NSE "Kazakhstan Temir Zholy": development strategy

/IRBIS, June 26, 00/ - The short description of Kazakhstan Temir Zholy development strategy composed from the conclusion report of the Listing Commission of Kazakhstan Stock Exchange (KASE) is presented below. In turn, the conclusion report made by KASE experts based on documents NSE "Kazakhstan Temir Zholy" submitted to KASE with the purpose to meet listing requirements. The materials are published in light of admission of the company's bonds in the official list of securities of KASE, category "A". MARKETING ACTIVITY At present, NSE "Kazakhstan Temir Zholy" reached several agreements that could attract additional transportation volumes due to re-orientation of some freight flows through Kazakhstan. From January 2000, Magnisogorsk metallurgical plant has conducted a shipment of metal-roll to Iran through Aktau port (previously shipment was in Astrakhan port). By the year end, volume of cargo shipment could reach 200 th tons. The shipment of chemical fertilizers by JSC "Uralkalii" and JSC "Silvinit" Russian companies to China could attract another 100 th tons of cargo. Important work is being made to attract more Russian clients including manufacturers of metallurgy, chemical, and timber industries. The contract on bilateral transit tariff cuts between Kazakhstan Temir Zholi and Uzdekistan rail road company is going to be prolonged. The project on establishment of unified rates on transportation of goods through Russia at internal tariffs is being jointly prepared by Kazakhstan and Byelorussia. The work on attraction of clients from non-CIS countries on goods transportation through Northern Route of Trans-Asian rail road is also among the tasks currently executed. As a result of continuos meetings with representatives of Finland rail roads the first shipment of goods in large capacity containers to China was undertaken in March 2000. Formation of new transit routes including Finland - Iran direction (section on the eastern coast of Caspian Sea) as well as the second branch of Northern Route of Trans-Asian rail road, which will pass through Astana, Tobol and Ufa is considered too. NSE "Kazakhstan Temir Zholy" initiated resolution #258 "On customs registration of transit goods transported by rail road transport" dated on March 18, 1999 that significantly simplifies the procedure of custom registration thanks to introduction of fixed fee for transit goods customs clearing. Furthermore, the company plans to receive a status of customs broker. This will enable to abandon the deposit provision of transit excise goods and increase transportation volume of these goods through Kazakhstan. The company also established representative offices in Central Asian region (Tashkent), Baltic-Black Sea region (Minsk) and Asian-Pacific region (Beijing and Urumchi) with the purpose to attract additional volumes of transit transportation. NSE "Kazakhstan Temir Zholy" created a commission on rendering of special rates of transit goods shipping. The special tariff rates could be given on terms of trilateral agreements between consignor - forwarder - NSE "Kazakhstan Temir Zholy". The special rates are granted on the assumption of economic efficiency. INVESTMENT PROGRAM In 2001-2005 NSE "Kazakhstan Temir Zholy" forecasts the increase of goods turnover by 1.0-1.5% annually. Growth rates of passenger turnover is expected to be higher: 1.2-2.4%, at the same time, in 2000 more than 10% decrease is expected to be within the same indicators. This is connected with low level of consumer demand of population anticipated in this year. Forecasts state that because of inflation rate, growth in expenses and earnings will be higher than the production figures. At the same time expenses will grow fast than earnings as the industrial goods and services prices outpace rates of rail road tariffs. The main task of the NSE "Kazakhstan Temir Zholy" investment program is to develop and implement a number of measures on rail road capacity modernization, reduction of operating expenditures and introduction of new technologies. For the period of 2000-2005, the company plans to spend KZT50,788 mln on the development of its production and infrastructure facilities. Besides, in 2000-2001 the company will attract KZT3,735.8 mln. of credits from European Bank for Reconstruction and Development (EBRD) and OECF fund (Japane). The funds of EBRD are supposed to spend on acquisition of diagnostic equipment and small-scale mechanization facilities. The funds of OECF will be spent on continuation of "Rail transportation facilities development" project financing that was started in 1996. Besides, there are several other projects to be implemented in 2000: - construction of Aksu rail road with total length of 185.5 km (financing - KZT461 mln); - development of factory repair facilities for rolling-stock at: Atbasar station (KZT116 mln), Shu station (KZT19 mln), Kazalinsk station (KZT8 mln); - Almaty station (KZT1,194.4 mln), of which OEFC loan - KZT894.4 mln, company's resources - KZT300 mln); - development of software and communication systems (KZT712.6 mln); - implementation of automatic control centers, alternative technologies and registration equipment; - rehabilitation of rail road bridges (KZT300 mln).