SEVERAL KAZAKH GRES PLACED ON WATCH NEG PENDING REVIEW OF RELATIONSHIP WITH SOVEREIGN

/Standard & Poor's, Moscow, October 3, 07/ - Standard & Poor's Ratings Services said today that it placed its ratings on a number of Kazakhstan government-related entities (GREs) on CreditWatch with negative implications, after the rating on the Republic of Kazakhstan (foreign currency BBB/Watch Neg/A-3; local currency BBB+/Watch Neg/A-2; Kazakhstan national scale 'kzAAA') was put on CreditWatch with negative implications. The entities subject to CreditWatch are: - 100% government owned oil holding JSC NC KazMunayGas (BBB- /Watch Neg/-; Kazakhstan national scale 'kzAA'), as well as its operating subsidiaries JSC KazMunaiGas Exploration Production (BB+/Watch Neg/-), KazTransOil (BB+/Watch Neg/-), KazTransGas (ВВ/Watch Neg/-); - National railway operator Kazakhstan Temir Zholy (BB+/Watch Neg/-; Kazakhstan national scale 'kzAA-') and its subsidiary JSC KazTemirTrans (BB+/Watch Neg/-;Kazakhstan national scale 'kzAA-'); - Kazakhstan Electricity Grid Operating Co. (KEGOC; BB+/Watch Neg/-). "The CreditWatch reflects potential negative implications for these corporate credit ratings if the rating on the sovereign is lowered," said Standard & Poor's credit analyst Elena Anankina. All these corporate credit ratings incorporate some level of likely extraordinary government support. Still, no automatic actions will follow the resolution of the CreditWatch on the sovereign, which we expect by Oct. 9, 2007, in the case of a negative rating action. The national scale ratings could also be lowered, in line with the global scale ratings, as we do not expect any recalibration of the national scale. We will then have to assess the impact of the rating action on these GREs. In particular we will evaluate the degree of state support that should in future be incorporated into their respective ratings, and analyze to what extent a potential weakening of the sovereign's credit quality will affect the government's ability and/or willingness to provide ongoing and extraordinary timely financial support to these GREs. We will also review whether any social or investment mandates might be put on these GREs in a less benign environment, and to what extent they are exposed to the country's financial system. Several of the above entities- including KEGOC and KazTransGas-are largely dependent on short-term funding, and any disruption to the domestic financial system could therefore pressure their liquidity in the context of global turbulence in corporate debt markets. "Finally, we will also consider whether the gradual trend toward the government's more interventionist policy, as highlighted by renegotiation of the large Kashagan oil project, should be reflected by higher expectations of extraordinary government support to the GREs and whether state intervention would pressure the GREs' stand-alone credit quality," added Ms. Anankina. We intend to resolve the CreditWatch on the GREs within ninety days. RATINGS LIST -------------------------------------------------- To From ---------------------------------- -------------- JSC NC KazMunayGas Corporate credit rating BBB-/Watch Neg/- BBB-/Stable/- Kazakhstan national scale rating kzAA kzAA ---------------------------------- -------------- JSC KazMunaiGas Exploration Production Corporate credit rating BB+/Watch Neg/- BB+/Stable/- ---------------------------------- -------------- KazTransOil Corporate credit rating BB+/Watch Neg/- BB+/Positive/- ---------------------------------- -------------- KazTransGas Corporate credit rating ВВ/Watch Neg/- ВВ/Positive/- ---------------------------------- -------------- Kazakhstan Temir Zholy Corporate credit rating BB+/Watch Neg/- BB+/Stable/- Kazakhstan national scale kzAA- kzAA- ---------------------------------- -------------- JSC KazTemirTrans Corporate credit rating BB+/Watch Neg/- BB+/Stable/- Kazakhstan national scale kzAA- kzAA- ---------------------------------- -------------- Kazakhstan Electricity Grid Operating Co. Corporate credit rating BB+/Watch Neg/- BB+/Stable/- -------------------------------------------------- NB: This list does not include all ratings affected. Primary Credit Analyst: Elena Anankina, Eugene Korovin Secondary Credit Analyst: Lars Bjorklund, Peter Kernan, Lidia Polakovic Additional Contact: GroupE-MailAddress@standardandpoors.com [2007-10-04]