Kazakhstan Temir Joly NSE (Kazakhstan): Characteristics of activities

/IRBIS, July 11, 01/ - Following is a brief characteristics of Kazakhstan Temir Joly NSE (Astana), which are made based on the conclusion of Kazakhstan Stock Exchange (KASE) Listing commission. The characteristics are published due to the admittance of second issue inscribed coupon bonds of Kazakhstan Temir Joly NSE (Astana; KZ2EUY03A368, $100, $30m, July 10.01 - July 10.04, semiannual coupon at 8.0% APR) to the official list of the KASE securities under category "A" and an initial public offering auction, which will be held on July 12 in the trade system of the KASE. The management of Kazakhstan Temir Joly NSE is liable for the reliability of the information presented by the KASE Listing commission. STRUCTURE OF THE COMPANY Announced authorized capita of Kazakhstan Temir Joly NSE is KZT971,382.0 th. as of April 1, 2001. All authorized capital is paid. The company has following divisions: structural divisions of central unit (departments, independent administrations, and departments); 9 state subsidiaries and their branches; structural divisions with the status of Kazakhstan Temir Joly NSE subsidiaries. Main goals of the company are set as follows: - providing cargo and passenger transportation to the economy and the population; - ensure safety of train movements and conservation of transported cargo; - ensure safety of passengers; - maintaining and development of inventory and technical bases; - quick management of the railroad maintenance, development of train movement schedules, usage norms of rolling stock and transpiration plans, organizing direct and mixed transportation using different vehicle modes; - provide international economic relations of Kazakhstan, exports and imports of goods. COMPANY ACTIVITIES Operating activities of Kazakhstan Temir Joly NSE are divided into three components: cargo transportation, passenger traffic and other activities. Cargo transportation In terms of cargo turnover the railroad transportation holds the first place in Kazakhstan: it accounts for more than 71% of all cargo turnover - compared with 28.4% of pipelines, 0.5% automobile and 0.1% of sea and air transportation. Most of the company's cargo transportation falls on the mining industry, where about 30 enterprises create more than 80% of all cargo transportation. The volume of cargo loading at Kazakhstan Temir Joly NSE decreased from 129.9m tons in 1998 to 124.0m tons in 1999, then grew back to 156.3m tons in 2000. After the improvement of the economy in Kazakhstan and in other countries, the demand for cargo transportation increased. General growth of cargo transportation increased by 26% relative to 1999. In 2000 volumes of exports transported by railroads equaled 40.3% of total transportation. Railroad transportation is still a sole practical mode of transportation for coal, ore, and metals. About 80% of cargo transported by Kazakhstan Temir Joly NSE is coal, ferrous and non-ferrous metals, crude oil and oil products. In coal industry the major cargo consignors are the enterprises of Karagandy and Ekibastuz coal mines, where 80% of all coal production of Kazakhstan is located. Main consumers of Karagandy coking coal are Ispat-Karmet OJSC, Russian metallurgical plants, Karagandy and Bishkek thermal-power plants. About 67% of the coal extracted at Ekibastuz coal mine is consumed within the country, and the rest is exported to Russia. The economic growth taking shape in Russia and Kazakhstan, considering existing residual reserves of coal in Kazakhstani fields, give thoughts of future growth of coal transportation in next ten years. In oil industry the major consumers of Kazakhstan Temir Joly NSE are Tengizchevroil LLP and SHNOS OJSC. Oil and oil products are the second category of cargo based on their weight in total transportation in 1998 and 1999 and third in 2000, accounting for 11.0%, 12.3% and 11.6%, respectively. The transportation volumes of oil and oil products were steadily growing from 14.5m tons in 1998 to 15.3m tons in 1999 and 18.5m tons in 2000. Most of the oil produced by Tengizchevroil LLP is exported, with the most of it transported by railroad. Thus, 7.3m tons (66.3%) out of 11.0m tons of oil extracted in 2000 was transported by railroad. In 2001 expected 3.5- 4.0n ton decrease in transportation volumes of oil extracted at Tengiz will be approximately compensated by the oil supplies from CNPC-Aktobemunaigas OJSC and others. It is planned that cargo transportation within the country and on export routes will reach 17-17.5m tons in 2002. It is expected that increase in demand of the China and on domestic market will compensate for the most of the oil transportation losses to be incurred as a result of introduction of Caspian pipeline. In mining industry Kazakhstan Temir Joly NSE services transportation flows between ore producers (SSGPO OJSC, Donskoi and Lisakovsk GOK) and its consumers (Ispat-Karmet OJSC, Magnitogorsk, Kusbass, Novolipetsk metallurgical combines). In non-ferrous metal industry the main cargo consignors are Corporation Kazakhmys OJSC, Kazzinc OJSC, Aliuminii Kazakhstan OJSC and TNC Kazchrome enterprises. In 2000 volume of metal ore transportation reached 12.9m tons. Passenger traffic Railroad transportation accounts for more than 50% of passenger traffic, against 36% of automobile and 12% air transportation. Total passenger traffic on Kazakhstani railroads, which was tend to decline in 1998 and 1999, increased by 17.2% in 2000. It was the result of an increase in the number of routes in suburban directions. In 2000 passenger traffic equaled 10.2bn passenger-kilometers against 8.7bn in 1999. Total number of passengers declined from 21.6m people in 1998 to 18.9m in 1999, or 12.3%. However, as the economic growth is observed in the region and the growth of public income in late 1999 and 2000 passenger traffic increased. Total number of passengers equaled 21.3m in 2000, a 12.7% increase relative to 1999. Secondary economic activities Most of the secondary activities of the company are conducted at the enterprises, which are the part of Kazakhstan Temir Joly NSE. This income item will increase in the future, as the company plans to engage in the activities such as major overhaul of the railroads, car repairs, cargo security and other services at the first stage of railroad industry restructure, in order to introduce competition in this industry. TARIFF POLICY When transporting cargo on Kazakhstani railroads following tariffs are used: - "Tariffs on exports-imports of cargo railroad transportation", introduced on July 1, 1999 and calculated in Swiss francs for interstate transportation; - rates of Price-current #10-01, effective from 1989 (domestic cargo transportation). These tariffs are 2 or more times lower than international transit tariffs; - rates of "Tariff policy of Kazakhstani railroads for cargo transportation in international directions for a freight year" for international directions, which are adopted annually by the Tariff Conference of railroad administrations (transporters) of the Tariff Agreement of CIS countries (rates are calculated in Swiss francs). These rates are based on two tariffs: International railroad transit tariff (IRT) and United transit tariff (UTT). Cargo transportation tariffs are differentiated based on many factors such as: the type of the engine and car, workload and capacity, distance, speed etc. Tariff discount system is important for Kazakhstan Temir Joly NSE. Tariffs are set and controlled by the Agency of Kazakhstan for natural monopoly regulation, competition protection and small business support. As far as passenger tariffs concerned, presently, a united tariffs are used in passenger traffic (in CIS), which are calculated in Swiss francs (Interstate passenger tariffs - ISPT). On domestic routes a discount rate of 0.5 is used for existing interstate tariffs. Unlike cargo tariffs, where they are set based on expenses, passenger tariffs are set primarily based on the purchasing power of the population and social importance of the traffic. Based on current antimonopoly law, except for the transit tariffs, which are not regulated by the Antimonopoly committee, cargo and passenger tariffs can be reviewed once in a quarter. The first increase in tariffs from the establishment of Kazakhstan Temir Joly NSE (January 1997) took place on January 1, 2000, when oil and oil products export tariffs were raised 2 times, except for Aktau port. From April 1, 2000 tariffs for other cargo transportation were raised by 20 to 100% (ferrous and non-ferrous metals, limestone, alcohol and tobacco, cotton, lumber and others).