Shareholder and investor relations

There were no changes in the shareholder structure in the reporting period.

The annual General Meeting of Shareholders, with its roles performed by the Management Board of the Fund according to applicable law and KMG Charter, pending approval of the following documents:

• KMG’s 2020 annual financial statements (consolidated and separate)
• KMG’s 2020 net profit distribution
• Amount of dividend per ordinary share in KMG

Dividends

The Dividend Policy aims at ensuring the balance of interests of the Fund and the Companies, as well as predictability and transparency of the approach to determining the dividend amount and payment terms and procedure.

The amount of dividend payable to companies, with more than 50% of common owned by the Fund, is differentiated according to their maturity and financial and economic position determined based on financial stability and liquidity indicators.

The dividend payment timeline is fixed by the General Meeting of Shareholders when resolving to pay out dividends.

Credit ratings

Credit ratings assigned by international rating agencies serve as reliable and independent tools for the Group’s credit assessment. KMG aims at aligning its key financial metrics with target investment-grade long-term ratings and exceeding it. The Company provides rating agencies with access to all information necessary for a comprehensive and reliable evaluation of the Group’s creditworthiness Rating agencies and KMG’s Management Board hold regular review meetings, and KMG maintains the contacts.

In addition to the Company’s operating and financial results and market environment, KMG’s credit ratings are linked to Kazakhstan’s sovereign credit profile as its change may impact credit ratings of Kazakhstan’s companies, including KMG.

KMG’s efforts to strengthen its financial position were recognised by rating agencies. In 2018–2019, KMG’s financial performance improvement was translated into higher ratings of the Company’s stand-alone credit profile (SACP) from Fitch, Moody’s and S&P.

In 2020, despite material external economic risks, Fitch and S&P affirmed their earlier ratings. Currently, the Company has investment-grade credit ratings from Moody’s and Fitch and is two grades below the investment-grade credit rating from S&P.

• On 22 August 2019, the Moody’s rating agency affirmed KMG’s long-term credit rating at Baa3 with the outlook changed from stable to positive, whereas the standalone rating of KMG was upgraded from Ba3 to Ba2. In its periodic review on 14 December 2020, Moody’s mentions such factors as large oil reserves and track record of sustainable production without OPEC+ restrictions, robust liquidity and long-term debt maturity profile and expects that the Company’s leverage, interest coverage and cash flow metrics will remain commensurate with its Baseline Credit Assessment (BCA).
• On 27 March 2020, Fitch Ratings affirmed KMG’s long-term issuer default rating at BBB— with a stable outlook. KMG’s standalone credit profile at BB- was conditioned by the agency’s forecast for the Company’s leverage to gradually decrease after a projected increase in 2020 due to the pandemic-driven drop in oil prices.
• On 27 March 2020, S&P Global Ratings revised its outlook for KMG from stable to negative and affirmed its BB local and foreign currency ratings, following its review of Brent crude prices which are expected to average USD 30 per bbl for the rest of 2020, USD 50 per bbl in 2021 and USD 55 per bbl afterwards.
• On 28 January 2021, following the revision of its risk assessment for the oil and gas exploration, production and refining sector, S&P Global Ratings affirmed KMG’s credit ratings at BB with a negative outlook.

Bond issues

As at 31 December 2020, KMG’s consolidated debt (expressed in USD) was USD 9,690 bln, including USD 7,075 bln (around 73%) in bond issues.

KMG Group’s projects are largely financed through its own net cash flows. At the same time, KMG and its subsidiaries and dependent companies may enter the bonds market, if the conditions are favourable, in order to finance individual strategic projects or remain financially stable to implement the Development Strategy until 2028.

KMG borrows both on the national and global capital markets in line with its flexible, balanced debt management policy. KMG bonds are among the most liquid instruments among those offered by Kazakhstan’s issuers. KMG’s FX-denominated bonds have been historically attractive to a wide range of investors. KMG bonds’ investor base includes thousands of institutional and retail investors, mostly based in the USA, Europe and Asia. KMG’s Eurobonds are traded in the London Stock Exchange and the Kazakhstan Stock Exchange.

KMG Eurobonds for a total amount of USD 6.25 bln have been included in the official list of Astana International Exchange since 30 March 2021. KMG Eurobonds have been traded on AIX since 31 March 2021 under the ticker symbol (KMG) with settlements in US dollars.

In October 2020, the Company issued 12.5-year Eurobonds for a total amount of USD 750 mln. Orders from investors in Kazakhstan were collected through JSC Kazakhstan Stock Exchange (“KASE”) simultaneously with the international book-building. The initial price guidance was set at yields to maturity of around 3.875%, but backed by strong investor support was later revised to 3.5%, implying a total yield improvement by 37.5 bps. In October – November 2020, the Company made an early full repayment of bonds due 2022 and 2023 with nominal value of USD 906.6 mln

As at 31 December 2020, KMG had six outstanding Eurobond issues for a total amount of USD 6.25 bln on par value.

Investor communications

KMG continues to successfully implement its investor relations programme to ensure stability of financing and reduce its cost of capital. Communications with investors involve the Chairman of the Board of Directors, Chairman of the Management Board, members of the Management Board and heads of KMG’s strategic, financial, and operating units, as well as the Investor Relations. In 2020, the Health, Safety and Environment Department also started participating in conference calls to provide more detailed information on occupational health, industrial safety and environmental protection matters.

KMG holds quarterly conference calls for investors to discuss financial and operating results with the Deputy Chairman and members of the Management Board, as well as department directors. Apart from the quarterly ones, the Company held special conference calls to discuss the divesture of JSC KazTransGas from KMG Group in Q2 2020 and the roadshow before the Eurobond issue in Q4 2020.

The Company adheres to the principles of timeliness, completeness and availability of disclosures for the investment community. KMG quarterly publishes quarterly results presentations, financial results, trading updates, IFRS financial statements and analyst databooks. In 2020, the Company continued its practice to promptly inform investors and analysts on KMG’s financial and operating performance upon their request.

Guided by sustainability principles, in 2020 the Company considerably enhanced the transparency of its ESG disclosures. Particularly, the Company published its expanded 2019 Sustainability Report as well as 2019 CDP Climate Change Questionnaire and, for the first time, a Water Security Questionnaire, both on the CDP’s website as well. In addition, for a third year running, KMG has been the leader of the environmental transparency and responsibility rating of Kazakhstan oil and gas companies in 2019, prepared by the World Wide Fund for Nature (WWF), CREON Group and the National Rating Agency, supported by the Ministry of Ecology, Geology and Natural Resources of the Republic of Kazakhstan and in partnership with the United Nations Environment Programme (UNEP) in Central Asia.

KMG understands the importance of further enhancing its two-way dialogue with the investment community and regularly conducts investor perception surveys on the Company, with the results reviewed by the Board of Directors.