UPDATE 1-Kazakhmys in talks over possible $1.6 bln power station sale

Thu Feb 7, 2013 2:57pm GMT

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LONDON Feb 7 (Reuters) - Copper miner Kazakhmys said on Thursday it was in early stage talks about selling its stake in a Kazakhstan power station in a deal which could be worth around $1.6 billion.

The London-listed company said it noted press speculation regarding its ownership of Ekibastuz GRES-1, the largest power station in Kazakhstan, and confirmed it had started discussions about a possible deal to sell its 50 percent holding.

While primarily focused on mining copper and gold, Kazakhmys also manages four coal-fired power stations which supply around 20 percent of Kazakhstan's power, a part of the business which generates reasonable returns.

Analysts estimate that Kazakhmys' power division could account for a quarter of its net profit in 2013, but the ownership structure of the assets - a joint venture with the government - has not been without challenges, and the company could use the cash instead to fund investment in mining, which it controls.

"Kazakhmys has entered into discussions regarding the holding, but these are at an early stage and may or may not lead to a transaction," said the company, declining to comment on the possible value of any deal.

Press reports said the talks are being held with Samruk Energy, a unit of Kazakhstan's sovereign wealth fund, and the deal has a $1.6 billion price tag. Samruk already owns the other 50 percent of the asset, which it bought from Kazakhmys in 2009.

"If an eventual sale is close to the suggested price, although negative for earnings, we would view this as a positive given the beneficial impact on the balance sheet and cash flows," Credit Suisse said in a note.

The Ekibastuz power station differs from the company's three other power assets as it sells to third parties, whereas the others supply Kazakhmys' mines and smelters. The company bought Ekibastuz for an initial payment of $1.1 billion in 2008, as it sought to use its cash pile and diversify.

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