8 July 2009 This is bne's Central Asian and Caucasus daily newsletter, a list of the top stories in region for the day. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options here: http://businessneweurope.eu/users/subs.php Eurasia TOP STORY 1. Uzbekistan: Initec wins €450m power plant modernisation contract 2. AFN undertakes stress test and calculates potential provisioning levels for Kazakh banks 3. Kazakhstan: Financial police not investigating Alliance’s Yertayev Eurasia Kazakhstan 4. Former BTA executive arrested in Moscow 5. Homebuyers protest construction delays in Almaty 6. JBIC and VEB to finance Aktobe metallurgic plant 7. Kazkommertsbank repays JPY25bn (US$264m) Eurobond on schedule 8. KazMunaiGas EP maintains its BB+ S&P rating On the website today 9. BRICKS & MORTAR: Kazakh banks hope for more funds from mortgage programme 10. Survey finds economic outlook for emerging Europe improves 11. The crisis for Central Europe's pension funds Eurasia Other Central Asia 12. Kyrgyzstan: Bakiyev signs off new Manas deal Eurasia Caucasus 13. Azerbaijan and European Union reach aviation deal 14. International currency reserves of Georgia decrease to USD 1 504 539 000 in June 15. Large salt plant to be opened in Azerbaijan this year 16. VTB Bank extends subordinate loan payment to VTB Bank Georgia by 5 years --************************************************************ Eurasia TOP STORY --************************************************************ 1. Uzbekistan: Initec wins €450m power plant modernisation contract bne July 8, 2009 Spanish energy company Initec has been appointed by Uzbekenergo to modernise the Navoi thermoelectric power station, UzDaily reports. The €460m project will include the construction of a combined-cycle plant at the Navoi power station, with capacity of 477 megawatts. Uzbekenergo and the Reconstruction and Development of Uzbekistan are financing the project, which is due to start in the fourth quarter of this year. --************************************************************ 2. AFN undertakes stress test and calculates potential provisioning levels for Kazakh banks Visor Capital July 8, 2009 The stress test made by the AFN shows the maximum potential provisioning levels that Kazakh banks may reach without breaking minimum regulatory capital requirements. We do not expect any significant impact for the banks covered by the stress test. The Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (AFN) yesterday published a press release highlighting the results of its most recent stress test for Kazakh banks. The AFN calculated the maximum potential provisioning level for each bank under its stress test a by lowering their retained earnings, up to that level where a bank is able to maintain regulatory K1 and K2 capital adequacy ratios. The AFN also assumed in its stress test that there would be no additional capital injections going forward. The table below sets out maximum provisioning levels for the banks that we have under our coverage universe. The AFN did not include BTA Bank (BTAS KZ), Alliance Bank (ASBN KZ)(ASBNp1 KZ)(ALLB LI) and Temirbank (TEBN KZ)(TEBNp KZ) because these banks were in breach of regulatory minimum capital adequacy requirements as of 1 June 2009. The stress test showed that Kazkommertsbank (KKGB KZ)(KKGBp KZ)(KKB LI) could further increase provisions by 4.4% up to 25.9% from its level of 21.5% as reported in regulatory statistics for May. Halyk Bank (HSBK KZ)(HSBKp KZ)(HSBKp1 KZ) (HSBK LI) and Bank CenterCredit (CCBN KZ) has the highest potential for further provisioning among the above-indicated five banks, based on the AFN stress test. ATF Bank (ATFB KZ) and Kaspi Bank (CSBN KZ)(CSBNp KZ) may increase provisions to 18.1% and 14.8% from the current level of 12.7% and 9.8%, respectively, without breaking minimum regulatory capital requirements. We do not expect any significant impact for the banks covered by this stress test. We have all the above-mentioned banks under formal research coverage, available to our clients. //IMG:0709_Kazakhstan_BanksProvisioning.gif:IMG// --************************************************************ 3. Kazakhstan: Financial police not investigating Alliance’s Yertayev SRI July 8, 2009 Kazakhstan’s Agency for the Fight against Economic Crime and Corruption (financial police) denied to have initiated criminal proceedings against former CEO of Alliance Bank, Zhomart Yertayev. Yertayev was suspended from his new job as CEO of Eurasian Bank by the Financial Supervision Agency (FSA) on Friday, reportedly because of violations of Kazakhstan’s banking legislature which had occurred during his tenure at Alliance. Yertayev is expected to give his take on the situation at a press conference on Wednesday. businessneweurope.eu Eurasia Kazakhstan --************************************************************ 4. Former BTA executive arrested in Moscow SRI July 8, 2009 Former head of corporate banking at BTA Bank, Veronika Yefimova, has been arrested in Moscow. Kazakhstan had issues an international warrant on Yefimova who was wanted in Kazakhstan for allegedly embezzling $1.34 million in 2006-08. Yefimova is reportedly expected to be extradited to Kazakhstan shortly. --************************************************************ 5. Homebuyers protest construction delays in Almaty SRI July 8, 2009 A group of home buyers who had bought pre-constructed apartments held a press conference in Almaty protesting the delays in construction of the Zhaily residential complex constructed by the Sert real estate developer. According to the home buyers, the company invested money paid for apartments into unrelated projects. Meanwhile, the construction is delayed by more than three years. There are reportedly more than 1000 families who were promised and paid for apartments in Zhaily. --************************************************************ 6. JBIC and VEB to finance Aktobe metallurgic plant SRI July 8, 2009 Japan Bank for International Cooperation (JBIC) and Russian Vneshekonombank (VEB) will finance a new metallurgic plant in Aktobe, according to the plant operator SBS Steel. According to Kabul Shadiev, the chairman of SBS Group, the parent company of SBS Steel, JBIC and VEB will finance 80 percent of the $480-million project. The construction is expected to start in August and should last three years. The plant will have annual production capacity of 500,000 of granulated iron. According to reports from 2007, BTA Bank was originally expected to finance the project. Shadiev announced that the company has already identified potential customers for the production. Hares Engineering expressed interest to buy the entire production, and the SBS group has also been in negotiations with other domestic steel producers. businessneweurope.eu --************************************************************ 7. Kazkommertsbank repays JPY25bn (US$264m) Eurobond on schedule Visor Capital July 8, 2009 We expect slight positive impact for the bonds or shares of the Bank. Yesterday, Kazkommertsbank (KKGB KZ)(KKGBp KZ)(KKB LI) announced that on 6 July 2009 the Bank successfully repaid JPY25bn (US$264m) Eurobond. The Bank noted that it has repaid the floating-rate bond on schedule from its own funds. The Eurobond was issued under an MTN Programme in July 2007 through the Bank’s subsidiary, Kazkommerts International B.V. We expect slight positive impact for the bonds or shares of the Bank. We currently have Kazkommertsbank under formal research coverage, available to our clients. --************************************************************ 8. KazMunaiGas EP maintains its BB+ S&P rating Visor Capital July 8, 2009 The Company also moves to stable outlook from ratings watch negative. NC KazMunaiGas meanwhile loses its investment grade status as it is downgraded to BB + from BBB-. No significant share impact is expected. Standard & Poor’s Ratings Services yesterday downgraded NC KazMunaiGas’s long- term corporate credit rating to BB+ from BBB-, while its subsidiary KazMunaiGas EP (RDGZ KZ) (KMG LI) maintained its rating at BB+. The downgrade reflects the Agency’s concerns of NC KMG’s liquidity position, and the group’s subsidiaries (including KazMunaiGas EP), being required to deposit the majority of their cash in local banks including Halyk Savings Bank, Kazkommertsbank and BTA Bank, where liquidity and asset quality was “under pressure” according to the S&P report. S&P confirmed that both NC KMG and KMG EP had a stable outlook (from ratings watch negative for KMG EP). No share impact is expected. We currently have KazMunaiGas EP under formal research coverage available for our clients. On the website today --************************************************************ 9. BRICKS & MORTAR: Kazakh banks hope for more funds from mortgage programme Clare Nuttall in Almaty July 8, 2009 The Kazakh government's mortgage refinancing programme has been eagerly accepted by banks and their clients, with several banks hoping for additional funds to satisfy additional demand. However, low consumer confidence is holding back the recovery of the retail lending and real estate markets. A total of KZT120bn (about $800m at current rates) has been allocated to Kazakhstan's 12 most active mortgage lenders to refinance existing mortgages. The programme is specifically targeted at the middle and working classes. Only businessneweurope.eu customers with only one property, not more than 120 square metres