Standard & Poor's: Kazakhstan electricity grid operating Co. "BB+" rating affirmed; outlook stable

/Standard & Poor's, Moscow, March 10, 05/ - Standard & Poor's Ratings Services said today it affirmed its 'BB+' long-term corporate credit rating on the monopoly operator of the Kazakhstan high-voltage electricity transmission grid, Kazakhstan Electricity Grid Operating Co. (JSC) (KEGOC). The outlook is stable. "The rating on KEGOC reflects its aggressive financial policy, which stems from the company's ambitious grid development program; operational challenges arising from implementation of two large investment projects; and the weak characteristics of the national power market," said Standard & Poor's credit analyst Eugene Korovin. These risks are mitigated by KEGOC's strategic importance to the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3; local currency BBB/Stable/A-3), which translates into strong explicit support for the company and increasingly supportive tariff regulation; KEGOC's continued monopoly position in a relatively stable electricity transmission business; and the good medium-term prospects for national power consumption growth. The stable outlook reflects Standard & Poor's expectations that KEGOC will remain closely integrated with the government and that the government will continue to support the company through guarantees on new borrowings and/or budget allocations, including certain supportive measures for financing of the subsequent stages of the North-South transmission line, and more cost- reflective tariffs. A change in the sovereign credit rating will not automatically result in a change of the rating on KEGOC, which would be subject to a separate review. Standard & Poor's will focus on the degree of government support to offset the expected heavy capital expenditures and debt buildup, in particular regarding any government guarantees on the new debt, higher tariffs, or equity injections. Should the government deviate from its currently supportive policy, KEGOC's credit risk will become more dependent on its weaker stand-alone credit profile. This might put downward pressure on the rating and/or the outlook. Eugene Korovin, Moscow, 7 (095) 783-40-90 Eugene_Korovin@standardandpoors.com Paul Lund, London, 44 (207) 176-37-15 Paul_Lund@standardandpoors.com InfrastructureEurope@standardandpoors.com Ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. It can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find Ratings, then Credit Ratings Search. Alternatively, call one of the following Standard & Poor's numbers: London Ratings Desk (44) 20-7176-7400; London Press Office Hotline (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5916; or Moscow (7) 095-783-4017. Members of the media may also contact the European Press Office via e-mail on: media_europe@standardandpoors.com. [2005-03-11]