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Politics and Macroeconomics

Senate Approves Power Industry Law

The Senate of the Kazakhstani Parliament has adopted the law "On the power industry" on Thursday. The Kazakhstani Minister of Energy and Mineral Resources Vladimir Shkolnik said that the document was created to further develop market relations in the Kazakhstani power industry.

The draft law stipulates the distribution of electricity-related services. The draft law includes issues concerning centralized electric power trade at the wholesale market, the transition to the retail market, and the status of the electric energy supplier. The draft also envisages the development of corresponding legal acts to further develop the wholesale and retail electricity markets. According to Shkolnik, adopting the draft law will not require additional funds. (KazInform)

Equities

The KASE-Shares index increased by 0.48% to 192.43 by the end of period on June 29 2004.

 KASE-Shares index and weekly volume of trades

Note: KASE-Shares index is based on ask prices for equities in A Listing

In the period between June 23 and June 29 2004, the volume of equity trades at the KASE increased to USD 48,145,002 from USD 4,372,693 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank CenterCredit (CCBN), Bank Caspiyskiy (CSBN), Narodniy Bank (HSBK), Kazakhmys (KZMS), Ordabasy (ORDB), Temirbank (TEBN), UKTMK (UTMK), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Almaty Kus (ALKSp), Alyuminiy Kazakhstana (ALKZp), AMG (AMGZp), Bank Caspiyskiy (CSBNp), MangystauMunayGas (MMGZp),  Tsesnabank (TSBNp), ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

The Forum for Kazakhstani contracting organizations organized by the «Agip KCO» company- project operator began on June 23 in Atyrau as a part of the North Caspian Production Sharing Agreement. One hundred and twenty-five domestic companies, the potential contractors of the gas refinery plant construction in Western Eskene, formerly Karabatan, participated in the forum. The companies will be required to perform pipe-and electric installation and other necessary work. “Agip KCO” would supply the oil, gas and sulfur equipment.

The tender has already been announced to implement the first phase of the Kashagan deposit pilot-commercial development project. Kazakhstani contracting organizations were able to obtain information on the construction contract.

Foreign members of the tender learned more about working conditions in Kazakhstan and in the Atyrau Oblast in particular. The winner of the tender must be determined by the winter of 2005 so that work may begin in the spring of 2005. According to estimates made by “Agip KCO” specialists, the first and second lines of the project will be completed by the second quarter 2008 by which time the daily oil production volume will reach 300,000 barrels.

The partners of the North Caspian Production Sharing Agreement include “Agip Caspian C.B.V.,” (16,67%), “BG” (16,67%), “ExxonMobil” (16,67%), “Shell Kazakhstan Development Billion.V.” (16,67%), “Total” (16,67%), “ConocoPhillips” (8,33%) and “Inpex” (8,33%). (KazInform)

***

The Caspian Pipeline Consortium (CPC) estimates that the capacity of the Tengiz-Novorossisk oil pipeline will increase by up to 67 million tonnes and that the pipeline will be completed in 2008 rather than in 2014 as initially planned, the CPC Deputy General Director of Projects and Design said on Wednesday during a presentation at the second Russian oil and gas congress. "CPC stockholders let us know that they are ready to act,” he said. Recently CPC chose the contractor to prepare the preliminary project paperwork needed to increase the system’s capacity and develop a construction plan.

According to him, the development of the Caspian deposits both in the Russian and Kazakhstani sectors will require a pipeline capacity increase of up to 50 million tonnes of oil per year. Deputy General Director also said that to increase the capacity of the pipeline by 2008, CPC needs the full support of those governments of the countries with which it works and that of the company’s stockholders. (Interfax-Kazakhsta n)

***

The Italian-based energy group ENI is willing to work with the Kazakhstani government on a potential purchase of a share of the British BG in the Kashagan oil deposit, ENI CEO Vittorio Mincato announced at a press conference on Friday.

Mincato said that ENI is prepared to work with the Kazakhstani government as they have done in the countries where their offices are located.

ENI heads the project on the development of one of the major oil deposits in the world. Previously, BG intended to sell its share to the other consortium members -ENI, Shell, ExxonMobil, ConocoPhillips and Total. (RusEnergy)

***

Nelson Resources Ltd., a private Canadian company currently implementing numerous long-term oil projects in Kazakhstan, plans to list its shares and gain admission to trading securities on the London Stock Exchange (AIM), according to the company’s website.

The funds raised from share placement will be used to finance oil projects launched by Nelson Resources. The company plans to raise approximately GBP 80 Million by floating its shares on AIM (USD 146 MM). After the shares are floated, the worth of the company will be GBP 500MM. Hoare Govett and Conaccord Capital are consulting Nelson Resources on its share listing.

Nelson Resources management has stated that the expected permission to trade the company's common shares on AIM will contribute to Nelson Resources recognition in business circles, enhance the company's reputation and status among its clients and suppliers, and increase the public’s awareness of the company's activities (Interfax-Kazakhstan)

***

From January through May 2004, the “UzenMunayGas” company, a branch of JSC “Exploration Production “KazMunayGas,” has produced nearly 2,369,000 tonnes of oil, 5% more than planned, the PB “UzenMunayGas” director Murat Kurbanbaev said.

According to Kurbanbaev, for the January through May 2004 period, the company produced some 616,000 tonnes of oil above projected amounts, whereas for the same period in 2003 some 99,000 more tonnes were extracted than planned. Kurbanbaev said that oil extraction growth resulted from oil recovery increases at the underdeveloped deposits and from increased drilling. Kurbanbaev also noted that oil product indices concerning oil deliveries to consumers exceeded forecasts by 6% and totaled 141, 475 tonnes of oil.

Gas condensate production during the first five months of 2004 totaled 11, 175 tonnes. Gas production at the start of the year amounted to 460 million cubic meters, 365 million cubic meters of which was natural gas. Associated gas totaled 94 million cubic meters. An additional 36 million cubic meters of gas was extracted beyond the estimated levels.

Thus far in 2004, the “UzenMunayGas” production branch plans to produce 5, 600,000 tonnes of oil, 27,000 tonnes of gas condensate and 229.1 million cubic meters of associated gas. (Kazakhstan Today)

Banking and Finance

The Kazakhstani Senate has ratified the agreement between the Kazakhstani government and the European Bank for Reconstruction and Development (EBRD) for a loan for the Atyrau-Aktau highway reconstruction project. The goal of the project is to help Kazakhstan rebuild five lanes of the 610 km Atyrau-Aktau highway in West Kazakhstan.

The completion of the highway will reduce traffic volume of the Aktau-Astrakhan route, vehicle depreciation, cargo expenses, and passenger transportation.

The project is part of Kazakhstan’s 2004-06 social-economic development plan. The EBRD loan will be allocated over a 15-year period, which includes a three-year grace period. The loan amount totals USD 119.2 Million. The project is expected to begin in the spring of 2005 and be completed by November 2007. (Kazakhstan Today)

***

The representatives of several banks included in the International Foreign Exchange Fund World Bank group met in Almaty last Friday and discussed energy market issues, the oil-sector development, and the central banks’ role in monitoring and supporting the countries’ financial stability, the Kazakhstani National Bank press-service reported.

Heads from the Belgian National bank, the central banks of Czechia, Hungary, Luxemburg, Slovakia, Slovenia, Turkey as well as the Kazakhstani National Bank, the Kazakhstani Finance Ministry, International Foreign Exchange Fund, the World Bank and oil producing companies participated in the meeting.

The International Foreign Exchange Fund office has been working in Kazakhstan since 1995. Since September 1992, when Kazakhstan joined the World Bank, it obtained loans from this fund totaling USD 1.9 Billion. The loans were used to implement 23 projects. Kazakhstan has already spent USD1.4 of the total amount. Sixty-six percent of the assets were invested in state management, energy and finance management. (Kazakhstan Today)

***

The State Corporation for Kazakhstani export loans and investments insurance joined the international Credit Alliance network after signing a partnership agreement at a recent conference of Credit Alliance held in the Paris headquarters of the largest COFACE organization in the world. Credit Alliance unites loan-credit insurance and credit information companies from more than 90 countries.

According to the corporation’s press release, the agreement allows the members to access a broad database of credit information from more than 44 million enterprises and organizations in various countries and explore the export potential of Credit Alliance members. The conference members greatly appreciated Kazakhstan’s export loan insurance experience and noted the corporation’s active work.

Some 146 of 750 Kazakhstani enterprises not involved in the natural resources exports expressed interest in the corporation’s services. Twenty-four export loan and investments insurance coverage applications totaling USD 22.7 Million were received, and the corporation agreed to insure 20 projects in the amount of USD 20MM. The State Corporation is currently considering 14 insurance contracts that amount to USD 6.7 Million. (Interfax-Kazakhstan)

***

The Saving Retirement Fund (SRF) of Kazakhstan’s Halyk Savings Bank (HSBK) has accumulated KZT 100 Billion in retirement money as of June 1, 2004 (current rate – 136.53/$1). The SRF’s press-service wrote that the Halyk Bank's SRF is one of the largest retirement savings systems in Kazakhstan and has the best results as compared to its competitors.

According to the press release, the bank’s present paid-in charter capital amounts to KZT 630.1 Million. However the fund's shareholders plan to increase this amount to KZT 1 Billion by the end of 2004. The fund's reserve capital is over KZT 230.8 Million, and its equity capital is KZT 1,269.6 Million, the “highest” among all Kazakhstani SRFs, according to the press release.

SRF's shareholders include the Halyk Savings Bank of Kazakhstan, which holds over 50% of the SRF's shares, KazTransOil State Company, KazMunayGas National Oil and Gas Company and the Kazakhstan Temir Zholy national railway carrier. Some KZT 406.1 Billion worth of retirement savings was in Kazakhstan's SRFs as of May of this year. The SRF’s net investment income totaled KZT 100.7 Billion. Sixteen SRF’S including one state fund are currently operating in Kazakhstan. (Interfax-Kazakhstan)

Metals and Mining

The agreement to apply Chinese electrolysis technologies to aluminum production in Pavlodar was signed recently in Beijing. The Swiss-based CORICA AG and Chinese international aluminum concern CHALIECO, formed by Chinese companies CHINALCO and China Aluminum International Trading Co. Ltd, signed the agreement.

The Swiss-based CORICA AG obtained a contract to construct an electrolysis plant in Pavlodar to produce primary aluminum. Kazakhstani firms will take part in the creation of the plant’s infrastructure, including roads, its water and power supply, and telecommunication system.

According to the General Director of the Kazakhstani office of CORICA AG Georgiy Ganauer, Chinese businessmen won the tender to participate in aluminum processing because of the low-priced progressive technologies they apply, and their obligations to observe environment protection requirements. The Chinese party intends to invest up to USD 20 Million worth of equipment and technologies in the project. CHALIECO Corporation plans to install 320 K/Ampere electrolysis equipment in the Pavlodar plant’s workshop, and to produce the first batch of products in 2007. (KazInform)

***

Aluminium Kazakhstan JSC’s 2003 net profits reached KZT 3.772 Billion (current rate 136.45 / USD1). In 2002, they totaled KZT 1.992 Billion, according to the company’s financial report.

According to this report, in 2003 the company’s sales totaled KZT 31.022 Billion, an increase from 2002 when Aluminium Kazakhstan JSC netted KZT 29.111 Billion.

At the end of 2003, Aluminium Kazakhstan’s equity capital amounted to KZT 27.114 Billion compared to KZT 23.450 Billion at the end of 2002. During this period, the company’s capital stock remained at KZT 5.835 Billion. In 2003, the company’s assets amounted to KZT 33.678 Billion compared to KZT 31.093 Billion in 2002. In 2003, Aluminium Kazakhstan produced 1.450 million tonnes of alumina, a 2.5% increase from 2002.

The enterprise, located in the Pavlodar oblast, unites the Pavlodar aluminum plant, Torgai and Krasnooktyabrsk bauxite mines, Keregetas lime mine and the TETS-1 heating station. Aluminium Kazakhstan is one of the top ten alumina producers in the world. It is also a member of the Eurasian industrial association along with Kazhrom, SSGPO, Eurasian Energy Corporation and the Shubarkol Komir coalmine. (Interfax-Kazakhstan)

***

The Kazakhstani Stock-Exchange (KASE) registered a contract agreed upon by Ust-Kamenogorsk titanic and magnesium plant (UKTMP, Eastern Kazakhstan oblast) with ordinary shares -shares sold as "A" category securities.

The Irbis agency said that as a result of this deal, 215,820 ordinary shares that comprise nearly 11% of the declared voting shares were sold last Thursday at KASE.

Andrey Tsalyuk, the leading exchange analyst, explained that the percentage amount was calculated based on the shares the company declared. Tsalyuk added that in 2004 the UKTMP shareholders intend to increase the JSC's charter capital by several times.

In early 2004, the UKTMP's equity capital totaled KZT 7.7 BL, and its charter capital was KZT 21.6 Million. According to KASE, the deal was closed at KZT 4.726.86 per share for the total amount of KZT 1.020.150.925, 20. The company's average share price is 4,507.20 tenge per piece.

"This deal stands out because of its amount, Tsalyk said. “It is notable that probably a part of the state shareholding that had been sold earlier was re-sold by the UKTMP's shareholders."

The remaining UKTMP state shareholding (SSH) of 15.5% of the total floated shares or 17.22% of voting shares were sold at KASE in January 2004. The shares were sold in a number of lots at an estimated average price of KZT 7.880,45 per share (USD 56.53 at the effective exchange rate) for more than KZT 1.318 Billion (about USD 9.4 MM). This SSH was auctioned at KASE on January 26-30. KIB Asset Management Ltd. brokerage company served as the company’s liaison. (Interfax-Kazakhstan)

***

The JSC Sokolov-Sarbay Mining and Enrichment Plant (SSMEP) in the Kostanay oblast plans to invest USD 63 Million in production this year, according to the company’s press-release.

The company has already reported its plans to invest USD 49 Million in 2004 production. In 2003, the enterprise invested USD 44.2 Million in the production. SSMEP also planned to increase iron-ore output to 37.7 million tonnes, instead of the planned 35.5 million tonnes, and up to 15.9 tonnes of saleable ore, including 9.5 million tonnes of pellets.

SSMEP is Kazakhstan’s largest iron-ore producer specifically of concentrate and fluxed pellets. The plant is included in the Eurasian Industrial Association along with the JSC “Alyuminiy Kazakhstana,” the Eurasian Energy Corporation, both of which are located in the Pavlodar Oblast in north Kazakhstan, JSC Shubarkol Komir coal mine located in the Karaganda oblast, and the KazChrome transnational company. (Interfax-Kazakhstan)

Energy and Power

Kazakhstani experts have analyzed the possibility of constructing an industrial atomic low-power reactor (IAR) in Kurchatov in the East Kazakhstan oblast at the seminar entitled the "Development of Japanese –Kazakhstani Cooperation in the Field of Peaceful Use of Atomic Energy and Nuclear Technology " recently held in Almaty

According to the Kazakhstani National Nuclear Center Deputy General Director Irina Tazhibaeva, the IAR construction has been considered because Kurchatov, which has a population of 10,000, experiences heat and hot water supply problems and needs additional energy supply sources. Annual city-heat needs are estimated at 150,000 Gcal. Fuel use during heating season in Kazakhstan amounts to nearly 25,000 tonnes of coal. Ecologists noted that coal use has considerably worsened the ecological condition in Kurchatov.

The Russian-based CJSC “METR” Vice-President Dmitriy Zelenskiy, a seminar member, proposed to build a nuclear heating plant (NHP) based on the RUTA reactor facility. While presenting NHP RUTA, Zelenskiy emphasized that creating a nuclear technology park would enable the people to live in more civilized conditions. (Interfax-Kazakhstan)

Transport and Telecommunications

The Russian airspace organization “Rosaviakosmos” has asked Kazakhstan to develop the technical conditions necessary for a universal platform for low-orbit and geostationary spacecrafts. Scientists from many other countries are interested in participating in this space program as well.

The Kazakhstani Prime-Minister Daniyal Akhmetov gave a specially-formed group one week to prepare the paperwork for the quickest possible financing of these priority projects and to develop a plan to create a unified organization that would coordinate and implement Kazakhstani space projects.

Akhmetov also said that such important space exploration proposals from a Russian airspace agency offers proof of Kazakhstan’s significant role in these projects. (Khabar)

***

More than 60 projects have already been realized in the information technologies park in the Alatau village outside of Almaty, the JSC “Center of Engineering and Technologies Transfer” Vice-President Timur Kusainov announced at the park-development project presentation in Almaty.

Foreign companies have completed forty percent of the projects, of which some 15% are so-called start-up projects. The remaining percentage has been completed by Kazakhstani enterprises. Project participants include such companies as Microsoft, HP, Siemens, Cisco Systems and Thales. Negotiations are being conducted with Samsung, LG, Oracle, and Sun Microsystems.

The enterprise registration process has been simplified to create the most favorable investment climate, and the corporate tax has been reduced by 50%. To obtain such preferences, the enterprises must be located in the techno park, which will receive 90% of the profit from its principal activities. (Kazakhstan Today)

***

The Intergovernmental Television and Radio Company (IGTRC) Mir obtained the rights to broadcast in Astana and Almaty. The frequencies were granted to the two cities at the regular session of the government’s television and radio frequencies tender commission on Tuesday in Astana, according to the commission’s chairman and the Minister of Information Sauytbek Abdrakhmanov. Abdrakhmanov noted that at the last session of the government commission, which took place on December 22, 2003, members decided to consider separately the issue of granting television broadcasting frequencies to Mir IGTRC.

Abdrakhmanov emphasized that Mir IGTRC’s Kazakhstani branch occupies a well-deserved place in CIS television and thanked the management of the branch for such a position. Abdrakhmanov also noted that at the same time the Kazakhstani Ministry of Information has the right to insist upon a balanced language.         

According to Kazakhstani legislation, Kazakh-language programs must comprise 50% of all broadcast programs. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 6 July 2004

Note: Some of the information quoted in this issue has been provided for us by Golden Eagle Partners. For more information on those articles, please contact: zhanar@maverick.kz

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