Fitch Ratings upgrades KazTransOil to 'BBB-', outlook Stable

/Fitch Ratings, April 26, 07/ - Fitch Ratings has today upgraded the Kazakhstan-based oil pipeline monopoly company JSC KazTransOil's ("KTO") Issuer Default rating ("IDR") to 'BBB-' (BBB minus) from 'BB+' and Short-term rating to 'F3' from 'B'. Following the upgrade, the Outlook is now Stable. The upgrade is based on reported improved financial results that have led to an improvement in KTO's cash flow generation and credit ratios, thanks to revenue generated from the newly completed Atasu-Alashankou pipeline. Press reports indicate that KTO plans to issue a eurobond of at least USD1bn in 2007 to fund construction of two new pipelines, including a 700- km (437-mile) Kenkiyak-Kumkol route. The latter route will connect western Kazakhstan to China and is due to become operational by 2008. KTO also plans to build a link between the Kashagan oilfield and a new export terminal on the Caspian Sea. Fitch expects that the eurobond would be issued by the Kazakhstan - Chinese Pipeline LLP (KCP LLP), a finance subsidiary of KTO registered in the Netherlands, and therefore may not have recourse to KTO as Fitch has previously received legal opinions from McGuire Woods indicating that current outstanding debt held by this entity is non-recourse to KTO. If this continues to be the case, KTO's favourable credit ratios are expected to be maintained. Completion of the Kenkiyak-Kumkol link is an important step in fulfilling KTO's strategy of supplying oil in western Kazakhstan to China. It will greatly improve the company's business profile by allowing it to play an increasingly important role as an energy supplier to growing markets in China. It will further allow supplies along the Atasu-Alashankou trunk pipeline to be increased to the targeted 20 million tonnes per year from the current 10 million tonnes. Additionally, crude oil transportation was up by 9.1% in Q1-2007. In order to provide reliable and continuous intake and transportation of oil by the Atasu- Alashankou route, KTO has undertaken projects to modernize and reconstruct the Eastern Branch units at Priirtyshsk-Atasu and Karakoin- Atasu. KTO has been the monopoly owner and operator of the Republic of Kazakhstan's oil pipeline network since 1997 and is the main provider of point-to-point oil export routing. As such it plays a crucial role in the development of Kazakhstan's oil reserves. KTO also owns and operates 2,175 km of water pipelines and is in charge of water transportation to the Atyrau and Mangistau areas. Contacts: Jeffrey Woodruff, London, Tel: +44 (0) 20 7417 4294 Andrew Steel, London, +44 (0) 20 7862 4086. Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364 Alla Izmailova, Moscow, Tel: +7 495 956 9903 [2007-04-27]