SOFAZ reveals its investment portfolio

/By Azernews/

By Nigar Abbasova

The assets of Azerbaijan State Oil Fund (SOFAZ) have increased by 4.6 percent as of July 1, 2016 and stood at $35.1 billion as compared to $33.57 billion in early 2016, SOFAZ said in its recent report. 

The overall volume of investment portfolio amounted to $33.76 million. Some 20.45 percent of funds was placed in real estate, bonds and gold.  

As many as 79.6 percent of the investment portfolio was placed in bonds and money market instruments. Some 13.02 percent fell to a share of securities with AAA rating, while 26.61 percent was placed in securities with AA rating. Securities with A, BBB and BB rating accounted for 36.04, 19.9 and 4.43 percent respectively. 

As many as 70.12 percent of the SOFAZ investment portfolio was placed in financial instruments with the term of up to 5 years in the first half of 2016.

SOFAZ allocated some $611.5 million for construction of the Georgian section of the Baku-Tbilisi-Kars (BTK) railway as of July 1, 2016.

The funds were transferred to Marabda-Kartsakhi Railway LLC through the International Bank of Azerbaijan, in accordance with the agreement signed between the governments of Azerbaijan and Georgia.

Marabda-Kartsakhi Railway LLC was established for designing, construction, rehabilitation, reconstruction and operation of the Marabda-Turkish border railway section and relevant infrastructure projects. SOFAZ allocated $23.2 million for the implementation of the project in the first half of 2016.  

Being constructed on the basis of the trilateral (Georgian-Azerbaijani-Turkish) intergovernmental agreement, the railway project is expected to be commissioned by late 2016. Maximal bandwidth capacity of the railway will be 17 million tons of cargo per year. The figure is expected to stand at one million passengers and 6.5 million tons of cargo at the initial stage.  Azerbaijan allocated a loan of $775 million for the construction of the railway's Georgian section.

SOFAZ finances the project in accordance with the presidential decree. BTK is expected to expand multi-modal transportation opportunities and ensure the growth of passenger and freight transportation. 

The Fund has also allocated some $844 million for financing the project on the construction of a new STAR refinery in Turkey.

SOCAR Turkey Yatirim JSC was established with an authorized capital of $1.9 billion and a 40 percent public share, according to the decree of the President Ilham Aliyev, on adopting some additional measures to support the participation of Azerbaijan in the construction of Star refinery Turkey. Some $84 million was allocated for the project in the first half of 2016. Total cost of the project exceeds $5 billion.

The refinery will produce diesel fuel (5.95 million tons per year), aviation kerosene (500,000 tons), petroleum coke (630,000 tons), liquefied gas (240,000 tons), mixed xylol (415,000 tons), and sulphur (145,000 tons).

Annual volume of naphtha which is used by the Petkim oil and chemical complex (where SOCAR has a share in capital) as a main raw material is expected to be 1.66 million tons.  

Star Oil Refinery, which will be the first oil refinery built by the private sector in Turkey, is expected to be completed in 2018. The total cost of the project is estimated at $5.7 billion. It is expected to contribute significantly to the region's and country's economy by creating job opportunities and increasing competitiveness.

Earlier, the Fund’s CEO Shahmar Movsumov said that the entity is considering the possibility of making investment in Turkey.

The geography of SOFAZ asset allocation is as follows: 44.99 percent in European countries, 23.07 percent in North America, 3.83 percent in Australia, 27.07 percent in the Asia-Pacific region, 0.39 percent in the Middle East, 0.21 percent in South America, 0.44 percent in international financial institutions.

SOFAZ was established in 1999 with assets of $271 million. Based on SOFAZ's regulations, its funds may be used for construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems. 

The main goals of the State Oil Fund are accumulation of resources and placement of the Fund’s assets abroad in order to minimize the negative effect on the economy, prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations, and supporting current social and economic processes in Azerbaijan.