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Politics and Macroeconomics

Thorough Analysis For Budget Financed Investment Projects

Kazakhstani Prime Minister, Daniyal Akhmetov has ordered the Ministry of Economy and Budget Planning to tighten selection requirements for investment projects to be financed from the national budget in 2005-2007, the governmental press service disclosed.

Issues surrounding investment project financing was discussed on Wednesday during a government meeting. According to the press release, Kazakhstani Prime Minister chaired the meeting. The Kazakhstani Prime Minister “instructed the Minister of Economy and Budget Planning to consider only those projects that have conducted feasibility studies and design estimates”.

The Prime Minister pointed out on the necessity to establish responsibility for local budget program administrators who oversee government spending related to implementation of investment projects, in particular for social infrastructure. (Interfax-Kazakhstan)

Mangystau Fixed Capital Investment Exceed KZT 282 Billion Over First 7 Months Of 2004

The volume of the investment into fixed capital in the Mangystau Oblast during January–July 2004, totalled KZT 282.37 Billion, the Oblast Statistics Department Director, Galina Ivanova said.

Investment into fixed capital for construction and major building repairs remain 50.5%, or more than KZT 14.2 Billion out of total investment volume into fixed capital. Geological survey expenses totalled 25.9%, or about KZT 73.3 Billion, machines and equipment were15.2% or KZT 42.8 Billion.

The chief funding source was the assets of economic entities (74.6% of total volume). Foreign investments totalled 20.1%, or about KZT 56.7 Billion.

Private plants and organizations utilized the majority of investment (66.2%) into fixed capital. 27.2%, or KZT 76.9 Billion was from economic entities from other countries operating in the Mangystau Oblast. The share of the state sector was 6.6%, or more than KZT 18.5 Billion.

The investment was mainly spent for industrial facilities, totalling 82.2% of the general investment volume. Including the mineral resources industry, this figure would be 76.2%. (Kazakhstan Today)

Equities

The KASE-Shares index increased by 6.85% to 188.91 by the end of period on August 24 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 August 18 and August 24 2004, the volume of equity trades at the KASE increased to USD 118,552,418 from USD 21,385,881 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank CenterCredit (CCBN), Bank Caspiyskiy  (CSBN), Narodniy Bank (HSBK), Kazakhmys (KZMS), Ordabasy (ORDB), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Alyuminiy Kazakhstana (ALKZp), ATF Bank (ATFBp), ATF Bank (ATFBp8), ValutTransit Bank (VTBNp) and ValutTransit Zoloto (VTZLp). (Irbis)

Company News

Oil & Gas

It is expected to build the Atasu –Alashankou oil pipeline from the oil loading railway rack at the Atasu station in the Karaganda Oblast in central Kazakhstan to the Chinese border and within the area of the railway terminal, Druzhba – Alashankou. The pipeline route will pass along the Atasu –Agadyr - Akchatau- Aktogay- Ucharal – Alashankou, along the territory of the Karaganda, East Kazakhstan and Almaty Oblasts. According to preliminary technical data, it will be 988 km long.

Kazakhstan and China have now agreed to begin building the Atasu-Alashankou section in August so as to complete construction in December 2005. Before the present time, no information was provided about the commencement of construction. In July, the State Oil Transportation Company, KazTransOil (part of KazMunayGas) and the Chinese National Corporation of Oil and Gas Exploration and Development (CNODC, an affiliate of CNPC) announced the foundation of a JV on a parity basis for the construction of the Atasu-Alashankou oil pipeline.

The commissioning of the first line is scheduled for 2006, and the second for 2011. The annual carrying capacity for the first 813 Million diameter line will total up to 10 million tonnes, the second line - 20 million tonnes. (Interfax-Kazakhstan)

***

Russia and Kazakhstan have agreed on expanding the capacity of the Caspian Pipeline Consortium (CPC), but only on certain conditions. A CPC shareholder stated that consortium members were briefed on these conditions during a recent meeting chaired by the Industry and Energy Minister, Viktor Khristenko.

The shareholders feel that the entire credit line of the consortium should be changed to 9% from 12% per annum by 2005. In addition, the payment of CPC liabilities would be executed for all creditors simultaneously. The CPC is currently paying only for cash loan while interest is being accrued and not paid in reference to Russia and Kazakhstan, which have placed fixed assets into the consortium. (Interfax-Kazakhstan)

***

The offices of the offshore projects operation companies Tyub-Karagan and Atashskiy have opened in Aktau. These projects have been implemented on a parity basis by the national oil and gas company, KazMunayGas and LUKoil Overseas, the LUKoil Overseas Holding Ltd., the press service reported.

The spring and summer stages of general environmental research at the sea sectors of Tyub-Karagan and Atashskiy have been completed. A group of contractors also completed detailed seismic work at these deep-sea sectors. The seismic research of shallow waters is also almost completed, and environmental monitoring is being conducted. By the end of this year, it is planned to conduct engineering geological research, and the preparation of project documentation for drilling, as well as the beginning of equipment purchases for the construction of the first exploration well at Tyub-Karagan. In addition, at this time, an insurer will be chosen for the project through a tender.

Currently, forecasted oil resources of Tyub-Karagan are estimated at approximately 390 million tonnes. (KazInform)

***

TengizChevroil is currently considering the possibility of transporting oil through various export routes. TCO Director General, Alexander Cornelius said at a news conference in Atyrau on Tuesday that the company is studying the possibility of using the pipeline from western Kazakhstan to China, which is currently under construction. He noted that the CPC is "the cheapest variant", for TCO right now.

At the same time, he believes that the CPC expansion will remain behind the increase of oil production by TCO. "As far as I am aware, CPC is considering expanding its capacity, however we are able to complete our projects for the increase of production earlier than they will be able to complete this process”, Cornelius said.

TCO develops the oil deposits Tengiz and Korolevskoe, which are located in the Atyrau oblast. The estimated potential recoverable reserves at these deposits amount to 750-1,125 million tonnes.

TCO is now implementing two projects at Tengiz, and their total estimated cost is more than USD 3.5 Billion. These are the sour gas injection (SGI) and second-generation project (SGP). The scheduled completion time for SGI construction is Q2, 2005. The launching date for the SGI/SGP projects is Q3, 2006. Their implementation would increase recovery of oil at Tengiz to at least 19 million tonnes per year. (Interfax-Kazakhstan)

Banking and Finance

The International rating agency, Fitch Ratings increased the individual rating of the Kazakhstani Bank, CenterCredit (BCC) from ‘D/E’ to ‘D’, and confirmed the long-term rating of ‘B+’, a short-term rating of ‘B’, and support – at ‘4’.

The rating outlook is considered ‘stable,’ the bank press release reads. “A rating increase reflects the growing profitability and capitalization of the bank, and its continued expansion,” the press release said, quoting rating agency specialists.

In addition, a Fitch commentary was cited in the press release, “The individual rating also includes the potentially fluctuating (but not improving) operational environment in Kazakhstan, and a considerable concentration of credit and low Loan Loss Reserves (LLR).”

Long-term, short-term and individual BCC ratings indicate Fitch’s outlook on the likelihood of governmental support in case of necessity, the press release said.

Bank CenterCredit’s net profits in H1 2004 were KZT 1.125 Billion (current rate 136.27/$1) versus KZT 463 Million in H1 2003. The bank’s assets were KZT 120.5 Billion as of July 1, 2004, having increased by 46% from the beginning of the year, and by 82% compared to July 1, 2003. The bank’s liabilities as of that date were KZT 110.9 Billion, having increased by 47% from the beginning of the year. The bank’s own capital was KZT 12.3 Billion as of the beginning of July, compared to KZT 10.8 Billion as of the beginning of 2004.

BCC is one of the five largest banks of Kazakhstan. It has 19 branches and 88 cash desks throughout the country. (Interfax-Kazakhstan)

***

During the first half-year of 2004, the assets of Eurasia Bank JSC increased by 36.9% and exceeded KZT 69 Billion.

Funds available for loans at the bank exceeded KZT 23.5 B; and they have increased since the beginning of the year by KZT 7.4 Billion, or 45.7 %. Among the bank’s clients are the enterprises belonging to the Eurasian Industrial Association. Most loans are provided for the expansion and modernization of industrial capacity.

From January to July 2004, the bank increased its liabilities by more than KZT 17.7 Billion or by 42.4 %. By July 1, the liabilities of Eurasia Bank equalled KZT 59.7 Billion, equity capital – KZT 9.5 Billion (a 9.5 % increase since January 2004), and net profit is KZT 849.9 Million (2.1 times more than last year).

According to management, the bank plans to maintain its pace of development, and increase its share in the banking system. Moreover, by the end of the year it is planned to open branches in all regions of the republic. (Kazakhstan Today)

***

The international rating agency, Moody’s Investors Service raised its rating for the JSC Bank TuranAlem on Eurobonds from “Baa3” to “Baa2”, the BTA press service disclosed.

In addition, the agency has reconsidered future changes of BTA’s rating from stable to positive. The improvement in the rating confirms the positive financial development of the bank, the press release read.

According to experts, the JSC Bank TuranAlem’s rating is one of the highest among all financial institutes of CIS countries. (Kazakhstan Today)

Metals and Mining

Recently, an OHSAS 18001 labour protection management system certificate of compliance was awarded to the Donskoy GOK Mining and Enrichment Plant at the republican seminar on issues surrounding the introduction of OHSAS 18001 international standards at Kazakhstani industrial enterprises.

The Donskoy GOK has become “the first industrial enterprise in the entire post-Soviet territory”, to receive such a certificate, Gulzhan Karagusova, the Minister of Labor and Social Protection of the Population of the RK, noted.          According to Ms. Karagusova, the most important fact with this situation is the fact that Donskoy GOK is a mining enterprise and “the process introduction of international safety standards was more complicated, than at most other industrial enterprises in Kazakhstan”. “This proves that the introduction of international standards for labour safety is achievable for all Kazakhstani enterprises”, the Minister said.

The availability of OHSAS 18001 standard certificates at industrial enterprises is a necessary condition for the country to enter the World Trade Organization. Pursuant to WTO requirements, 80% of the country’s industrial enterprises must possess such certificates. (Kazakhstan Today)

Energy and Power

AES Ekibastuz LLP, which owns Ekibastuz GRES-1 in the Pavlodar oblast in Northern Kazakhstan, plans to invest a total of KZT 694 Million (current rate 136.16/$1) into upgrading the station’s power units in 2004.

AES Kazakhstan is a structural subdivision of the American AES Corporation. AES Ekibastuz approved KZT 182 Million of additional investment into upgrading Unit 5 at the station, which will allow them to increase the capacity of Unit 5 from 300 to 400 MWt (by 33%). The commissioning for the 500 MWt-powered Unit 3 is planned in February 2005.

As a result of these agreements, is planned to increase “AES Ekibastuz” power plant’s available capacity to 2,000 MWt by March of next year, the company press service stated. A total of 4 power units with total capacity of 1,800 MWt are currently operational at AES Ekibastuz.          AES is a leading global power company; with sales of USD 8.4 Billion in 2003. AES delivers 45,000 megawatts of electricity to customers in 27 countries through 114 power facilities and 17 distribution companies. The company employs 30,000 people. (Interfax-Kazakhstan)

***

From January through June 2004, the Aksu Electrical Power Station, a part of the JSC Eurasian Energy Corporation (EEC) produced some 6.156 billion kW/h of electrical power, which is 5.6% more than the anticipated volume, the EEC press service disclosed.

EEC specialists have connected the increase in production capacity with the technological re-equipment of the plant that was conducted in 2001. Some USD 30 Million was spent for reconstruction of the fourth energy block. As a result, the effectiveness of the energy block was boosted by 15%, and environmental pollution was reduced.

In 2004-2006, reconstruction of equipment for the energy block No.3 is planned to perform during 2004-2006. The complete upgrading of the entire Aksu Electrical Power Station is planned by 2016. As one of the main coal producing plants and electrical power producers in Kazakhstan, EEC holds International Standard of Quality certificates, ISO 9001 and ISO 2000. (Kazakhstan Today)

***

In February 2005 at Ekibastuz GRES –1, the LLP AES Ekibastuz it is slated to commission the energy block No. 3, the company’s press service reported.

A KZT 512 Million expense for the recovery of the third energy block, damaged because of an accident that occurred in November 2003, is expected. In 2004, the company spent KZT 132 Million.

The company also plans to make additional investments amounting to KZT 128 Million for reconstruction of energy block No. 5, which was suspended seven years ago and re-started in March 2004. It will enable the company to increase its capacity by 33% (300 to 400 mW).

According to the AES Ekibastuz press service, the company plans to produce 7.7 billion kW/hour of electrical power in 2004, whereas in 2003 it generated 6.4 billion kW/hour. The LLP AES Ekibastuz was founded based on the GRES -1 plant in 1996. At present, four energy blocks operate at the station, which carry a load of up to 1,800 mW. (Kazakhstan Today)

Transport and Telecommunications

Russian-based TopS Business Integrator (BI from Moscow) noting its strong potential intends to launch its market development from Kazakhstan. “Traditionally, Russian companies begin from Ukraine, but we have decided not to focus on traditions, but rather on the objective reality, which is why we chose Kazakhstan”, TopS BI Director of Regional Sales, Ivan Kachinskiy said at press-conference on Thursday in Almaty. He reported that this choice was based on the “high business growth dynamics in Kazakhstan and accordingly, strong demand for business automation”. The company is planning to open an office early this fall in Almaty as a serious basis for cooperation.

TopS BI Vice-President of Regional Development, Andrey Nadein cited experts, saying that the volume of the IT-market in Kazakhstan is assessed at USD 250 Million - 300 Million for the current year. The majority of this volume is for projects involving the national companies. “We assess the market as rather positive, and plan to take 5%-7% during the next couple of years”, he stated.

In the meantime, speaking about the potential of the IT-market in Kazakhstan, A. Nadein commented that its annual growth totals from 25% to 40%, based on estimates.

TopS BI was founded in 1991. It employs more than 350 people. Total sales volume for last year exceeded USD 36 Million. (Interfax-Kazakhstan)

***

Between January-June 2004, the Kazakhstani national telecommunications operator, Kazakhtelecom JSC earned KZT 12.8 Billion in net income (at the current exchange rate 136.38/$1), which is 61.1% more than during the corresponding period of last year.

The company report submitted to the Kazakhstan Stock Exchange read that the volume of services rendered for the reported period increased by 17.9% to KZT 36.8 Billion, and the cost of services rose by 16%, totalling more than KZT 20.3 Billion as of July 1 of the current year.

Kazakhtelecom’s equity capital for the year (since July 1, 2003) grew by 1/3, having exceeded KZT 72.2 Billion as of end of June.

The national operator's assets as of July 1, 2004, totalled more than KZT113.3 Billion, or 21.9% more than one year earlier.

Currently, Kazakhtelecom JSC is the only communication services provider in Kazakhstan operating in a rural area and holding the exclusive right to provide long distance and international communication services.

As an international operator, Kazakhtelecom provides communications to over 230 countries worldwide. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 31 August 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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