OJSC "KEGOC" (Kazakhstan): strategy of the company

/IRBIS, June 27, 00/ - Following is a brief description of OJSC "KEGOC" (Astana) long-term strategy, prepared by the specialist of Kazakhstan stock exchange (KASE) based on the materials of the company. The information is published due to the fact that the bonds of OJSC "KEGOC" were entered into KASE official list of securities under category "A". Long-term strategy of OJSC "KEGOC" was developed for the years 2001 through 2005 and includes following activities: - Modernization and reconstruction of existing electric network to maintain its working condition, increase the efficiency of the services, decrease the electricity transmission costs, as well as increase its reliability and safety. - Optimization of OJSC "KEGOC" financial structure to provide sufficient financing of current activities and to make currently used capital cheap: - building capital structure management system and development of the fund raising mechanisms on domestic and international capital markets in order to use only financial levy, as well as making borrowed funds cheap while increasing borrowing terms; - development of a flexible tariff policy which is the stimulus to increase energy consumption in the country. - Implementation of the project "Rehabilitation of power grids" by using long-term loans of the World bank and European bank for reconstruction and development. - Development of wholesale and retail power markets. Total need for financing "Rehabilitation of power grids" project, including interests during the construction period and commissions on the loan, is estimated at 257.2 mln U.S. dollars. Financing that has to come from OJSC "KEGOC" is 73.4 mln U.S. dollars (or 28.4% of total loan) and is to originate from internal monetary flows (14.44 mln U.S. dollars a year) during five year implementation period of the project. The company has developed an Indicative development plan for national power grid for the years 2001-2205 costing KZT45,536 mln, to be used to solve the matters related to the increase in reliability of the works and renovation of fixed assets of all production and technological complex, including: - making fire safety and security systems in compliance with existing norms that require KZT217 mln; - reconstruction and modernization of existing substations, of which those to be carried out under "Modernization of national power grids" program: 5 substations for 500 kV; 21 substations for 220 kV; total expenses - KZT25,536 mln (including the World bank and EBRD loans for KZT18,966 mln); - replacement of transformers and installation of reactive capacities for 1,311 th. kVA and 520 MVA (under "Modernization of national power grids" program using the funds of OJSC "KEGOC"), expenses - KZT3,238 mln; - reconstruction of power lines with total length of 1,475 km, expenses - KZT2,794 mln; - modernization of telecommunication equipment for the system of controlling the National power grids (SCADA/EMS), expenses - KZT9,996 mln (including loans of the World bank and EBRD for KZT8,512 mln); - creation of repair floors to solve the problem of centralized repair of high voltage inlets of substations and other electrical equipment, expenses - KZT708 mln; - purchase of diagnosing and special equipment for KZT1,754 mln, which will let the company to eliminate emergency situations quickly and not to allow unpredictable deviations; - purchase of emergency reserve of equipment for KZT1,293 mln to provide renewable reserves required to eliminate emergency situations quickly. After the implementation of these activities the volume of power transmission through the networks of OJSC "KEGOC" will increase from 23.0 bln kWh in 2000 to 26.0 bln kWh in 2005, or 11.5% as a result of gradual substitution of imported power for bordering regions, growth in total consumption of electricity in the country and change in the tariff policy of the company.