State Oil Fund to con­tinue fi­nanc­ing four strate­gic pro­grams

Azer News - - Nation - By Sara Is­rafil­bay­ova

The State Oil Fund of Azer­bai­jan SO­FAZ is pro­jected to con­tinue fi­nanc­ing four strate­gic pro­grams in the 2018 bud­get-year, SO­FAZ told Az­ernews.

“Out of them two are in­fras­truc­tural, the Sa­mur-Ab­sheron ir­ri­ga­tion sys­tem re­con­struc­tion project and the Baku-Tbil­isi-Kars (BTK) new rail­way project; the other two projects re­flect so­cial re­spon­si­bil­ity: mea­sures re­lated to so­cial and set­tle­ment is­sues of refugees and in­ter­nally dis­placed peo­ple; and the “State Pro­gram on Ed­u­ca­tion of the Azer­bai­jani youth abroad in 2007-2015,” the com­pany re­ported.

SO­FAZ stressed that over­all, ex­pen­di­tures on all four projects are to equal 482.3 mil­lion man­ats ($283.69 mil­lion) be­low 5 per­cent of the Fund’s over­all ex­pen­di­tures, adding that in or­der to pre­serve the SO­FAZ’s in­comes, the use of al­ter­na­tive fund­ing sources has been in­creas­ing. For ex­am­ple, since 2017 SO­FAZ has not been con­tribut­ing to the “South­ern Gas Cor­ri­dor”, which is now fi­nanced via debt in­stru­ments.

Speak­ing of future in­vest­ments plans, SO­FAZ noted that the com­pany con­stantly re­views its in­vest­ment strat­egy in line with risk/re­turn pro­file of its stake­hold­ers to fur­ther op­ti­mize in­vest­ment port­fo­lio and in­crease the Fund’s long term re­turn.

“Go­ing for­ward, SO­FAZ will con­tinue de­ploy­ment of its funds within ma­jor as­set classes in the quest of max­i­miz­ing risk-ad­justed re­turns. We reg­u­larly track the fi­nan­cial mar­kets, an­a­lyze the in­vest­ment cir­cum­stances and op­por­tu­ni­ties through the re­search based method­olo­gies and eval­u­ate them ap­pro­pri­ately,” they noted.

Fur­ther, the Oil Fund stressed that cur­rency al­lo­ca­tion lim­its are set within its In­vest­ment Pol­icy and when­ever the Fund makes in­vest­ment de­ci­sions it also takes into ac­count those lim­its.

“Given that SO­FAZ, as an in­sti­tu­tional in­vestor, is fac­ing a va­ri­ety of mar­ket risks, in­clud­ing volatil­ity, di­ver­si­fi­ca­tion is key in mit­i­gat­ing those risks. Say­ing that, the core ob­jec­tive of the Fund’s in­vest­ment strat­egy, that re­flects a long term fo­cus, is to build a di­ver­si­fied in­vest­ment port­fo­lio to max­i­mize the risk-ad­justed re­turns,” the or­ga­ni­za­tion stressed.

Fur­ther, it was men­tioned that in line with this strat­egy SO­FAZ has man­aged to sig­nif­i­cantly di­ver­sify its in­vest­ment port­fo­lio by as­set class and this process will con­tinue go­ing for­ward. “Through this ap­proach we get ex­po­sure to new cur­ren­cies as a re­sult of fur­ther di­ver­si­fi­ca­tion of the in­vest­ment port­fo­lio by as­set class. There­fore, our new cur­rency se­lec­tion gen­er­ally de­pends on the at­trac­tive­ness of re­turns of dif­fer­ent in­vest­ment op­por­tu­ni­ties lo­cated in dif­fer­ent coun­tries.”

Touch­ing upon the in­vest­ments to im­prove the so­cial con­di­tions of refugees and IDPs, the com­pany noted that it is the Fund’s flag­ship project, which has been run­ning since 2001, and dur­ing all these years a to­tal of 2.102 bil­lion man­ats ($1.24 bil­lion) has been spent on it, with 105.0 mil­lion man­ats ($61.76 mil­lion) hav­ing been paid by SO­FAZ in 2017 only.

Afore­men­tioned funds were al­lo­cated for the con­struc­tion of 71 res­i­den­tial dis­tricts of pri­vate houses, 16 res­i­den­tial blocks with 202 houses multi-storeyed build­ings that in to­tal al­low for the set­tle­ment of 32,480 fam­i­lies, as well as a large num­ber of so­cio-in­fras­truc­tural ob­jects. In ad­di­tion, 76 schools, 7 mu­sic col­leges, 55 com­mu­nity cen­tres, 63 ad­min­is­tra­tive build­ings, 60 kinder­gartens, 17 med­i­cal cen­tres, 5 hos­pi­tals, as well as 49 com­mu­ni­ca­tion junc­tions, 773 km of high­ways, 870 km of wa­ter pipe­lines, 1640 km of trans­mis­sion lines, 436 km of gas pipe­lines, 84 km of sew­er­age lines were built within the frame­work of the pro­gram; 745 high volt­age elec­tric trans­form­ers, 30 elec­tric sub­sta­tions, 241 arte­sian wells, 212 wa­ter reser­voirs and 86 pump­ing sta­tions were com­pleted and made ready for use, and an ir­ri­ga­tion sys­tem cov­er­ing 11,310 hectares was cre­ated. Thanks for the pro­gram, en­demic poverty be­came a thing of the past in the refugee and IDP com­mu­nity, drop­ping from 75 per­cent in 2003 to be­low 12 per­cent.

Speak­ing of the Fund’s out­look for 2018, given the sit­u­a­tion at the global oil mar­ket, SO­FAZ noted that the bud­get for 2018 was pro­jected with the oil price taken $45 per bar­rel, as against $40 for the last year.

“Still, this fig­ure rep­re­sents a very pru­dent down­side risk es­ti­ma­tion, since given the lat­est oil mar­ket trends it is highly prob­a­ble that the ac­tual an­nual price will in fact be higher. In Jan­uary 2018, SO­FAZ also re­ceived a pay­ment of $450 mil­lion bonus for the ex­ten­sion of the pro­duc­tion-shar­ing agree­ment on the Az­eri-Chi­rag-Guneshli (ACG) oil­field; also, rev­enues from the man­age­ment of SO­FAZ as­sets are ex­pected to be slightly higher than in 2017,” Azer­bai­jan’s Oil Fund em­pha­sized.

They went on to say that in view of these facts, it is re­al­is­tic to ex­pect that SO­FAZ’s bud­get rev­enues pro­jected at 11.56 bil­lion man­ats ($6.8 bil­lion), will be fully ex­e­cuted.

“Ac­tual re­sults of the year far ex­ceeded ex­pec­ta­tions in 2017, and the Fund’s as­sets, in­stead of de­crease, reg­is­tered an in­crease from $33.1 bil­lion to $35.8 bil­lion. This year, the SO­FAZ bud­get sur­plus is es­ti­mated to constitute 1.8 bil­lion man­ats ($1.06 bil­lion),” SO­FAZ un­der­lined.

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