Baiterek Holding creates venture capital fund, pursues long-term construction projects in 2020

NUR-SULTAN – Baiterek National Managing Holding, the Kazakh government’s key financial agent, will continue to pursue its long-term goals this year. It ended 2019 included in the environmental, social, and governance (ESG) rating and creating a venture capital fund.

As of Dec. 30, the Fitch Rating of BBB confirmed the holding was responsible for the country’s diversification and sustainable economic growth with a stable outlook.

Baiterek’s subsidiary organisations, Development Bank of Kazakhstan (DBK) and Kazyna Capital Management (KCM), support long-term financing for infrastructure and manufacturing investment projects, Chair Aidar Arifkhanov told The Astana Times. KCM is financing the Makinski poultry farm and construction of a meat factory and the first start-up wind farm complex in the Akmola Region.

DBK is providing seven billion tenge (US$18.37 million) in loan funds for up to 20 years. The bank also prioritises “transport, logistics, communications and energy, including green energy,” he said.

“Currently, DBK is the leading bank in the country for long-term lending to the non-oil economy. At the end of 2018, the share of DBK’s long-term lending to the manufacturing industry and infrastructure amounted to 46 percent of the total loans issued by all banks,” he added.

The bank’s loan portfolio is 1.6 trillion tenge (US$4.24 billion). DBK’s major strategic projects include building the Aktobe rail and beam plant, Shymkent transformer factory, ferroalloy plant in the Karaganda Region, transport and logistics centre in the Turkestan Region, the Aktau seaport and Saryarka gas pipeline.

“DBK provides loans to enterprises, then direct investment funds included in the structure of KCM provide equity financing in the form of a contribution to the capital of the project company. Private equity funds are usually included in the project for a period of five-seven years. At the end of this period, the project applicant redeems its share,” he said.

On Dec. 23, Baiterek became the first financial institution in Kazakhstan to receive the ESG rating that assesses the sustainable development of an organisation’s activities.

“The rating agency experts have confirmed a high level of commitment to the principles of social responsibility, corporate governance and business ethics. At the same time, experts noted the need to consider environmental principles in the framework of project activities, including environmental risk management,” according to the holding’s press service.

Considering the rating results, Baiterek has developed measures to improve sustainable development management practices and the quality of non-financial information disclosure.

It was also scheduled to create Kazakhstan’s first venture capital fund. QazTech Ventures, the holding’s subsidiary, and 500 Startups, the leading U.S. venture capital fund, signed an agreement Dec. 10 adding the Kazakh branch to the V Global Fund.

The document envisions QazTech Ventures’ $10-million participation in the V Global Fund “with further financing of Kazakhstan startup projects,” said the Baiterek press service. The total size of the fund is $150 million.

San Francisco-based 500 Startups is interested in working with QazTech Ventures to create a separate thematic fund focused on Kazakhstan.

“The signing of the package of documents, we believe, will certainly lead to positive results. In particular, investments of a leading venture company in Kazakh projects will increase the attractiveness of our country’s venture market and attract other key players. In addition, Kazakh projects will have the opportunity of international acceleration and access to advanced competencies and experience,” said Arifkhanov, reported the press service.

Later QazTech Ventures also signed a memorandum with Quest Ventures Foundation, a leading venture capital fund in Singapore, as well as a tripartite memorandum with the National Agency for Innovation of Thailand and Baiterek Holding.

“The countries of Southeast Asia were able to make a significant breakthrough in the development of their economies thanks to the recently adopted and successfully implemented strategy for the development of innovations and venture financing. Over the past five years, Asia’s VC (venture capital) indicators have increased by almost 14 times,” the Baiterek press service said.

Baiterek has received “offers from a number of venture management companies in Singapore, Malaysia, Thailand, Korea and the United States” since the beginning of 2019. The holding chose 500 Startups after “an analysis of the compliance of the proposals of venture management companies with the preliminary criteria established by the investment regulations,” he added

Established in 2010, 500 Startups has created 21 funds – five global funds investing in startup projects around the world and 15 thematic funds focused on individual international regions. The latter are purposefully invested in Brazil, Canada, Israel, Japan, Mexico, the Middle East, Singapore, South Korea, Thailand, Turkey and Vietnam, among other countries.

Baiterek Holding manages 11 state development institutions, financial organisations and national companies. It attracted approximately $2.95 billion in foreign investment from 2016 to the first half of 2019.

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