Kazakhstan Infrastructure Report Q1 2013

BMI View: Kazakhstan's Construction and infrastructure sector continues to power ahead and we seeinvestment flocking to the oil rich country in 2013. We anticipate year-on-year growth of 7% in 2013rising to 9.6% by 2014, driven by demand for the country's resources. The industry value is expected tonearly triple from US$16.1bn in 2013 to US44.8bn by the end of our forecast period in 2021. The maindownside risk remains long-term political stability.

Key developments in the sector:

The European Bank for Reconstruction & Development will assist the Kazakhstan city ofAlmaty in awarding a public-private partnership (PPP) contract for the development of a 'fasttram' line. According to a Memorandum of Understanding (MoU) between the bank and the city,the 14km light rail line to replace the existing tram route on Momyshuly, Makatayev andZhetysu streets is estimated to cost US$300mn. Czech firm Inekon had already been named thesupplier of up to 34 light rail vehicles.

Kazakhstan plans to sell up to 10% of its state grid KEGOC in an initial publicoffering (IPO) in Q213. The government hopes to raise around US$500mn from the first roundof IPOs and is also considering issuing international bonds in 2013. According to sovereignwealth fund Smaurk-Kazyna deputy head Kuandyk Bishimbayev,several state companies couldbe sold in 2013.

The World Bank has approved a US$1.07bn loan to Kazakhstan for the construction of a newhighway connecting Almaty city with Khorgos in China, Road Traffic-Technology reports. Theproject is expected to be completed in 2015. The cost is estimated at US$1.25bn, with theremaining US$188.5mn donated by the Kazakh government.

We forecast Kazakhstan's real GDP growth will reach 5.8% in 2013 up slightly from an estimated 5.3%in 2012. Relatively high oil prices will continue to boost domestic demand and public investment,somewhat counteracting the continued slowdown in global demand. However, we caution that risks tothis outlook are firmly to the downside, with macroeconomic headwinds prevailing from the slowdown inChina and the persistent eurozone sovereign debt crisis.