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Politics and Macroeconomics

Government Discusses Hydropower Industry

The development of a hydropower industry was discussed during a government session under the chairmanship of Prime Minister Daniyal Akhmetov.

During the beginning of the meeting, the Prime Minister reminded participants that electrical energy consumption is growing annually. During the last three years, consumption increased by 20%. An energy shortage occurs during the winter season, which is why Kazakhstan purchases the balance of its energy needs from Russia and Kyrgyzstan at high prices. Even though energy generation potential of the country is significant, in the near future Kazakhstan will experience an electrical energy deficit, in particularly in the Southern regions.

According to the Ministry of Energy and Mineral Resources, it is necessary to build several hundred small and medium capacity hydropower stations. These could provide a 2.5 times growth in ecologically friendly energy production. The nation possesses all natural, regulatory, technical, and financial conditions to begin construction of such plants.

The Prime Minister noted that it is necessary to pay close attention to existing but non-operating stations. The Moinakskaya hydropower station was given as an example. The construction of this hydropower station began 10 years ago but was never completed. (KazInform)

Investment Agency Touts Oil And Gas Services Enterprises

"Currently more than 600 enterprises in the manufacturing sector possess industrial and personnel potential to fulfil orders for oil and gas production," state investment agency KazInvest Vice President Igor Grigoruk announced at a meeting entitled "Industrial-Innovation In Mangystau Oblast" held in Aktau this week.

Some 50 of these enterprises are major machine-building enterprises that already produce goods for the oil sector, including 29 which are capable of increasing their export potential.

Grigoruk noted that Kazakhstan expects to receive USD 80 Billion in investment in its oil and gas sector alone by 2015. These funds will be used to create infrastructure, buy equipment and build facilities in all aspects of oil and gas production, including orders from industrial and manufacturing plants.

"Domestic enterprises could begin producing items to be used in the development of the Kurmangazy project, a deposit on the Caspian shelf, in order to gauge their level of preparedness," Grigoruk suggested. (Interfax)

Mangystau Oblast Investments Double

Fixed capital investments in Mangystau Oblast doubled during January-September 2004 compared to the same period of last year, and totalled over KZT 42.9 Billion. According to statistics, 50% of the investments, KZT 21.5 Billion was placed into fixed capital, for the construction and renovation of buildings and structures. 27.7%, or KZT 11.9 Billion was used for other projects and expenses.

Geological exploration totalled 20.5% or KZT 8.8 Billion; 22.3% or KZT 9.6 Billion went for the purchase of vehicles and equipment. The largest investment, 80.3%, was invested into industries, of which 75.6% or KZT 32.5 Billion was directed into the mineral resource industry and 1.7% or KZT 723.5 Million into manufacturing.

Private organizations and companies invested 69.5%, the majority amount of total investment amount. Foreign companies invested 24.1% of the total amount; state enterprises – 6.4%. (Kazakhstan Today)

Financial Center Planned For Almaty

The Minister of Economy and Budget Planning of Kazakhstan, Kairat Kelimbetov presented the concept of a financial center in Almaty at a governmental meeting on Tuesday in Astana. According to Kelimbetov, there are a number of advantages to creating it in Almaty, which has adequate conditions for further development as a financial center. Almaty has a high concentration of local capital and a positive climate for attracting foreign investment.             According to the minister, a working group created to develop the plan took into account international experience of current financial centers from a number of cities including Dubai, Dublin, and Singapore. In Kelimbetov’s opinion, it is necessary to create a legal regime in Almaty for the financial center, which implies the adoption of a specific law on the creation of a financial center in Almaty. It will also be necessary to introduce amendments into a number of national legislative acts. (KazInform)

Russian Minister Assumes Access To Pipeline In Kazakhstan

Viktor Khristenko, Russian minister of industry and energy, assumes that Russia will be able to use the Atasu-Alashankou oil pipeline in order to transport Russian oil to China. Mr. Khristenko spoke at a press conference in Moscow on Tuesday during the Russian Oil and Gas Week.

Responding to questions from journalists about the possibility of oil transportation though the Kazakhstan-China pipeline, Khristenko said, “Everything is possible. Russia and Kazakhstan are working together to balance long-term energy resources mainly oil and gas.” Khristenko emphasized that he was talking about directions in which Russia and Kazakhstan have already planned.

The minister noted, “In the framework of the potential long-term balance, recovery and transportation of oil in Russia and Kazakhstan, the parties must negotiate the new route to China which is currently under development in Kazakhstan.” “Russia and Kazakhstan will discuss increasing the capacity of the pipeline and the possibility of relying on transporting Russian oil via this route.” “Everything is possible,” concluded the minister. (Kazakhstan Today)

Equities

The KASE-Shares index increased by 0.61% to 205,54 by the end of period on October 26 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 October 20 and October 26 2004, the volume of equity trades at the KASE decreased to USD 11,951,334 from USD 27,890,908 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank CenterCredit (CCBN), Kazakhmys (KZMS), Kazakhtelecom (KZTK), Ordabasy (ORDB), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Alyuminiy Kazakhstana (ALKZp), ATF Bank (ATFBp), MangystauMunayGas (MMGZp), Ordabasy (ORDBp), ValutTransit Bank (VTBNp) and ValutTransit Zoloto (VTZLp). (Irbis)

Company News

Oil & Gas

Kazakhstani Energy and Mineral Resources Minister Vladimir Shkolnik announced that the nation is even now prepared to purchase a portion of the BG share in the Northern Caspian project.

"Perhaps in the end we will settle for a portion of the stake but we do hope to buy the whole share", Shkolnik told Senators during a plenary session of the Senate (upper chamber of parliament) on Thursday.

He said that the next round of negotiations would be held on October 28-29.

In regard to sources of funding for the BG stake, the minister said, "I believe that most likely it will be through loans", adding that this issue "depends on the amount of the stake to be bought". Shkolnik also expressed doubt that the deal could be financed by the national fund.

Earlier, Shkolnik said that Kazakhstan had reached an understanding with members of the international consortium Agip KCO on the possible purchase.

Earlier, BG had announced its intention to sell its stake in Agip KCO, which is carrying out drilling at a number of oil deposits in the Kazakhstani sector of the Caspian Sea, the largest of which is Kashagan. Consortium members intended to buy the 16.67% share. The government then announced its own intention to purchase the stake in June, which is assessed at USD 1.23 Billion.

Agip KCO includes ENI (16.67%) Total (16.67%), ExxonMobil (16.67%), Shell (16.67%), Inpex (8.33%), Phillips (8.33%), and BG (16.67%).

Agip KCO was formed following the signing of a 40-year PSA in 1997. It will begin commercial production in 2007 - 2008. (Interfax Kazakhstan)

***

Orenburggasprom (a subsidiary of Gazprom) will increase the conversion of Kazakhstani gas by 14.3% from 7 billion cbm in 2004 up to 8 billion cbm in 2005, the Public Relations Director, Ivan Kuzayev announced.

Currently according to Kuzayev, Gazprom, Orenburggasprom and the international consortium Karachaganak Petroleum Operating Billion.V. are negotiating a long-term contract on the expansion of conversion of Kazakhstani gas at the Russian gas refinery to up to 15 billion cbm annually.

In the event of a conclusion of the contract, the gas transportation system and Orenburggasprom facilities will be renovated. The costs could reach USD 300 Million, Kuzayev noted.

Renovation of the gas refinery at Orenburg is an alternative to the construction of a gas refinery in Kazakhstan, for which costs could be USD 1-1.2 Billion. (Interfax Kazakhstan)

***

Transneft is ready to consider the expansion of the Atyrau-Samara pipeline following Kazakhstan guarantees that it will be shipping a specific volume of oil through it, the president of Transneft, Semen Vainshtok, said at a press conference in Moscow.

 “We are negotiating with Kazakhstan on shipment and payment conditions. We will not consider investing without guarantees,” he said.

He also noted that increasing the capacity of the Baltic Pipeline System up to 62 million tonnes per year would force Transneft’s oil shipments to sit idle. Currently Transneft is unable to meet the pipelines’ requirements for 13 million tonnes per year. According to his data, Samara-Lisichansk pipeline lacks 4.5 million tonnes, the Unecha-Polotsk - 2 million, Omsk-Pavlodar (toward China, Atasu) – 6.8 million.

The president of Transneft noted that the expansion of the Baltic Pipeline System would allow the company to avoid depending on transporting Russian oil through neighbouring countries. (Interfax-Kazakhstan)

Banking and Finance

According to the Managing Finance Director of the KZT 10 Billion BTA Ipoteka (BTAI) registered bond program, Kairat Altynbekov, the program allows for obtaining cheaper long-term resources with lower interest rates on mortgage loans. Moreover, BTAI securities (with 10-years term of circulation) are considered additional instruments for local pension funds.

Bonds will be placed on the Kazakhstan Stock Exchange in 2005. The value of each tranche will be KZT 1.5-2 Billion. The first placement will already take place in November 2004.

 “Since pension funds are the main investors, the most significant portion will be in tenge equivalent and connected to the inflation rate”, Altynbekov explained. (KazInform)

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The syndicate of foreign banks has increased a syndicated loan to the Kazakhstani commercial bank, ATF Bank by USD 13 Million, and extended the term of the loan by one year. The original loan was provided in November 2003 in the amount of USD 62 Million. The total amount of the next syndicated loan is USD 75 Million. “This syndicated loan was presented to the bank for one year, it is an extension of the previous syndicated loan for USD 62 Million,” the bank’s press service reported.

The interest for the new loan is LIBOR+1.8%. The interest for the previous loan was LIBOR+2.25%. 25 foreign banks are included into the new syndicate. The lead managers of the loan are ABN AMRO Bank of the Netherlands and Deutsche Bank AG London.

The loan will be used to finance clients’ export-import operations.

ATF Bank is among the ten largest banks in Kazakhstan. It has branches in 18 cities throughout the country. The bank’s net profit after nine months of this year is over KZT 2 Billion (the current exchange rate in Kazakhstan is 132.6/$1), which is 51.6% more compared to the same period last year. (Interfax-Kazakhstan)

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Narodniy Bank of Kazakhstan estimates that after 2004 its assets will grow by 60% and net profit by 70%.

“After the first nine months of this year the bank's assets grew by more than 50%. I believe it will grow up to 60% by the end of the year. The profit for the first nine months of this year doubled compared to the same period of 2003, and it is expected to grow by 70% by the end of this year,” said the board’s deputy chairman of finance, Almas Chukin, at a press conference in Almaty on Wednesday.

Assiya Syrgabekova, the chairman of the board of directors of Narodniy Bank said that the bank’s assets grew by one third from the beginning of this year totalling KZT 337 Billion at end of September (the current exchange rate in Kazakhstan is 132.29/$1). Most of the growth, 72.5% happened by increasing their credit portfolio. The bank’s net profit from January to September of 2004 was KZT 7.5 Billion, which is 48.7% greater than their entire profit for 2003, and is twice more than the same period of last year. (Interfax-Kazakhstan)

Metals and Mining

The Sokolov-Sarbay mining and enrichment plant (SSMEP) in the Kostanay Oblast produced 11.35 million tonnes of commercial ore from January to September, compared with 10.8 million tonnes during the same period of 2003. This year’s output included 3.8 million tonnes of commercial concentrate and 7 million tonnes of iron ore fluxed pellets.

The company supplied Russian, Kazakhstani and Chinese metallurgical plants with 10,837,000 tonnes of commercial ore, which is 4.6 % more than in 2003. SSMEP also produced 26,258,000 tonnes of raw iron ore, 106.4% more than in 2003, and processed 26,253,000 tonnes of raw ore, or 6.3% more.

SSMEP is the largest producer of raw iron ore products in Kazakhstan, specifically, concentrate and fluxed pellets. SSMEP is part of the Eurasian Industrial Association (EIA). In addition to SSMEP, the EIA includes JSC Aluminum of Kazakhstan, Eurasian Energy Corporation, and enterprises of transnational company KazChrome. In 2003, SSMEP produced 13,999,700 tonnes of commercial ore, 6.6% more than in 2002. (Interfax-Kazakhstan)

Energy and Power

ShygysEnergoTrade LLP, a branch of East Kazakhstan Regional Energy Company CJSC, has been established in East Kazakhstan.

According to the director of the energy division within the oblast department of energy, communal services and construction, Viktor Bekseitov, the national energy sector will be regulated by new rules for creating markets for electrical energy under the new legislation beginning on October 1. Throughout the country, in particular the eastern region, an electrical energy sales network is being created. At the present time, the energy sector is divided into three areas: production, transportation and sales.

East Kazakhstan Regional Energy Company, specializing in delivery and distribution to consumers, separated into two independent organizations. Starting on November 1, ShygysEnergoTrade LLP, a new company, will deal with consumers. (KazInform)

Transport and Telecommunications

The national communications operator, Kazakhtelecom has become the first among the CIS telecom operators to integrate all of its 17 branches with a universal certified billing system. As indicated in their press-release, this automated billing and technical telecommunications system has allowed Kazakhtelecom to “significantly improve the quality and speed of servicing subscribers”.

The billing system also allows the company be more efficient in the provision of clients with data on rendered communication services. “The introduction of universal modern billing technology is a confirmation of the fact that the company is a leader among the CIS states in the introduction of new information products, which assist in the improvement of the mobility and efficiency of all of our structural subdivisions”, the Kazakhtelecom Executive Director Marat Abdildabekov said.

Kazakhtelecom provides the majority of telecom services in Kazakhstan. (Interfax-Kazakhstan)

***

Recently, a group of Majilis deputies addressed the government with a request to answer questions concerning the technical and safety conditions of Air Astana’s fleet, the current monopolist on the sale of air travel tickets. In response to the request, Air Astana CJSC reported that the statement made by Deputy Tatiana Kvyatkovskaya about the airline contained false information.

Air Astana explained that a Boeing jet did not catch fire in the Atyrau airport. “Actually the Boeing-757-200 from Atyrau to Amsterdam ran into birds during take-off. The airline’s crew managed the incident properly.” They said, “The Boeing landed safely in Atyrau, and passengers were sent to another airplane owned by Air Astana.”

Commenting on an accident at the Sheremetievo airport, Air Astana reported that an airport technician died on an engine trial run because the technician came too close to the engine. “If there were any signs that the crew was guilty of causing this accident, they would not have been allowed out of Moscow,” the explanation read. (Kazakhstan Today)

Money Markets

KZT/USD market rate dynamics during the week