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The Times: Kazakh authorities may buy back shares on LSE of banks hit by squeeze

October 13, 2007
James Rossiter in Astana

Kazakhstan may buy back shares in some of its largest national companies listed on the London Stock Exchange, including Kazcommertsbank and Alliance Bank, as the country grapples with a financial crisis.

President Nazarbayev said yesterday that he had ordered his Government to consider intervening directly in international markets and he has instructed Kazakh authorities to offer $4 billion of emergency funding to the country’s banks that have been crippled by the global credit squeeze.

Kazcommertsbank, the country’s largest bank, and Alliance Bank, its third-largest, are the most likely to have shares snapped up either by the Government or by the Kaznaya fund, a state-owned investment vehicle.

Shares in Kazcommertsbank and in Alliance have fallen since mid-August, when the global freeze on short-term interbank lending set in. Kazakh banks had become heavily reliant on short-term funding and have run into difficulties as overseas lenders have pulled the plug on them over the past two months.

Industry sources in Astana, the republic’s capital, said that Kazcommertsbank was looking to tap into $500 million of emergency funding from private sources before the Government’s emergency funding is made ready. Karim Masimov, the Prime Minister, said: “Next week there will be a new draft for amending the budget, [with government funding] ready for two weeks’ time.”

Alliance, which raised $700 million in July by selling a 20 per cent stake on the London Stock Exchange, gave warning this week that it would breach its loan covenants if its customers continued a run on the bank that led to the withdrawal of £110 million, or 10 per cent of its deposits, in July and August.

Other Kazakh banks with securities listed on the LSE include Halyk Bank, Kazakhmys, the FTSE 100 mining group, and KazMunaiGas Exploration and Production, part of the state-owned energy firm KazMunaiGas. This week Standard & Poor, the rating agency, cut Kazakhstan’s sovereign rating to BBB-, the lowest investment grade.

Trouble in the financial markets coincided with Kazakhstan admitting yesterday that it was cutting its long-term oil production forecast by 13 per cent to 130 million tonnes per day by 2015. The reduction comes after an international row over the production of its massive Kashagan oilfield in the Caspian sea. The cut removes 400,000 barrels per day from global supply estimates. Mr Masimov laid the blame for the Government’s decision at the feet of an international consortium, led by Eni, of Italy, and including Royal Dutch Shell.

The consortium was due to start producing oil from the Kashagan site next year, but this summer that was put back to 2010, while the production budget has ballooned. Mr Masimov said: “This is all Kashagan. They [Eni] delayed production from 2008 to 2010. Of course we are making adjustments.”

The Government halted work on the site in August citing environmental concerns and since then has threatened to impose a penalty on the consortium, which, sources said, could be as high as $10 billion. “How much this figure is is a commercial negotiation, but you will hear the news after October 22,” he said.

There are fears that the Kazakh Government may also force Eni to sell part of its holding to KazMunaiGas, owner of 8.3 per cent of the consortium. Other members of the consortium include ExxonMobil, Total, ConocoPhillips and Inpex.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2648620.ece

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