First Stage of Privatization
Second Stage of Privatization

On November 8 2000 Uzbekistan held a tender for an international financial consultant to advise on the privatization of national energy holding company Uzbekneftegaz. However, a winner has not yet been selected and the State Commission on Conducting Tenders for Sale of State Property to Foreign Investors is still evaluating the technical and financial proposals of bidders. The privatization plan is part of an aggressive oil and gas investment bid launched by the Central Asian state earlier this year, under which foreign companies involved in exploring and extracting oil and gas would enjoy major concessions.


Uzbekneftegaz, which has a charter capital of $1.56 billion, produced 8 million tons of crude oil and 56 billion cubic metres of natural gas last year. Since independence, the government has invested $1.2 billion in modernizing the company.

Uzbekneftegaz holds 51% of the shares in the following eight joint stock companies: Ugeoneftegazdobycha, Uztransgaz, Uzneftepererabotka, Uzburneftegaz, Uznefteproduct, Uzneftegazstroy, Uzneftegazmash and Uzneftegazishchitaminot.

First Stage of Privatization

According to Resolution 511 on Measures of Denationalization and Privatization of Enterprises with Attraction of Foreign Investors in 2000-2001, dated November 26 1999, all the above companies except Uzneftegazishchitaminot are set for privatization in 2001. Uzneftegazishchitaminot was set for privatization in 2000. However, these privatizations (as appears to be the usual case in Uzbekistan) are behind schedule, and competition of the privatizations in 2001 may not be realistic given the delays in appointing financial consultants. The role of financial consultant is important in assisting Uzbekneftegaz and the Bureau on Case-by-Case Privatization in structuring and implementing the privatization of Uzbekneftegaz's four subsidiaries, which were highlighted as the core companies in the oil and gas industry.

The subsidiaries are:

  • oil and gas prospecting/exploration company Uzgeoneftegazodobycha;

  • transport monopoly Uztransgaz;

  • Uzneftepererabotka, which consists of two refineries; and

  • drilling unit Uzburneftegaz.

The government intends to sell 44% of Uzgeonefetegazdobycha and Uztransgaz, and 39% of Uznefrepererabotka and Uzburneftgaz, to foreign investors. The financial advisor will likely have the option of advising on the privatization of each company separately or all of them in a package.

The bureau invited six investment banks to bid. These are BNP Paribas, ABN Amro, CCF/HSBC, CS First Boston, Commerzbank and Raiffeisen of Austria. However, it is not yet known how many of these have submitted proposals.

Second Stage of Privatization

Resolution 511 also provides that the 49% interest in Uzbekneftegaz is subject to privatization in 2001. Uzbekneftegaz intends either to offer its shares to portfolio investors or to deposit them with the Bank of New York, which will issue American depositary receipts or German depositary receipts.

In addition to offering shares to foreign investors, eight joint stock companies are offering 5% to 10% of their shares to employees. It has been announced that, at present, the employees of Uzburneft, Uzneftgazstroy, Uzneftgazmash, Uzneftgazmash and Uzneftgazishchitaminot have already completed the purchase of the shares allocated to them.

For further information on this topic please contact Mark Lockwood or Tamara Perekolskaya at Baker & McKenzie's Almaty office by telephone (+7 3272 50 99 45) or by fax (+7 3272 50 95 79) or by e-mail ([email protected] or [email protected]).
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