OJSC "KEGOC" (Kazakhstan): brief description

/IRBIS, June 27, 00/ - Following is a brief description of OJSC "KEGOC" (Astana), prepared by the comments of the Listing commission of Kazakhstan stock exchange (KASE). The characteristics are published due to the fact that the bonds of the company were entered into KASE official list of securities under category "A". GENERAL INFORMATION Date of initial state registration - July 11, 1997. Legal status - Open joint stock company. Ownership - private. Legal address of the head office - 60, Republic Ave., Astana, 473000, Kazakhstan. Actual address (location) - 7, Bogenbai batyr Ave., Saryarka district, 473000, Astana, Kazakhstan. PRIMARY ACTIVITIES Main activities of OJSC "KEGOC" in accordance with the Charter are: - transmission and distribution of electricity through electric grids, - organization of centralized dispatcher management of the objects of United Electrical and energy System of Kazakhstan, - exploitation and repair of electric grid objects, their reconstruction and development by introducing effective methods and advanced technologies. In accordance with the law of Kazakhstan "On electric energy", OJSC "KEGOC" is a system administrator of the electricity market and performs following functions: - management of the generation, transmission and consumption of electricity in the united energy system on the basis of legal norms of Kazakhstan in accordance with the distribution of dispatcher management zones and the agreements on purchase and sale and transmission of electricity; - management of interstate electricity flows; - transmission of electricity through 220-500 kV electric networks based on purchase and sale agreements. The company is a natural monopoly in electricity generation and distribution area. The major consumers of OJSC "KEGOC" services are big industrial enterprises (67%) which are connected to 220-500 kV electric networks, and regional electricity companies (33%). Volume of services depends on industries activities of the Northern, Eastern, Central and Southern regions where the most of the consumers are located. LICENSES - State license #0001059 of the Ministry of energy, industry and trade of Kazakhstan, dated July 20, 1998, to transmit and distribute electricity. Validity - till July 20, 2001. - State license #0002623 of the Ministry of energy, industry and trade of Kazakhstan, dated May 4, 2000, to resale electricity. Validity - till December 31, 2001. - State license #0000227 of the Ministry of transportation and communication of Kazakhstan, dated March 30, 1998, to engage in entrepreneurship activities to offer local communication services. Validity 10 years. - State license #0000228 of the Ministry of transportation and communication of Kazakhstan, dated March 30, 2000, to engage in entrepreneurship activities to lend communication lines. Validity 10 years. - State license #0000934 of the Committee on standardization, metrology and certification of the Ministry of energy, industry and trade of Kazakhstan, dated February 15, 2000, to check measurement gages in accordance with the licensed area. HISTORY AND ADDITIONAL INFORMATION OJSC "KEGOC" was established on July 11, 1997 as a joint stock company of open type based on the resolution #802 of the State property management committee of Kazakhstan, dated December 10, 1996, by transferring the assets of State republican enterprise "National electricity system "Kazakhstanenergo" into authorized capital of the company. On May 26, 1999 the company was re-registered as open joint stock company "Kazakhstan electricity grid operating company" ("KEGOC"). The founder of OJSC "KEGOC" is the State property management committee of Kazakhstan which owns 100% of shares. The company has 9 branches of intersystem electric networks (IEN), created on territorial basis and Central dispatcher of United Electrical and energy System of Kazakhstan located in Almaty. OJSC "KEGOC" is a member of the Association of industrial producers and the Kazakhstani energy association. As of May 1, 2000, the number of OJSC "KEGOC" employees, including the head office, is 4,388. CAPITAL STRUCTURE Announced authorized capital is KZT100 bln. Issued authorized capital - KZT74,069,000,630. Total number of shares - 7,406,963 with the face value of a share KZT10,000.00. The number of common inscribed shares - 7,406,963. CREDIT RATINGS In September 1998 OJSC "KEGOC" received credit rating BB+ "stable" (in local currency) and BB- "stable" (in foreign currency) from Standard & Poor's, as well as Ba3 "stable" from Moody's. Subsequently, due to a decrease of the country's credit rating in foreign currency, Standard & Poor's lowered the ratings of OJSC "KEGOC" from BB+ to BB- in local currency and from BB- to B+ in foreign currency. STRUCTURE OF THE COMPANY OJSC "KEGOC" has 9 IEN branches, Central dispatcher of United Electrical and energy System of Kazakhstan located in Almaty. IEN branches that control system forming electric network objects are located throughout Kazakhstan: - "Western IEN" (Atyrau) is located in Atyrau and Mangistau regions and not connected to UES of Kazakhstan. Energy sources: Mangyshlak atomic energy combine (MAEC), that includes Atyrau TETS-1, TETS-2 and TETS-3 (Hydropower stations), regional power station - Atyrau TETS, local power stations (Tengiz GTES, and TETS of Atyrau oil refinery (OJSC "ANPZ"). - "Aktobe IEN" (Aktiubinsk) is located in Aktobe and West Kazakhstan regions and not connected to UES of Kazakhstan. Uralsk power unit is connected to electric networks of "Western IEN". There is no connection between Aktobe and Uralsk power units. Energy sources: power stations of the Russian Federation (most part) and partially local power stations (Uralsk TETS, Aktobe TETS, Akturbo, Janajalskaya GTES and TETS of Alginskii chemical plant). - "Sarbaiskii IEN" (Rudnyi) is located in Kostanai region. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Akmola IEN" through intersystem power lines, to neighboring energy networks of the Russian Federation through interstate power lines. Energy sources: national power stations of Pavlodar region and partially local power stations (Rudnyi, Kostanai, Arkalyk TETS). - "Akmola IEN" (Astana) is located in Akmola and North Kazakhstan regions. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Sarbaiskii IEN", "Northern IEN", and "Central IEN" through intersystem power lines, to neighboring energy networks of the Russian Federation through interstate power lines. The power is transmitted through the power networks of the branch to "Sarbaiskii IEN" and "Central IEN" branches. Energy sources: national power stations of Pavlodar region, regional power stations (Akmola TETS-2, Petropavl TETS-2), and local power stations (Akmola TETS-1, TETS of Akmola mining and chemical combine (CJSC "KazSabton"), (Sergeevsk GES). - "Northern IEN" (Ekibastuz) is located in Pavlodar region. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Eastern IEN", "Akmola IEN", and "Central IEN" through intersystem power lines, to neighboring energy networks of the Russian Federation through interstate power lines. The power is transmitted through the power networks of the branch to UES of Kazakhstan. Energy sources: national power stations (Aksu GRES, Ekibastuz GRES-1 (LLP "AES-ST Ekibastuz"), Ekibastuz GRES), regional power stations (Pavlodar TETS), local power stations (Pavlodar TETS-1, Pavlodar TETS-2, Ekibastuz TETS). - "Eastern IEN" (Ust-Kamenogorsk) is located in Eastern Kazakhstan region. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Northern IEN" through intersystem power lines, to neighboring energy networks of the Russian Federation through interstate power lines. Energy sources: national hydroelectric stations (Bukhtarminsk GES, Ust-Kamenogorsk GES, Shulbinsk GES), regional power stations (Ust-Kamenogorsk TETS) and local power stations (Leninogorsk TETS, Sorginsk TETS, Semipalatinsk TETS, Tishinsk GES, Khariuzovsk GES, Zaisan GES). - "Central IEN" (Karagandy) is located in Karagandy region. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Akmola IEN", "Northern IEN", "Eastern IEN", "Almaty IEN" and "Shymkent IEN" through intersystem power lines. Energy sources: national power stations of Pavlodar and Eastern Kazakhstan regions (Karagandy GRES-2), regional power stations (Karagandy GRES-1 and TETS-3, Jezkazgan and Balkhash TETS), local power stations (Karagandy TETS-1, Karagandy TETS-2, TETS of JSCOT "Ispat- Karmet", Tentek TETS). - "Almaty IEN" (Almaty) located in Almaty region. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Central IEN" and "Shymkent IEN" through intersystem power lines, to neighboring energy companies of Kyrgyzstan through interstate power lines. Energy sources: local power stations (Almaty TETS-1, Almaty TETS-3 (GRES), Tekeli TETS, cascade of Almaty GES, Antonovsk GES, Karatal GES, Uspensk GES). - "Shymkent IEN" (Shymkent) is located in Jambyl, Shymkent and Kyzylorda regions. The networks of the branch is a part of UES of Kazakhstan and connected to the networks of "Central IEN" and "Almaty IEN" through intersystem power lines, to neighboring energy companies of Kyrgyzstan and Uzbekistan through interstate power lines. Electric networks of the branch provide simultaneous work of UES of Kazakhstan and UES of Central Asia. Energy sources: sources of Kyrgyzstan, North Kazakhstan, local power stations (Jambyl GRES), regional power stations (Shymkent TETS-3, Shardara GES), local power stations (Jambyl TETS, Kyzylorda TETS, Shymkent TETS-1 and TETS-2, Kentau TETS, as well as power stations at the space ship launch site (rented by Russia) Baikonur TETS, GTES of object "K". DYNAMICS OF POWER TRANSMISSION In 1999 OJSC "KEGOC" transmitted 21.8 bln kWt/h, which is less than that of 1998 by 0.9 bln kWt/h, or by 4.5%. Decrease in power transmission through the grids of the company was caused by unstable work of OJSC "SSGPO" in 1999, as well as industrial enterprises of Eastern Kazakhstan, Akmola, Karagandy and Jambyl regions. Decrease in the volumes measured in tenges was caused by offering 5-25% discounts to constant clients of OJSC "KEGOC" in compliance with Antimonopoly committee. There are a number of big companies which are constant users of power and which received up to 50% discounts. According to the forecast developed by OJSC "KEGOC" based on the country's indicative plan of social and economic development in 2000 approved by the government of Kazakhstan: - consumption of electricity in Kazakhstan is expected to be 51,500 mln kWt/h; - electricity generation by domestic power stations of Kazakhstan - 49,300 mln kWt/h; - imports of electricity - 2,200 mln kWt/h; - volume of services offered by OJSC "KEGOC", taking into account new calculation methods of electricity transmission tariffs and decrease in the tariff to distance ratio, is expected at 23,000 mln kWt/h; - operating income of OJSC "KEGOC" is expected at KZT9.44 bln. From April 1, 2000 discounts on transmission tariffs through the company grids were cancelled, as well as new tariff calculation method was introduced, which will allow the company to expand its services while creating equal opportunities to all participants. Tariffs were set for dispatching power and consumption of imported power, which is to affect all energy sources of Kazakhstan (for distributing electricity from bus-bars), as well as the consumers of imported power. For the consumer there is a differentiation of tariffs on transmission of the electricity based on the distance, but it is less affected when the distance is more than 600 km. INVESTMENTS From January 1998 OJSC "KEGOC" is a participant of CJSC "APF Halyk Bank of Kazakhstan" (Almaty) with 20% participation in the authorized capital. In 1999 investments were increased by KZT20,000 mln by the decision of shareholders general meeting held on October 11, 1999 by recapitaization of net income received in 9 months of 1999, and by keeping the stake in authorized capital of CJSC "APF Halyk Bank of Kazakhstan". INFORMATION ON THE MOST IMPORTANT CONTRACTS To modernize the main equipment of OJSC "KEGOC", on December 1999 $140 mln loan agreement was signed with the World bank and $45 mln agreement with European bank for reconstruction and development. The World bank loan was granted for 20 years with 5 year promotional term. EBRD loan was granted for 15 years, with 3 year promotional term. The loans are to be repaid by equal semiannual installments. These loans were received by OJSC "KEGOC" under the guarantee of the government of Kazakhstan. The guarantee agreement was signed between the government and the World bank on December 3, 1999, and with EBRD on December 21, 1999.