters in Astana. Photo by Danial Okassov©
KazMunaiGas headquarters in Astana. Photo by Danial Okassov©
KazMunaiGas National Company will sell around 20 non-core assets and 349 non-core facilities within several years, i-news.kz reports citing Managing Director and board member of Samruk-Kazyna National Welfare Fund Nurlan Rakhmetov.

"The program of restructuring of assets, especially non-core ones, has kicked off. It is understandable that the issue is quite long and complicated. It is impossible to get rid of all non-core assets in one day. That's why we have a plan to sell poorly performing and non-core assets over several years," Rakhmetov said at the press-conference.

"KazMunaiGas plans to sell aroung 20 non-core assets - when I say "an asset", I mean a company or an organization - and around 349 non-core facilities, like buildings, hotels and sanatoriums. The total cost these assets and facilities stands at around 95 billion tenge ($633 million)," he said.

According to him, this value is a balance cost of these assets. "If we sell or auction them, the market can either raise and lower their cost, but anyway, we plan to sell these assets and this will also increase our operating earnings," Rakhmetov stressed.

He admitted that "until recently many companies of the Fund were constructing, purchasing or selling non-core assets". "This used to happen indeed. Now we have banned it. Just think about it, why why would a production company need hotels, especially abroad? If they give up these projects they will generate serious profits.

"The companies are currently banned from implementing investment projects with the internal rate of return less than the capital of these companies. The cost of the company's capital is different for every company. It varies from 11 to 16%, but the companies should not implement the projects with the rate of return less than their capital cost. If the company implements an investment projects with low returns, this lowers the company's cost; its capital," Rakhmetov stressed.

The Fund's representative emphasized that this provision does not apply to social projects implemented by the Fund's companies. "Major social projects aimed at development of the economy (construction of railroads, infrastructure projects, construction of gas pipelines) have low returns. We will implement them, but there is one condition here: if we implement such projects, the government that is our shareholder, undertakes to reimburse our expenses from the state budget," he noted.

"In case the budget has no such capacities, then our expenses for implementation of such projects will be considered part of the dividends distributed to shareholders; this way they don't increase our expenses and don't lower our returns. Otherwise, implementation of low-return projects (without compensation) will lower our capital cost," Rakhmetov said.

Besides, he noted that Samruk-Kazyna has cut sponsorship 3-fold this year. "Sponsorship made around 60 billion tenge ($400 million) in 2011, this year it is expected to total at around 20-40 billion ($133-266 million)," Managing Director of Samruk-Kazyna declared.

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