Page 21 - Uzbek Outlook 2024

And Uzbekistan’s debut $1bn Eurobond issued on the London Stock Exchange (LSE) in February 2019 proved a smash hit, with demand of over $8.5bn, or eight-times oversubscribed. The launch was made with yields of 4.75% on the 5-year note and 5.375% on the 10-year note and was greeted with an air of optimism among investors who attended Uzbekistan’s New York, Boston and London roadshows. The issuance is set to pave the way for regular debt sales and sets a sovereign benchmark that will allow the biggest SOEs like oil and gas company Uzbekneftegaz to issue their own eurobonds.
The volume of state treasury bill issues has been rising fast, up 20-fold in the last five years, Isakov says. Currently local banks are the only players on the local bond market, but the hope is to repeat Ukraine’s success: after Kyiv was hooked up to Clearstream billions of dollars of foreign capital entered the local bond market, becoming an important new source of funding for the state.
Uzbekistan issued UZS4.25 trillion ($349.1mn) of green sovereign international bonds on the London Stock Exchange (LSE) in October 2023. In tandem, Central Asia’s second largest economy also placed international bonds valued at $660mn. The country’s green som tranche broke new ground as it made Uzbekistan the first EM sovereign to sell a local currency green bond overseas. Raised funds are to be used to implement goals of the country’s 2030 Development Strategy, including the transition to a green economy and energy sector reforms. Funds have been raised for a period of three years. Due to high demand from buyers, the coupon rate was reduced from 18% to 16.25% per annum.
More reforms are needed. The Ministry of Finance is still working on a draft capital markets law and the pension and insurance businesses are tiny. But development of the equity capital market has been slow and marred by disappointment.
Much hype surrounded the People’s IPO of UzAvto in 2022, which brought in $5mn, making it the biggest listing ever, but the government and investors were still disappointed.
But foreign investors looked at [UzAvot IPO] and decided it was too expensive. Officials say Uzbekistan has to admit that it is a small new market far away and that means it needs to offer discounts to attract some interest... UzAvto price fell some 20% after the IPO and its price remains below the IPO price.
In the run-up to the listing a large public awareness campaign was launched and workshops and roadshows organised to explain to the public the merits of investing in shares, but it failed to convince retail investors to buy the shares.
Several more top Uzbek companies are being prepared for similar listings, but it will take time and effort to tempt international investors into the market. The authorities have taken the experience in their stride.
7.0 Energy & Power
Uzbekistan’s economy is one of the fastest growing in emerging Central Asia. With that, the country’s energy consumption is expected to double in the next decade, requiring $26bn in investment to meet the electricity demand.
Gas
Russia will sell gas to the energy-hungry Uzbekistan by reversing the flow of the Soviet-era gas pipeline network that used to transport Turkmen gas to Russia.
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