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Astana's KMGI and Bucharest's SAPE set up $1bn energy investment fund

posted onOctober 29, 2018
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Kazakhstan's state-owned oil and gas company KazMunayGas International (KMGI) and SAPE, a Romanian company that manages the state’s stakes in the energy sector coordinated by the Ministry of Energy, established on Friday (Oct.26) a joint energy investment fund.

The Kazakh – Romanian Investment Fund was set up in accordance with the provisions of the memorandum of understanding signed between Astana and Bucharest in 2013 and is expected to reach $1 billion of investments over a period of seven years.

KMGI (former Rompetrol Group) owns 80 percent of the fund's shares, with the Romanian state holding the remainder. KMGI’s contribution to the fund is $150 million. Part of it, representing the contribution of the Romanian state in the amount of $30 million, will also be paid by KMGI.

According to the company, the main priority of the fund represents the development of energy projects, thus positively contributing to the Romanian energy sector at large, as well as to the consolidation of the country’s energy security by diversifying the sources of supply for petroleum products and supporting a favourable investment climate in Romania.

KMGI has already identified at least two major projects, with the total amount of investments exceeding 200m USD, which can be developed within the framework of the Kazakh - Romanian fund and which will positively impact Romania’s economy, especially through the direct creation of approximately 2000 jobs.

One of the projects which is considered for the joint investment fund refers to the construction of a cogeneration plant on the Petromidia platform, in partnership with Uzina Termoelectrică Midia. The cogeneration plant (combined production of electric power and heat) will have the capacity to provide energy for both Năvodari city and the Petromidia refinery. The value of the investment will reach $120mil and it is estimated that the project will be finalized 4 years after its commencement.

petromedia refinery

Another project refers to the expansion of the local gas stations network with approximately 80 new locations. The new gas stations will be developed through greenfield investments, the total budget allocated to this expansion is in excess of $100mil.

“The establishment of the Kazakh - Romanian Fund represents a win-win situation both for our company, the Romanian State and, of course, for Romanians. The fund’s investment policy is designed to support profitable projects which endure over time and produce dividends for its shareholders. This means generating real benefits for both the Romanian State and KMGI, which will register an increase in profitability. We look towards the future with trust and a great deal of responsibility together with our Romanian partners” Daniyar Berlibayev, KMGI Chairman of the Board said in a statement.

In his turn, Constantin Vaduva, SAPE President of the Executive Board, said that the fund represents not only an opportunity to attract new investments in the Romanian energy sector

“but also a clear signal that we can actively contribute to the development of our national industry. The investments which will be generated by the creation of this fund will create new job opportunities in Romania, while the national energy sector will benefit from an increased production capacity.”

The Investment Fund is built upon a transparent investment policy, with clear criteria and mechanisms for evaluating the investment projects, both parties having equal rights to propose projects for financing. Moreover, SAPE representatives have the right to veto investment projects based on grounds involving national security.

The Romanian State, through SAPE is represented at all governing levels of the fund. Thus, in accordance with the shareholders structure, SAPE will nominate a member of the Board of Directors, the parties also agreeing to the nomination of a SAPE representative at the level of the Executive Board and the Investment Initiation Committee.

The Kazakh state-owned energy giant which carries out major operations in the fields of refining, petrochemicals, retail and trading on 11 international markets, owns Petromidia Navodari-the biggest oil refinery in Romania  and one of the largest in Eastern Europe. It also operates the Vega Ploiești refinery – the oldest refinery still in operation (1905) in Romania and the only producer of bitumen and hexane, but also a vast network for the distribution of petroleum products.