Key financial indicators

For the first time in the last 10 years, the growth rate of the economy crossed the 5% threshold and amounted to 5.1% by the end of 2023. The main driver was the government's expansionary fiscal policy with a significant share of government spending financed by transfers from the National Fund. This increase investment in fixed assets was also a record since 2013.

Inflation at the end of 2023 amounted to 9.8%, which was halved compared to the beginning of the year (source: halykfinance.kz, macroeconomic report for Q4 2023).

To prevent price increases, the National Bank of the Republic of Kazakhstan maintained the prime rate at 16.75% in 2023, the highest rate in the last six years. Tightening of monetary policy in Kazakhstan occurred against the background of tightening of monetary policy by global central banks. However, in August, October and November 2023, the Monetary Policy Committee of the National Bank of the Republic of Kazakhstan made decisions to reduce the prime rate. Thus, the prime rate at the end of 2023 amounted to 15.75% per annum (source: ­www.nationalbank.kz, the schedule of decisions on the prime rate).

In 2023, the national currency strengthened by 18.2% against the Russian ruble and appreciated by 1.4% against the U.S. dollar. Volume of trades on KASE increased by 57%, on the secondary market of shares increased by 78%, volumes of trades on the secondary market of GS increased by 49%, and the number of deals on the exchange market increased by 53% (source: ­www.kase.kz, performance review for 2023).

According to the data of the National Bank of Kazakhstan for 2023, the exchange rate of tenge fluctuated in the range of KZT 431.08-482.77 per U.S. dollar. At of the end of December 2023, the exchange rate of tenge to US dollar was 454.56 tenge per US dollar (source: ­www.nationalbank.kz, exchange rates).

Forecast for 2023-2024

Profit growth of equity companies is planned due to increase in profit of EGRES-2 JSC, capitalization of finance costs and other expenses due to resumption of the project on power unit No.3, as well as increase in tariff for electricity generation and capacity.

Implementation costs, million KZT

Sales expenses at the end of 2023 decreased by KZT 179 million (2%) compared to 2022 and amounted to KZT 8,931 million. This decrease is attributed to lower costs for KEGOC's services related to the balancing of electricity production and consumption due to a reduced tariff.

Forecast for 2024-2025

In the forecast for 2024, distribution costs are planned at KZT 9,215 million, which is KZT 284 million or 3% higher than in 2023. The increase in selling expenses is attributed to a rise in the volume of electricity output from the turbines of EGRES-1 LLP and an increase in KEGOC's service prices. For 2025, the increase compared to 2024 is expected due to further growth in electricity supply from EGRES-1 LLP turbines and an additional rise in KEGOC's service prices.

Administrative expenses

For 2023, administrative expenses amounted to KZT 20,435 million, a decrease of KZT 5,327 million or 28% compared to 2022, mainly due to EGRES-1 LLP recognising in the prior period a penalty on the additional CIT return relating to the cancellation of the tax incentive at OSH-500 for 2016-2020.

Forecast for 2024-2025

In the forecast for 2024, administrative expenses are expected to amount to KZT 20,435 million, higher than in 2023. This increase is mainly due to the indexation of salaries as part of social support for employees of subsidiaries and affiliates, growth in expenses for consulting, audit, and legal services (with some consulting expenses from 2023 reallocated to 2024), and the inclusion of AES Ust-Kamenogorsk LLP and AES Shulbinsk LLP into the Company’s consolidation perimeter. For 2025, the rise in administrative expenses is primarily attributed to cost indexation.

Financial expenses

Financial expenses for 2023 totaled KZT 25,244 million, which is KZT 4,504 million lower than in 2022. This decrease is mainly due to a reduction in expenses for EGRES-1 LLP as a result of capitalization of remuneration costs during the reporting period and a decrease for the Corporate Center due to debt reduction from early and scheduled repayment of loans.

Forecast for 2024-2025

The forecast for 2024 shows finance costs of KZT 35,918 million. The increase is mainly due to the reflection of borrowing costs at EGRES-1 LLP (Unit 1) in current costs from the second half of 2024, as well as an increase in the debt portfolio. Increase in the 2025 forecast, compared to 2024, due to reflection of EGRES-1 LLP (Unit 1) borrowing costs in current expenses from the beginning of 2025.

Based on the results of 2023, Samruk-Energy JSC complied with financial and non-financial covenants of creditors, which are fixed on a semi-annual basis.

Loan covenants

The Group of companies of Samruk-Energy JSC has certain covenants on all bank loans and obligations under bonds, bank guarantees of Samruk-Energy JSC, as well as the loan of Samruk-Energy JSC from Samruk-Kazyna JSC (Note 16). Non-compliance with these covenants may result in negative consequences for the Group of companies of Samruk-Energy JSC, including increase of borrowing costs and declaration of default. As of December 31, 2023, the Group of companies of Samruk-Energy JSC complied with its covenants.

Based on the results of 2023 and 2022, the Group of companies of Samruk-Energy JSC fulfilled normative values of covenants on loans, as well as received waivers to reduce thresholds, in cases where a breach event was predicted to occur.

Debt load

Based on the results of 2023, the consolidated nominal debt of the Group of companies of Samruk-Energy JSC amounted to KZT 271.7 billion, the reduction of nominal debt for the reporting period compared to the results of 2022 (KZT 314.6 billion) amounted to KZT 42.9 billion.

Decrease in nominal debt in 2023 is due to full early repayment by the Group of companies of Samruk-Energy JSC of the EBRD loan, foreign currency loan of Moynak HPP JSC to DBK and loan of EGRES-1 LLP to Halyk Bank of Kazakhstan JSC.

Currency and inflation risks

In order to level the currency risk in in September 2023, works on full early repayment of the currency loan of ‘Development Bank of Kazakhstan’ JSC in the amount of $6.41 million with the rate of 1.15*6M LIBOR+1.15% (5.96%) in ‘Moynak HPP JSC were carried out.

Reserve for liquidation of ash dumps

In accordance with the Environmental Code, the Group of companies of Samruk-Energy JSC also has a legal obligation to liquidate the site of ash dumps, which are landfills for disposal of wastes from the operating activities of the Group of companies of Samruk-Energy JSC.

As of December 31, 2023, the carrying amount of ash dump liquidation reserve was KZT 3,143,439 thousand (December 31, 2022: KZT 2,481,989 thousand). Estimation of the existing reserve for ash dumps liquidation is based on the interpretation by the Group of companies of Samruk-Energy JSC of the current environmental legislation of the Republic of Kazakhstan, supported by feasibility study and engineering research in accordance with current standards and methods of restoration and reclamation works.

This estimate is subject to change upon completion of subsequent environmental studies and revision of existing reclamation and restoration programs.

Optimization of interest expense

Reduction of interest expenses due to plan­ned — KZT 56.6 billion and early debt repayments — KZT 76.8 billion, carrying out works to reduce interest rates due to changes in financing terms and refinancing of existing loans of the Group of companies of Samruk-Energy JSC from new alternative sources of financing.

Credit rating (Fitch Ratings)

On October 20, 2023, the international rating agency Fitch Ratings affirmed long-term credit ratings of Samruk-Energy JSC in foreign and local currency at the level of ‘BB+’, outlook ‘Stable’, as well as revised the assessment of state support to the company from ‘strong’ to ‘very strong’.

Capital commitments

As of December 31, 2023, the share of the Group of companies of Samruk-Energy JSC in long-term contractual obligations of Forum Muider and EGRES-2 JSC amounted to KZT 3,495,602 thousand and KZT 3,137,124 thousand, respectively (December 31, 2022: KZT 3,997,304 thousand and KZT 11,812,824 thousand, respectively).

At present, Samruk-Energy JSC is inferior to foreign peer companies by some indicators.

EBITDA margin is a key indicator of the efficiency of the company's operations, reflecting its ability to generate earnings before interest, taxes, depreciation, and amortization. Compared to other companies such as Unipro, RWE, and CEZ Group, Samruk-Energy JSC shows high operational efficiency with an EBITDA margin ratio of 36%.

In terms of Debt/EBITDA and Debt/SK, Samruk-Energy JSC is on the average level compared to CEZ Group and RWE, but significantly lags behind Unipro in terms of financial stability.

In terms of ROIC (return on long-term invested capital), Samruk-Energy JSC is below its European peers, while 0.2% higher than CEZ Group.

At the same time, it should be noted that, unlike public peer companies, Samruk-Energy JSC is owned by the Government of the Republic of Kazakhstan. Consequently, the Company serves as an instrument of state policy in the electric power industry. Additionally, due to the high degree of wear and tear in the energy sector, socially significant investment projects (aimed at ensuring the reliability and uninterrupted operation of the energy system of the Republic of Kazakhstan) have been implemented since 2009. These projects have led to a significant increase in invested capital and, consequently, a reduction in ROI.

An additional factor affecting ROI is the low level of electricity tariffs in the Republic of Kazakhstan compared to peer countries.