Fitch assigns Kompetenz Joint Stock Company ‘B’ IFS; outlook stable

Fitch Ratings has assigned Kazakhstan-based Kompetenz Joint Stock Company (Kompetenz) an Insurer Financial Strength (IFS) rating of ‘B’ and a National IFS rating of ‘BB(kaz)’. The Outlooks are Stable.

The ratings reflect Kompetenz’s volatile underwriting performance, limited financial flexibility, (as it is privately owned by an individual) its relatively weak but new franchise in the Kazakh insurance market and the significant concentration risk in its insurance portfolio. Positively, the ratings reflect the solid quality of its investment portfolio and good capitalisation both on a risk-adjusted and regulatory basis, and its adequate reinsurance programme.

Kompetenz is privately owned, as a result of a management buy-out from Allianz SE (IFS: ‘AA-‘/Stable), the company’s previous owner, in Q411. 100% of the voting shares belong to Zhanar Kalieva, executive chairperson, who had been Kompetenz CEO for the past three years.

Kompetenz’s gross written premium declined by 49% in 2011. The key reason for this was the cancellation of a contract with Agip (a subsidiary of Italian oil company ENI ), which had formed a substantial proportion of Kompetenz’s premium in the past five years. Fitch understands that this decision was the result of a change in Allianz SE’s risk appetite in the region. Premium volumes continued to fall in H112 and, compared to H111, decreased by 31% on a net basis. Fitch notes that declining business volumes could indicate difficulties with the acquisition of new business, as well as the loss of premium reflecting the transfer of the obligatory employer’s liability insurance class to life insurance companies. Moreover, the retail market in Kazakhstan where Kompetenz targets growth is highly competitive.

There is significant concentration risk in the insurance portfolio. As at end-Q212, premiums were concentrated with a 49% contribution from one contract with a major oil services company. This concentration risk is partly offset by the solid credit quality of the reinsurer to which Kompetenz cedes a material proportion of this risk under a facultative arrangement.

Kompetenz (known as JSC Allianz Kazakhstan at that time) experienced negative underwriting performance in 2008 and 2009, when the combined ratio surged to 113.5% and 154.4% respectively, as a result of high expenses (2008: 70.4% of net premium written; 2009: 70.9%) and a high loss ratio (45.9% in 2009). This was largely explained by the inflexible remuneration system operated by the company at that time, investment in distribution, and reserve strengthening in respect of obligatory employer’s liability insurance. Kompetenz managed to stabilise its expenses in 2011, returning a profitable combined ratio at 77.5%. However, Fitch believes that containing expenses and remaining profitable throughout the planned expansion into the retail market could prove challenging.

Kompetenz has a conservative investment strategy, with investments in bonds accounting for 90% of total invested assets at end-2011. Positively, Kompetenz decreased the proportion of equities in its portfolio to 1% at end-2011 from 7% at end-2010. The portfolio is of a relatively high quality, when viewed from a local perspective, with assets of sub-investment-grade issuers accounting for only 4% of the total at end-2011.

Fitch believes that Kompetenz is well capitalised for its rating level. However, the regulatory solvency margin tends to be volatile and declined to relatively low levels in Q111 and Q112.

The ratings could be upgraded if Kompetenz proves its ability to grow the business franchise while maintaining an adequate financial profile (i.e. combined ratio below 100%) and capitalisation (solvency margin well above 100%).

The ratings could be downgraded if Kompetenz’s regulatory solvency margin structurally weakens to below 100% triggering regulatory intervention. Any indication of a reduction in the shareholder’s willingness to support the company would also be viewed negatively.

Kompetenz is a non-life insurance company, headquartered in Almaty, Kazakhstan. It wrote KZT3.9bn of GWP in 2011 and had gross assets of KZT4.0bn at FYE11.

Article sourced from Reuters


U.S. to provide grant to Kazakh KazTransGas

KazTransGas and USTDA have signed a grant agreement to prepare a feasibility study for nitrogen-helium development in deposits belonging to Amangeldy, KazTransGas said on Thursday.

“The grant will enable KazTransGas to define the economic, technical and financial capabilities of the innovative project for Kazakhstan for exploration, extraction, separation and recycling of helium, methane, and nitrogen on the deposit of Amangeldy group in Zhambyl region,” the statement said.
Separation of the gas flow provides that value-added products, such as fertilizer, purified helium, can be made on these deposits and used separately in various high-tech industries.

Concentrations of helium-nitrogen-methane gas at deposits in Amangeldy, Anabay, Airakty and Kumyrly gas fields contain from 8 percent to 81 percent of nitrogen and from 0.165 percent to 0.694 percent of helium.

Helium production on an industrial scale in Kazakhstan is a new innovative project. The U.S. is the world leader in the production and consumption of helium. The feasibility study will show how much it is possible to use advanced U.S. technology to produce helium on an industrial scale.

Helium is used in the space industry, electronics and other industries.]

Article sourced from Trend

Manufacturers to boost harmonization of anti-trust laws of Kazakhstan and Russia as part of CU

Kazakhstan’s manufacturers are planning to boost the harmonization of antitrust laws of Kazakhstan and Russia as part of the Customs Union to take actions against dumping from Russian companies, Nikolai Radostovets, the Executive Director of Kazakhstan Association of Mining and Metallurgical Enterprises, reported to KazTAG news agency.

According to experts, Kazakhstan’s companies were affected by serious dumping from Russian companies that sell goods in Kazakhstan at a price 20-40% lower than in Russia.
Article sourced from Caspio Net

Kazatomprom to increase share in Kazakhstan’s uranium reserves

Kazakh National Atomic Company Kazatomprom will increase its share in Kazakhstan’s uranium reserves to 52 percent in 2012, Novosti-Kazakhstan quotes Kazatomprom’s chairman Vladimir Shkolnik as saying.

The company’s share in uranium reserves will be increased due to purchase of shares in joint ventures, as well as enhancing exploration works.

“In early 2009, Kazatomprom had 41.8 percent of all uranium deposits under contract in the country. Our partners and foreign companies had 48.2 percent. The signed contracts infringed upon our company and our country’s interests. All these contracts have been revised. And our country’s share in uranium deposits under contract will hit 52 percent by December 2012,” Shkolnik said at a press-conference on Wednesday.

According to Shkolnik, Kazatomprom plans to increase uranium reserves by 250,000 tons by 2020.

Kazatomprom is Kazakh national operator for import and export of uranium, rare metals, nuclear fuel for power plants, special equipment and dual-purpose materials. A total of 100 percent of the company’s stock is held by the state through Kazakh Sovereign Wealth Fund Samruk-Kazyna.

Kazakhstan and Kazatomprom in particular are the world’s leading uranium producers.

In 2011 Kazakhstan produced 19,450 tons of uranium or 35 percent of world production.

Article sourced from Turkish Weekly

Kazakhstan expands gas capacity to China

The longest section of the Turkmenistan-Uzbekistan-Kazakhstan-China transit pipeline passes through Kazakhstan’s territory: it measures 1,115 kilometers in length, of the total 1,830-kilometer Turkmenistan-China distance. Kazakhstan is adding a dedicated export pipeline for its own gas exports to China. In combination, these developments (alongside planned oil exports) confer to Kazakhstan a major role in China’s energy security calculations.

Kazakhstan is currently transiting Turkmenistani gas to China at an annual rate that should approach 30 billion cubic meters (bcm) by December 2012 (ie, set for the full calendar year 2013), plus small volumes of Uzbekistan’s gas in transit. The transit pipeline is planned to reach full operating capacity through the parallel Lines A, B and C at 65 bcm per year by December 2015 (presumably from the calendar year 2016 onward).

On August 6, 2012, the project company Asian Gas Pipeline announced that it has completed the construction of Lines A and B of the transit pipeline on Kazakhstan’s territory. The installation of compressors is planned to be completed by the end of 2012. A further round of capacity expansion is planned with construction of Line C, in the same corridor across Kazakhstan’s south.

The project company, Asian Gas Pipeline, is a parity joint venture of China’s Trans-Asia Gas Pipeline and Kazakhstan’s Kaztransgaz (fully-owned subsidiaries of China’s National Petroleum Corporation and Kazakhstan’s national holding KazMunaiGaz, respectively). The joint company was established in November 2007 to build and operate this pipeline. Construction work on Kazakhstan’s territory started in July 2008. Lines A and B had commenced below-capacity operations already in December 2009 and December 2010, respectively.

The pipeline’s capacity on Kazakhstan’s territory is dedicated almost entirely to the transit of gas from Turkmenistan, with small inputs from Uzbekistan and Kazakhstan itself. In September 2011, CNPC and KazMunaiGaz signed the framework agreement on the design, financing, construction, and operation of Line C of the Turkmenistan-China transit pipeline on Kazakhstan’s territory.

Astana and Beijing support an additional pipeline, dedicated to Kazakhstan’s own gas exports to China (as distinct from the Kazakhstan section of the Turkmenistan-China transit pipeline). In June 2010, KazmunaiGaz’s and CNPC’s subsidiaries, KazTransGas and Central Asia Gas Pipeline, signed an agreement to build the Beyneu-Shymkent pipeline as a parity joint venture. Originating in the Mangistau region on Kazakhstan’s Caspian coast, this line connects with the pipeline bound for China, at a junction point near Shymkent in Kazakhstan’s south.

The Beyneu-Shymkent line is planned to be sourced from Karachaganak, Tengiz, and potentially Kashagan, thus relying in part on the capture of associated gas at those oil fields. The pipeline joint venture has started construction work on the line’s two sections in December 2010 and September 2011, respectively, budgeting $1 billion and planning to borrow nearly $3 billion for this project.

The 1,475-kilometer pipeline route is longer than Kazakhstan’s section of the Turkmenistan-China transit pipeline. The Beyneu-Shymkent line is expected to go into operation in two phases, with a capacity of 10 to 15 bcm per year when both phases are completed by 2013 and 2015, respectively.

Gas volumes flowing from the Caspian basin eastward in the years immediately ahead may leave little or no volumes available for a possible trans-Caspian pipeline westward. After Russia, China is now asserting its own priority claims more effectively, to larger-volume gas supplies from Kazakhstan.

Barring some unforeseen, major gas discoveries on Kazakhstan’s Caspian coast or its offshore, the planned trans-Caspian pipeline will apparently have to be sourced entirely from Turkmenistan’s vast reserves.

Fast-paced construction of Lines A and B of the transit pipeline to China is a performance that Line C, as well as the Beyneu-Shymkent pipeline, look set to emulate. Successful implementation of such tight construction schedules, on projects of this magnitude, seems to presage on-schedule completion of Kazakhstan’s entire export pipeline system in China’s direction, to the full planned capacity at a similarly fast pace.

Article sourced from Asia Times Online

TeliaSonera boosts presence in Kazakhstan

International operator TeliaSonera has announced that it is to acquire Alem Communications, a WiMAX operator in Kazakhstan, for $170m. Stockholm-headquartered TeliaSonera, which has an extensive footprint in Eastern Europe, already holds the leading position in the Kazakh cellular market through its local subsidiary Kcell (GSM Kzakhstan).

In addition the operator has struck a deal with Visor Group that will see both companies take minority stakes in KazTransCom, which owns a nationwide fibre network in Kazakhstan. This deal will set TeliaSonera back $35m and Kcell has signed a five-year backbone lease agreement with KazTransCom as part of the agreement.

TeliaSonera is unlikely to be pursuing a WiMAX strategy with its acquisition. Rather, it’s interest in Alem stems from the WiMAX player’s 2.5/2.6GHz spectrum portfolio, which is technology neutral.

“I am very pleased that we have been able to reach agreement in relation to these important transactions. They will be crucial for Kcell’s continued leadership in the rapidly growing mobile data sector and reaffirm our strategic commitment to developing mobile technologies and services in Kazakhstan. The investment in, and agreement with, KazTransCom would also secure further backbone capacity for Kcell at competitive prices for the years to come, a very important factor for future competitiveness as data volumes continue to grow rapidly,” said Tero Kivisaari, President, Business Area Eurasia, TeliaSonera.

TeliaSonera has a total of 172.1 million subscribers to its operations worldwide, according to Informa’s World Cellular Investors product.

Original Article

Kazakhstan takes measures to improve positions in Doing Business

Kazakhstan is taking active measures to improve its positions in the Doing Business ranking, the Kazakh Ministry of Economic Development and Trade said on Saturday.

“The main focus of work to improve Kazakhstan’s position in the Doing Business ranking in the current year will be on enhancing the reform process on indicators of “International trade” and “Obtaining a building permit”, the ministry said.

Thus, under the work on “International trade” direction a register of public service, providing paperless customs declaration of goods crossing the customs border of the Customs Union was approved.

At the same time, work is ongoing on the analysis of procedures performed by public authorities when carrying out export and import operations. According to the results of this analysis the list of documents required for the implementation of foreign economic activity will be formed.

A single list of documents and requirements for obtaining licenses, permits and other requirements in the field of export-import operations was also prepared.

In addition, to create an integration of information system “Single Window”, a list of procedures for issuing permits required to build the automation system was prepared.

At the same time, work has been intensified on other crucial indicators, which are aimed at improving the investment climate in the republic and concern mainly changes in legislation.

With regard to registration of property a law was passed this year which provides for reducing the time to register property to one day and the exclusion of paper.

The conditions for obtaining loans were also improved, in particular, the Kazakh law on regulation of banking and financial institutions, providing for the establishment of public credit bureau, which, on the recommendation of the World Bank will cover 100 percent of the adult population was put into effect.

In addition, the law includes a provision to determine the negative information on the subject of credit history, as well as the norms of production and delivery of this negative information without the consent of the subject’s credit history. The license for the activities of property management and affairs of insolvent debtors in bankruptcy proceedings was cancelled. Now those wishing to engage in activities manager will be able to register under the simplified system and a reduced list of documents.

All these activities contribute to improving the investment climate in the country, and strengthening the position of the republic in the Doing Business ranking.

Article sourced from Turkish Weekly