| Investment case. A Swedish private invest fund holds a blocking stake in an oil refinery business in Kazakhstan. The business is a profitable, partly government-owned going concern that exists for almost 30 years. It represents a bunch of refining capacities, tanks for storage of liquid products of distillation as well as back offices on the prmises of ca. 360 ha, all that in Aktau suburbs, 8 km away from the town. The invest fund is now conceiving expansion of the project thru aggressive investments, in order to raise its stake in the business to a controlling level to be able to take it private and make an IPO shortly afterwards. This expansion implicates upgrade of existing capacities and construction of new production facilities, which would enable broader production range and lower cost due to scale effects. |
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| Finance. A compehensive business valuation was carried out at the year start. It rendered $90-110 mln, dependent on different interest rates and economic growth scenarios in future. At this stage, we consider investing not less than $60 mln in expansion of the business to boost its value to $180-200 mln in 3 years time. Upon recapitalization, the project’s capacity should increase by 40% to reach a yearly level of 135 mln barrel, which would be enough to generate some $20 mln in free cash flows per year. At the moment, the project’s debt-to-equity ratio stands at 23%, which appears pretty low. Hence we do not rule out attracting part of the money to be invested by raising debt either in form of bank loans or by placing short maturity bonds. |
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| Project progress. At present we are in process of bond placement registration, which should be concluded by the year end. We are also assessing potential investors who would jump into the business to share with us our responsibilities and returns on the project. |
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