Astana-finance OJSC (Kazakhstan): Characteristics of activities

/IRBIS, May 29, 05/ - Following is brief characteristics of Astana-finance OJSC (Astana) activities, taken from the conclusion of the Listing commission of the Kazakhstan Stock Exchange (KASE), which is made due to the transfer of the company's common shares (KZ1C37671418, trade code - ASFI) from official list of the KASE securities under category "B" into category "A". The management of Astana-finance OJSC is fully responsible for the reliability of the information presented by the Listing commission of the KASE. Information is published by IRBIS as it may the attentions of potential investors. All figures are given in KZT, unless otherwise indicated. Main business of Astana-finance OJSC, apart from investment projects, are the following: lending (granting credits in monetary terms), leasing (leasing the property by maintaining ownership rights of the lessor on the property being leased for the duration of the contract), factoring (acquisition of payables from the buyer of the goods, works or services by accepting non- payment risks). Being a non-banking financial institution, Astana-finance OJSC has no correspondent relations with the banks. The company's payment system is based on settlement and currency accounts in the banks of the second tier. Astana-finance OJSC has settlement and currency accounts in Tsensabank OJSC (Astana), KAZKOMMERTSBANK OJSC (Almaty), Halyk Bank of Kazakhstan OJSC (Almaty), Bank TuranAlem OJSC (Almaty), Almaty Merchant Bank OJSC (Almaty), Irtyshbusinessbank OJSC (Pavlodar) and only settlement accounts in Halyk Bank of Kazakhstan and Bank TuranAlem OJSC. STRUCTURE OF ASSETS (in th KZT) ------------------------------------------------------------------- Ratio 1998 1999 2000 ----------------------------------- --------- ---------- ---------- TOTAL ASSETS 7,965,635 12,796,996 12,713,231 including: Investments into authorized capital 9,087 1,112,610 1,294,798 of legal entities Incomplete construction 2,785 212,458 1,217,230 Accounts receivable, 3,089,280 1,451,425 6,877,608 including: long-term 3,006,012 157,242 6,376,992 short-term 83,268 1,294,183 500,616 Credits granted, 4,605,367 9,547,455 2,965,098 including: long-term 4,519,795 8,974,208 1,664,585 short-term 85,572 573,247 1,300,513 Long-term financial investments 0 0 60,000 Cash 139,720 405,328 354,207 Bad debt reserves* 0 0 474,191 Other assets 119,396 67,720 418,481 ------------------------------------------------------------------- * in 1998 and 1999 were added to reserve capital INVESTMENTS INTO SUBSIDIARIES AND DEPENDENT COMPANIES In late 2000 Astana-finance OJSC had 5% or more in authorized capitals of 16 legal entities. Total investments as of the end of 2000 equaled 1,294.8 mln, or 10.2% of the assets. Financial and economic ratios of subsidiaries and dependent companies of Astana- finance OJSC in 1999-2000 (mln KZT) ------------------------------------------------------------------------------ Shareholders' Assets equity Sales Net income ---------------------------------------------------- Title 1999 2000 1999 2000 1999 2000 1999 2000 ------------------------------------------------------------------------------ Astanaenergoservis OJSC 8,073.6 7,923.5-502.7 619.53,536.03,963.7-864.0 -2.9 Fantasy World-Astana CJSC 723.0 898.8 322.6 322.6 38.9 72.2 -2.6-34.8 Sanatorii Priozernyi LLP 56.5 109.7 15.3 69.7 2.9 11.7 -7.0 -9.0 VIP-gorodok Astana LLP 270.8 594.2 95.4 66.3 11.4 10.3 -2.7-13.1 Nedvijimost-Consulting LLP 1.4 2,290.0 1.2 42.5 0.2 316.6 -1.0 21.9 Others 37.7 94.1 15.9 41.5 32.6 167.9 -10.8-17.8 ------------------------------------------------------------------------------ Total 9,163.011,910.2 -52.21162.13,622.04,542.3-888.1-55.9 ------------------------------------------------------------------------------ By the results of the year 2000, holding stakes in most of subsidiaries and dependent companies became not beneficial for Astana-finance OJSC. In 2000 the company began selling its stakes in authorized capitals of 4 subsidiaries, which along with the income after repayment of the loan by Fantasy world-Astana LLP, will release more than 70 mln. This money is to be used in more profitable projects. Based on the decision of the Board of directors of Astana-finance OJSC, in 2001 the company plans to give its subsidiaries, whose activities are based on offering services to the city, to Fond kommunalnoi sobstvennosti goroda Astana GKP (Municipal Property Fund of Astana) on account of the repayment of its debt to the city. After giving its stakes in Talion LLP, Shagala LLP, Astanaenegroservis OJSC and Fantasy World-Astana LLP, the debt of Astana-finance OJSC to the municipal budget at 6,447 mln will be written off. According to the information of the company, the shares of Astanaenergoservis OJSC for a total of 4,713.46 mln were passed to Municipal Property Fund of Astana GKP on May 11, 2001. INCOMPLETE CONSTRUCTION As a result of the development of subsidiaries, which are engaged in construction (Nedvijimost-Consulting OJSC, and VIP-gorodok Astana LLP), the volumes of construction work have increased, and as a result, the volumes of incomplete construction have also increased. In 1999 these figures increased by 209.7 mln against 1998 (76 times), in 2000 - 1,004.8 mln (almost 6 times). As of Jan 1, 2001, incomplete construction accounted for 9.6% of Astana-finance OJSC assets. From 2001 financing of Nedvijimost-Consulting OJSC changed: joint cooperation contract was canceled and loan agreement on completion and further construction of real estate objects was singed. Total borrowing volume amount to 1,546.1 mln for 3 years and 1 month at 15% to 21% APR depending on the object. The interests are to be paid semiannually on the basis of approved schedule, and the principal amount - as soon as the objects are sold. The change in financing terms of the construction will allow Astana-finance OJSC to increase its income and cut the terms of putting the objects into service, stimulate the sales of the objects, and make a more efficient use of local budget. As a result of the financing changes, from 2001 incomplete construction objects will be on the balance sheet of Nedvijimost-Consulting OJSC. NEW INVESTMENT PROJECTS In 2001 Astana-finance OJSC starts two new investment projects - establishment of Astana Gas Service OJSC and Akmolinskaya raspredelitelnaya elektrosetevaya kompanya CJSC (Akmola power distribution company). The Astana Gas Service OJSC project is the part of major investment project of NOC KAZAKHOIL CJSC (Astana) on construction of gas filling stations and the network of natural gas stations. The financing of the project should come from one of commercial banks of Kazakhstan. Planned borrowing terms: volume is $3.250 mln, term - 5 years, interest - 14% APR, favorable term - 2 years. The credit guarantor is NOC KAZAKHOIL CJSC. To implement the project, Astana Gas Service OJSC will be registered by the end of May 2001, whose founders will be Astana-finance OJSC and Kazakhoil-Products LLP - a subsidiary of NOC KAZAKHOIL CJSC. Authorized capital of a new company will equal $100.0 th. Astana-finance OJSC will hold 70% stake of a new company, and Kazakhoil-Products LLP - 30%. On February 16, 2001 Akmola Power Distribution Company CJSC was established with 3,625 th authorized capital, where Astana-finance OJSC has 33% stake, or 1,196 th. Akmola Power Distribution Company CJSC is established on the base of existing APDC OJSC, which is undergoing bankruptcy procedure based on the resolution of the Government of Kazakhstan, dated January 16, 2001. ACCOUNTS RECEIVABLE As of Jan.01, 2001, the receivables accounted for major shares in assets of Astana-finance OJSC and reached KZT6,877.6 mln or 54.1% (in 1998 - 3,089.3 mln or 38.8%, 1999 - KZT1,451.4 or 1.34%). From the total amount, KZT6,377.0 mln or 92.7% are long-term receivables. Among the company's debtors are Astanaenergoservice OJSC (KZT4,190.8 mln), Real estate-Consulting OJSC (KZT1,534.3 mln), Shagala LLP (KZT754.2 mln). Other receivables for a total of KZT398.3 mln include advance payments to the budget, default interest accrued to credit agreements, etc. Of the total amount, KZT4,112.0 mln or 60% fall on Astanaenergoservice OJSC including liabilities on transferring of mortgage deeds (KZT3,055.3 mln) and assignment of promissory notes claims (1,056.7 mln). Previously, these amounts were reflected as credits. In 2000, in agreement with the National Bank they were withdrawn from loan portfolio as non-banking loans. According to resolution of Administrative Council of FEZ dated Dec.12, 2000 and decision of shareholders' meeting on Jan.26, 2001, the company bought shares of Astanaenergoservice OJSC for a total of 3,779.1 mln using receivable indebtedness. On May 11, 2001, shares of Astanaenergoservice (4,713.5 mln) were transferred to the budget of Astana. As a result, corresponding amount of Astana-finance's indebtedness to the city was written off. The indebtedness of Real-estate-Consulting OJSC was a result of joint housing construction activity. In 2001, the contract on joint activity was restructured into loan contract. The indebtedness of Shagala LLP is temporary financial assistance provided for filial company. It will be written off by transferring ownership of Astana- finance stake in Shagala to Astana city budget. Thus, Astana-finance would pay back a debt to the budget. LOAN OPERATIONS The company provides short-, mid- and long-term loans to legal entities and individuals. Commercial loans. Financing of corporate clients and other legal entities take major share in the loan portfolio. At the same time, the company now implements other types of financing activity. Thus, this share will gradually lower. The biggest borrowers (loan of over 24 mln) take 85.7% of the portfolio. In 1998-1999, main loans were given to air and energy sector companies: Astanaenergoservice OJSC, NSC International Airport Astana OJSC and KazakhstanAirLines OJSC. In 2000, among prior sector were: production ("Tsesna" Corporation, "Sunkar" Corporation, Bikom TPK LLP, GCS-center LLP - 30.6% of loan portfolio), services (Mir Fantazii-Astana CJSC - 26.6%) and construction (VIP-gorodok Astana LLP, Komsnabstroi CJSC - 19.7%). The share of credits to air companies fell to 13.2%, construction of energy sector was stopped. Loans to affiliated companies. In total loan portfolio, the share of loans to affiliated companies at the end of 1999 equaled 56.5% (5,400 mln), at the end of 2000 - 30.2% (887.4 mln). Amount of provisions on loans to affiliated companies equaled 229.0 mln or 77.1% of total provisions. All loans have been given using internal funds. Most largest loans was given to VIP- gorodok Astana LLP (short-term loan for $2.9 mln, interest rate 15%, the loan was re-billed to Real estate Consulting OJSC.) and Mir Fantazii-Astana CJSC (mid-term loan - $2.9 mln, interest rate - 10% APR). Mortgage loans. Beginning from 2000, loans to individuals were distributed using two main schemes: city's program of mortgage financing of housing construction (municipal budget funds) and mortgage financing of housing acquisition (own funds). The maximal amount of lending (both programs) is 10 years, interest rate - 10% adjusted to USD/KZT exchange rate. The second scheme includes: initial charge of 30% from sale value of housing, mortgage - purchased housing. In case of consumer loans, the mortgage is movable and immovable property. In 1999-2000, budget funds were transferred under agreement on agent services without charging of interest. From 2001, budget funds have been given at 2% APR. This rate was set on a tender won by Astana-finance. By results of 1999, mortgage loans to individuals equaled 13.3 mln or 0.14% of the total loan portfolio, in 2000 - 95.3 mln or 3.24%. One of the main advantage of Astana-finance OJSC is vertical and integrated structure of the construction business, from construction to selling of housing. Leasing operations. At present, financial leasing operations take insignificant amount of loan portfolio. At the end of 1999, volume of operations reached 13.5 mln, end of 2000 - 35.0 mln. Quality of loan portfolio of Astana-finance OJSC (standards of the National Bank of Kazakhstan) -------------------------------------------------------------------------- As of Jan.01 As of Jan.01 As of Jan.01 1999 2000 2001 -------------- -------------- -------------- Loan KZT, th % KZT, th % KZT, th % ----------------------------- --------- ---- --------- ---- --------- ---- Standard 6,251,691 91.8 2,800,911 29.3 1,449,743 49.4 Substandard 10,908 0.2 2,093,320 21.9 959,963 32.7 Substandard, no interest rate 31,819 0.5 4,460,505 46.7 - - Unsatisfactory 294,969 4.3 108,073 1.1 76,116 2.6 Doubtful with a high degree of risk 18,989 0.3 2,650 0.03 437,192 14.9 Loss 200,503 2.9 94,534 1.0 14,928 0.51 ----------------------------- --------- ---- --------- ---- --------- ---- Total 6,808,878 100 9,559,993 100 2,937,942 100 -------------------------------------------------------------------------- For 2000, share of long-term loans fell to 48.67%. Simultaneously, short- term loans increased to 29.42% and mid-term - 19.24%. Interest rate did not show growth trend as the company is oriented on long-term relationships with borrowers. Income from loan operations are growing because of operational volume. As the table above shows, loan portfolio has undergone significant changes. In 1999, total volume of portfolio increased by 40.3%. While, by the end of 2000 it fell by 69.3% (to 2,938.0 mln).This was caused by a transfer of Astanaenergoservice portfolio (4,112.0 mln) to off-balance account of the city's budget (with conformation of Administrative Council of FEZ). Previously, this amount was classified as accounts receivable. The same operation was applied to interest payments on loans to International Airport Astana NSC (2,023.0 mln) and Onim OJSC (478.3 mln). According to the data presented by Astana-finance OJSC, a total of 718.7 mln of loans were redeemed in first quarter 2001, the loans granted reached 2,792.8 mln. As a result, gross volume of loan portfolio equaled 5,012.1 mln (as of April 01, 2001). COMPANY'S RESOURCES Liabilities of Astana-finance OJSC (KZT, thousand) ---------------------------------------------------------- Indicator As of Jan.01 As of Jan.01 As of Jan.01 1999 2000 2001 ------------------- ------------ ------------ ------------ LIABILITIES 7,731,017 10,498,767 10,539,673 including: long-term loans 5,754,427 8,600,398 9,393,607 short-term loans 66,705 149,988 0 accounts receivable 1,909,885 1,740,120 1,142,832 other liabilities 0 8,261 3,234 ---------------------------------------------------------- Total volume of attracted funds in 1998-2000 increased by 1.75 bln or 22.9%. This was conditioned by growth of clients base and expanding activity. In 1999, the growth rate equaled 14.5%, in 2000 - 7.4%. The main part of funds (86.6%) is linked to agent services for Administrative Council of FEZ and the Ministry of Finance, Small-business Development Fund CJSC. In 1999, construction of Astana-Walk (City Market) required attraction of additional funds. The company borrowed funds from Seagas International Ltd under the guarantee of the Ministry of Finance (redeemed on May 17, 2001). Structure of attracted funds ------------------------------------------------------------------------- As of Jan.01 As of Jan.01 As of Jan.01 1999 2000 2001 ------------- ------------- ------------- KZT, mln KZT, mln KZT, mln Name % % % ------------------------------- -------- ---- -------- ---- -------- ---- Administrative Council of FEZ 3,744.5 49.0 5,205.3 59.5 8,231.3 87.6 the Ministry of Finance 3,687.2 48.3 2,392.2 27.3 0 0 Small-business Development Fund 142.5 1.9 286.0 3.3 260.0 2.8 Bank loans 66.7 0.9 0 0 0 0 International loans 0 0 866.9 9.9 902.3 9.6 ------------------------------- -------- ---- -------- ---- -------- ---- Total 7,640.8 100 8,750.4 100 9,393.6 100 ------------------------------------------------------------------------- Agent services. Funds attracted using agent agreement with Administrative Council of FEZ have been annually increasing. By the end of 2000 their volume equaled 8.2 bln or 87.63% of total borrowing volume. According to the agreement, all risk are taken by Administrative Council, while no interest rate is paid off. The most part of debt or 6.76 bln (82.2% of total borrowing) will mature in 2010. According to Astana-finance OJSC, on May 11, shares of Astanaenergoservice OJSC (4,713.46 mln) were transferred to Astana Municipal Property Fund (the municipal structure). Consequently, company's liabilities decreased by the same amount. International loans. Under the international loan, provided by Seagas International Ltd., all responsibility falls on Astana-finance, interest rate equals to 12%. The loan is given under the guarantee of the Ministry of Finance. The loan is formed as 8 promissory notes of $1.0 mln at face value each. The company informed that as of May 17, 2001 it redeemed principal and interest for a total of $8.0 mln.