SOFAZ revenues exceed 3 billion manats

By Aynur Jafarova

The budget revenues of Azerbaijan's state oil fund SOFAZ reached 3.005 billion manats in the first three months of 2014.

SOFAZ's budget expenditures amounted to over 2.443 billion manats in the mentioned period.

The revenues were received from the implementation of oil and gas agreements, including over 2.99 billion manats from the sale of profit oil and gas, 2.3 million manats for transit payments, and 13.3 million manats for bonus payments, SOFAZ said on May 20.

The fund transferred over 2.34 billion manats to the state budget in the reported period.

Expenditures in the amount of 70.1 million manats were directed to financing the improvement of the social-economic condition of refugees and internally displaced persons, 5.6 million to financing the reconstruction of the Samur-Absheron irrigation system, 5.1 million manats to financing Baku-Tbilisi-Kars railway construction, and 3 million manats to financing the state program on the education of Azerbaijan youth abroad in 2007-2015.

"The fund's extra-budgetary revenues related to the revaluation of foreign exchange totaled 10.1 million manats. SOFAZ's extra-budgetary revenues related to the price change of gold amounted to 60.8 million manats, while extra-budgetary expenses related to the price change of USD, EURO, GBP, and other currencies totaled 50.7 million manats," SOFAZ said.

SOFAZ also pointed out that 51.2 percent of its total investment portfolio was concentrated in the U.S. dollar (around $18.6 billion) in the first quarter of 2014.

The total volume of the fund's investment portfolio amounted to around $36.344 billion in the first three months of 2014.

SOFAZ noted 36.9 percent of its investment portfolio is concentrated in euro (€9.75 billion), five percent in British pound (£1.08 billion), 1.2 percent in Turkish lira, 0.5 percent in the Australian dollar, 1.2 percent in Russian ruble, and 0.6 percent in Korean Won. The remaining part of the portfolio (3.5 percent) is concentrated in gold.

SOFAZ has continued its policy in the reported period to place investment portfolio in short-term tools.

The share of funds invested for a period of up to five years covers 87.7 percent of the fund's investment portfolio.

SOFAZ also noted 55.6 percent of the investment portfolio was concentrated in securities for a period of up to one year, 31 percent from one to three years, 1.1 percent from three to five years, 1.6 percent for a period of more than five years, and 10.7 percent in real estate, stocks, and gold.

SOFAZ, an entity that accumulates and manages Azerbaijan's oil and gas revenues, was established in 1999 with assets worth $271 million.

The main purposes of the fund are the accumulation of funds and placement of assets abroad to minimize negative impacts on economy, prevent the 'Dutch disease', ensure savings for future generations, and maintain the current social and economic standards in the country.

The assets of SOFAZ has increased by 2.07 percent as of April 1, 2014 compared to early 2014 ($35,877.5 million), standing at $36,618.4 million.

Starting from the first quarter of 2012, the fund started purchasing gold, and the amount of the purchased gold was 30 tons 175 kg (970,146 ounces) as of April 1.

Situation in Ukraine affect s SOFAZ portfolio

The value of SOFAZ's equity portfolio decreased in the first quarter of 2014 due to the developments in Ukraine.

"Despite the income received from different investments, the losses resulting from managing assets of the fund in the first three months of 2014 amounted to 1.8 million manats," SOFAZ said.

In the following months, the revenues from managing assets of the fund totaled 87.8 million manats on January 1-May 15 as a result of the stabilization and growth in the equities price of Russian companies, SOFAZ added.

Under the new investment strategy, SOFAZ began investing in assets denominated in Russian rubles on October 19, 2012.

SOFAZ's investment portfolio currently includes only short-term deposits in Russian Gazprombank to the amount of three billion rubles (nearly $100 million).

SOFAZ owns 2.95 percent of the shares in the Russian VTB Bank, which cost it $500 million.

SOFAZ also owns the Gallery Actor, a trade and office center located on Pushkin Square in Moscow. It was purchased by the fund at the price of $133 million.