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Politics and Macroeconomics

Fixed Capital Investments Increase 11.5% In January-August

Investment into fixed capital in Kazakhstan totalled KZT 772.6 Billion (current rate 135.80 / $1) in January to August 2004, an 11.5% increase vs. the same period of last year.

“A growth in investment was observed in 12 regions during the reporting period”, the National statistics agency said. The largest growth was noted in Astana (by 1.6 times) and in the Kostanay and Pavlodar oblasts (1.5 times). The growth of investment into the Almaty oblast was 1.3 times greater; in Atyrau and Eastern Kazakhstan oblasts and Almaty increased by 1.2 times each. In Akmola, Aktobe, Mangystau, Southern Kazakhstan and Karaganda it was 2-10% times.

Meanwhile, a decrease in investment of 1.6 times was reported in the Zhambyl oblast, the western Kazakhstan and the Kyzylorda regions dropped 1.5 times, and Northern Kazakhstan region by 2.2%. (Interfax-Kazakhstan)

Considerable Foreign Investment Growth Expected By 2008

A considerable growth in foreign investment is expected in Kazakhstan by 2008, the Kazakhstani Finance Minister, Arman Dunaev said Monday, citing international experts.

“A number of experts, in particular from the World Bank believe that the oil sector alone will experience no less than USD 4 Billion per year in investment”, Dunaev said at a meeting with correspondents from leading foreign mass media outlets. He said this would occur “in the foreseeable future, before 2008”.

The minister reminded attendees that for the first 13 years of Kazakhstan's independence the total volume of direct foreign investment totalled USD 25.8 Billion. He believes that this proves that the national investment policy has been successful. (Interfax-Kazakhstan)

Equities

The KASE-Shares index increased by 3.66% to 196.56 by the end of period on September 14 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 September 8 and September 14 2004, the volume of equity trades at the KASE decreased to USD 12,139,052 from USD 15,560,855 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank CenterCredit (CCBN), Charaltyn (HRLT), Narodniy Bank (HSBK), Kazakhmys (KZMS), Kazakhtelecom (KZTK), Ordabasy (ORDB), ValutTransit Bank (VTBN) and Zerde (ZERD) and preferred shares of Alyuminiy ATF Bank (ATFBp & ATFBp8), Narodniy Bank (HSBKp), Ordabasy (ORDBp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

The national oil and gas company, KazMunayGas plans to launch 20 new fuel stations in the regions of Kazakhstan during 2005. “This will be accomplished within the KMG three-year investment plan for expansion of fuel stations network”, a message on the official company website read.

The message said that by the end of 2004, the KMG affiliated structure – KMG-Zhaiyk LLP plans to build 13 new fuel stations in western Kazakhstan and oil bases in Uralsk and Aktobe

Moreover, KMG-Zhaiyk plans to establish a merchandizing network of fuel stations in the Mangystau and West-Kazakhstan oblasts, and before the end of 2005, plans to attract “not less than 170 fuels stations, including 50 before the end of this year”.

At the moment, there are 12 fuel stations, 6 gas fuelling stations and 1 gas collection unit operating in the western region of Kazakhstan under the KMG logo. Recently, the company opened a new fuel station in the Makhambet settlement in the Atyrau oblast, equipped with automatic registration and fuelling systems. The company also opened 4 similar fuel stations in 2003 along the main highways, the Astana-Borovoe and Astana-Almaty.

KMG-Zhaiyk LLP is engaged in the wholesale-retail sale of oil products in the western regions of Kazakhstan. As was reported earlier, KazMunayGas is 100% owned by the state. KazMunayGas is a vertically integrated oil and gas company, which includes more than 45 various structures and enterprises carrying out a full cycle of services for exploration, extraction, processing, transportation of crude hydrocarbons, and construction of petroleum industry, telecommunications and transportation facilities. (Interfax-Kazakhstan)

***

The oil extraction company, KazakhOil Aktobe LLP, intends to become a major company in Kazakhstan. “We intend to become one of the leading companies in Kazakhstan”, the company's Director General, William Daily said in Almaty.

The company is developing the deposits, Alibekmola and Kozhasay in the Aktobe Oblast. KazMunayGas and the privately held Nelson Resources Ltd. Own this oil company, with equal shares controlled by each.

Daily said that the Kazakhstani Energy and Mineral Resources Ministry approved a plan for the full-scale development of the southern section of the Alibekmola deposit. According to Daily, at the moment there are 25 production wells and one water-injection well at Alibekmola. Soon one more injection well will be launched. “At the moment, the pilot development of the Kozhasay deposit with 2 production wells is underway”, he added. As a whole, the director general said that KazakhOil Aktobe extracts 25,000 barrels of oil per day (3,000-3,300 tonnes). According to Kuandykov's information, this year, 19-20 wells would be drilled at Alibekmola. Over 100 wells will be drilled at the deposit in total.

According to Kuandykov, the volume of capital investment in KazakhOil Aktobe would total USD 140 Million in 2004. As was reported earlier, in May 2004 Nelson Resources purchased 36% of the Karakuduk deposit. (Interfax-Kazakhstan)

***

Eni SpA subsidiary Saipem SpA, an Italian service company, has won a USD 800 Million contract for the oil fields in Kazakhstan's sector of the Caspian Sea, Bloomberg reported on September 7, citing Roberto Macarello of Kepler Equities, who attended a conference Saipem held for analysts.

Saipem will work at the Kashagan field in the Northern Caspian, he said. The details of the contract will be worked out over the next six to seven weeks.

Agip KCO is conducting drilling at several oil blocks in Kazakhstan's sector of the Caspian, the largest of which is Kashagan. Agip KCO includes Eni (the operator with 16.67%) TotalFinaElf with 16.67%, ExxonMobil with 16.67%, Shell with 16.67%, Inpex with 8.33%, Phillips with 8.33%, and BG with 16.67% share. The latter has said it will leave the project, however. Consortium members legally have the right of first refusal for the share, but the government says it intends to purchase it. BG’s share is worth an estimated USD 1.23 Billion at market value.

Agip KCO was established after a 40 year PSA was signed in 1997. It will begin commercial production in 2007 — 2008. (Interfax-Kazakhstan)

***

The Oil-extraction company, KazakhOil Aktobe LLP has attracted USD 10.6 Million in credit for a 7-year period from a British export-credit agency, for use in developing deposits. A corresponding agreement was signed in Almaty on Thursday.

KazMunayGas and Nelson Resources Ltd own the company on equal terms. The loan was arranged by Nelson Resources Ltd with the assistance of BNP Paribas, and was guaranteed by Kazkommertsbank and supported by the export-credit guarantee department (EGCD) for payment of engineering services rendered by Halliburton KBR.

The deal, “demonstrates increasing trust in the Kazakhstani financial system and the bank, and it will help us to attract financing on a long-term and privileged basis”, Kazkommertsbank Managing Director, Magzhan Auezov said. Nelson Resources Ltd. President, Baltabek Kuandykov expressed hope “for continuing cooperation”.

KazakhOil Aktobe was established in 1999 and is developing the deposits Alibekmola and Kozhasay in Kazakhstan's Aktobe oblast. (Interfax-Kazakhstan)

***

Kazakhstan is currently considering the construction of a gas pipeline to connect the Caspian and the western regions of China, the Kazakhstani ambassador to Russia, Krymbek Kusherbaev said Tuesday. “Energy cooperation between Kazakhstan and China is now on a large-scale”, the ambassador stated.

“The Chinese National Petroleum Company has been producing oil in the Aktobe oblast for several years. The construction of the oil pipeline to western China, with a capacity of 20 million tonnes per year has begun. We are not ruling out the participation of the Chinese in the exploration and development of oil deposits in the Kazakhstan sector of the Caspian Sea”, the diplomat said.

Kusherbaev stressed, “the construction of a gas transportation facility connecting Kazakhstan with the western section of China is logical as a part of the partnership strategy”. (Interfax-Kazakhstan)

Banking and Finance

Kazakhstan's largest commercial bank, Kazkommertsbank, filed a claim with a court in Astana claiming that the results of a recent tax check made on the part of the Tax Committee of the Finance Ministry be declared invalid. “We made a claim against the tax authority for incorrectly calculating taxes. We are trying to prove that we have interpreted the law more correctly and we do not agree with the tax claims for USD 30 Million”, Magzhan Auezov, KKB’s managing director, told a group of foreign journalists on Tuesday.

Meanwhile, according to another KKB managing director, Aidar Akhmetov, Kazkommertsbank will refute an article that appeared in the Express K newspaper where the newspaper predicted the bank’s bankruptcy in the near future and accused its management of excessive involvement in politics. He called the information, “totally inadequate, and false”. He said, “The bank considers this an opportunity to file a claim against the newspaper”.

“For its 14 years in operation, KKB has never violated its obligations before its partners. All depositors and all clients are able to question their account managers”, Akhmetov said. Kazkommertsbank is one of the three largest banks of Kazakhstan.

During the first half of 2004, KKB made a profit of USD 38.1 Million. As of July 1, 2004 the bank's total assets totalled USD 3.6 Billion, and its capital grew to USD 372 Million. (Interfax-Kazakhstan)

Metals and Mining

During its annual shareholders meeting, the management of Kazakhmys Corporation JSC decided to restructure the company into a Limited Liabilities Partnership, Eldar Mamedov, the director of the corporate law services said.

The proposal, “On the Voluntary Reorganization of the Company” was raised in view of their plans to enter international financial markets. The company intends to increase its cost per share in order to make them a more attractive investment. The company considers the London Stock Exchange (LSE) as a potential market for the placement of shares. The shareholders made a proposal to list of Kazakhmys Corporation on the LSE through a British holding firm. (KazInform)

***

The Mining Metallurgical Corporation (MMC), Altyn Aymak CJSC, plans to launch a hydro-metallurgical gold-production plant by the end of 2004. It is believed that the plant will produce 500 kg of gold annually during the first stage of it’s operation with a further increase up to 1500 kg, reported Akhat Kulenov, the president of Altyn Aymak, at the Mining World Central Asia 2004 Central-Asian international conference on September 15.

According to Kulenov, the enrichment factory to process gold-containing sulphide ores at an annual capacity of 100,000 tonnes and the laboratory divisions have already been built and are operating. The enrichment technology focuses on “the application of gravitation methods of ore dressing”. Currently more than 70% of the gold is converted to concentrate, containing 100-120 grams of gold per 1 ton with 85% real extraction.

The project includes the reconstruction of the mine, the expansion of the enrichment factory and the plant. “If this project is implemented, future gold extraction will reach 90% of enrichment”, he concluded. (Kazakhstan Today)

Energy and Power

JSC Energocenter –3, which supplies heat for 70% of Shymkent, has been assigned the entrusted ownership of JSC Kazakhstan’s Municipal Systems, the Director of Oblast Department of Municipal Services in Shymkent, Murat Sabdenov said.

Mr. Sabdenov explained that assignment of an enterprise that was formerly public property to entrusted management has occurred due to a worsening financial situation at the company. According to Mr. Sabdenov, the last fiscal year ended with losses amounting to KZT 187 Million. Kazakhstan’s Municipal Systems will manage the Heat and Energy Company for 10 years without the right for subsequent purchase. JSC KKS agreed to invest KZT 463 Million into the firm during the management period. (Kazakhstan Today)

Transport and Telecommunications

A tender for the state-owned stake in the telecom company, Nursat has been announced for October 14.

A message on the part of the state property and privatisation committee of the Finance Ministry was published in the official press on September 7.

According to the message, the size of the state stake is 18.6% of total charter capital. The number of shares amounts to 246,617.

The starting price for this share is KZT 94.251 Million, and the guarantee fee is KZT 14,137,650.

The document read that the commission would announce a winner based on the highest price suggested, as well as the proposal best meeting all other tender requirements. The bids will be accepted in sealed envelopes.

If two equally attractive proposals are submitted, an English language auction will then be held to define the final winner.

On the other hand, if the number of registered participants is less than 2, the tender would be considered null and void, until following the third attempted tender, where the stake may be sold to the sole bidder.

At the same time, the message read that according to the tender requirements, a potential participant should assume an investment of USD 11.920 Million for the modernization and renewal of communications equipment over a 5-year period, and the company should meet all requirements for the long-term rent of the property.

Nursat is a leading telecom operator created as part of the Kazakhstani-US conversion program, and has operated since the mid 90’s. (Interfax-Kazakhstan)

***

Russian Telecom Company, VimpelCom announced that it would provide mobile communication services based mainly on pre-paid terms.

VimpelCom bought Kazakhstan's second largest mobile communications provider, Kar-Tel with the brands K-Mobile and the Excess card, in early September.

”At the moment, only 10% of Kar-Tel's subscribers provide pre-paid services while 95% of VimpelCom clients in Russia use this kind of service. So we are planning an aggressive introduction of pre-paid services in the Kazakhstani market", said Alexandr Izosimov, General Director of VimpelCom, at a news conference in Almaty. The company is not planning “significant changes” in the pricing policy in Kazakhstan.

VimpelCom bought Kar-Tel for USD 350 Million and the sale for cash of up to 50% minority interest minus one share in Kar-Tel is being discussed with a Kazakh partner. VimpelCom intends to retain control of Kar-Tel, with no less than 50% plus one share of ownership. The deal is scheduled for completion by the end of the year.

Currently, Kar-Tel provides services to more than 600,000 clients. Along with Kar-Tel another GSM service provider is Kazakhstani-Turkish K'Cell. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 21 September 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

For more information and other publications please contact Yelena Kovalenko at +7 (3272) 596 708

This publication is intended for investors who are not private or expert investors and should not, therefore, be redistributed to private or expert investors. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or solicitation of an offer to buy or sell investments. Information contained herein is based on sources which we believe to be reliable but we do not represent that it is accurate or complete. Kazkommerts Securities Ltd. and/or connected persons may have acted upon or used this material, or the research or analysis on which it is based before its publication. Kazkommerts Securities Ltd. and/or connected persons may from time to time, as principal or agent, make purchases, sales and/or offers to purchase and/or sell in the open market or otherwise and may have a position long or short holding in any investment mentioned herein, or a related investment, as a result of engaging in such transactions.