Atyrau region of Kazakhstan - brief description

/IRBIS, July 6, 00/ - On July 7, 1999 initial offering auction for the bonds of local executive body of Atyrau region amounting to KZT650 mln will be held in the trade system of Kazakhstan stock exchange (KASE). Therefore, a description of the region, made by the information of the region's administration, CJSC "Fondovyi Servis", and Listing commission of KASE, is given below. General information on Atyrau region The region was founded on January 15, 1938 and located in the west of Kazakhstan. It covers a vast area of Caspian lowlands and borders with West Kazakhstan, Aktobe and Mangistau regions, as well as with Astrakhan region of Russian Federation. The area is 11,863.0 th. hectares. As of Jan.1, 00 the population equaled 439.9 th. The regional center is located in Atyrau, which is also a sea port at the Caspian sea. Atyrau region has a unique reserves of oil and gas, gas condensate, rich in potassium and sodium salts, borate, building materials, as well as it is an important fishing grounds. Based on oil and gas producing data of the region, extractable reserves of oil are about 8.8 bln tons, that of gas - more than 2 trln cubic meters. The most of the reserves are located at Tengiz deposit site and on the shelf of the Caspian sea, and account for about half of proved reserves of Kazakhstan. According to the latest data obtained by the International consortium of OKIOC after the drilling of a well in the Kazakhstani sector of the Caspian sea, the reserves of Kashagan deposit site are estimated at 7 bln tons. Besides, the region is rich in medicinal mud and saline lakes, which creates a favorable conditions to set up a medical center. Atyrau region, due to the presence of rich deposit sites on its territory, is a favorable region to invest in. In terms of investment allocations among the regions Atyrau region is the most active one in Kazakhstan. In 1999 KZT63,236.8 mln was attracted from all financial sources into the development of the region's economy, which is 139.0% relative to 1998. In three months of this year investments into fixed assets of Atyrau region equaled KZT10,206 mln, or 34.9% more than in similar period of last year. The proportion of the investments into the region within a total national investments is about 18.5%. Now the region works with more than 50 foreign countries, and has 73 companies with the participation of foreign capitals, which account for 75% of industrial output. External trade turnover in 1999 equaled USD1,588.5 mln (114.6% to 1998), including, exports - USD1,219.3 mln (118.7% to 1998), imports - USD369.2 mln (103.0% to 1998). The main export items - oil and petroleum products, fish and fish products. The main consumers - Germany, Poland, Israel, Turkey, Finland, France, Italy, USA, Russia, Belorussia, Ukraine, Lithuania. The main JV LLP "Tengizchevroil", OJSC "Kazakhoil- Emba", JV "Sazankurak", OJSC "Atyraubalyk". In 12000 external trade turnover of the region is expected at USD1,678.6 mln, or 105.7% to 1999. Industrial production of the region is represented by 134 companies, of which 59 are located in Atyrau. The main industrial sectors are oil producing, oil processing and fishery, with their proportion reaching 94% of the region's production. In 1999 the region's companies produced goods worth of KZT191,918.1 mln (2.2 times more than in 1998), in three months of 2000 - KZT82,542 mln. Based on the forecasts, in this year volume of industrial output is expected at KZT217,248.7 mln. The most of the growth is to come from oil producing companies due to an increase in oil and gas production, oil processing as a result of the reconstruction of Atyrau refinery (OJSC "ANPZ"). It is planned to develop oil machinery manufacturing at OJSC "ZamanNeftmash" and OJSC "Shelf" to fulfill the orders of CJSC "NOC "KAZAKHOIL" and NOTC "KazTransOil". Compared to 1998 in 1999 oil production rose 10.6%, natural gas - 27.6%, sulfur - 18.5%, wide range of light hydrocarbon fractions - 82.4%. In 1999 in processing industry physical production index equaled 74.1% to 1998. Because of the lack of raw materials and working capital, production of sausages and other related items fell 52.1%, dairy products - 25.2%, fish - 53.7% to last year. Atyrau region is self-sufficient in electricity thanks to three producers: OJSC "Atyrau TETS", JV LLP "Tengizchevroil" and OJSC "ANPZ". Transportation infrastructure of the region consists of 1,480 km of railroad, 2,752 km of regular roads, 1,237 km of oil pipelines, 3,058.8 km of gas pipelines, 1,596 km of water pipelines, 986 km of thermal pipelines, water and off-ground routes. Atyrau port has access to Iran, Azerbaijan, Turkmenistan through the sea; through Volga river it has an access to Azov and Black seas. Dredging works that began at Ural-Caspian channel will increase transportation traffic through Atyrau port. High priority directions in social and economic development of Atyrau region are further strengthening of macroeconomic stability; creation of favorable investment climate and conditions for the development of the industry; further development of entrepreneurship; solving the most acute problems of the villages; implementation of the program aimed at elimination of poverty and unemployment; providing employment and social protection of the population; protecting internal labor market, creation of additional work places. The budget of Atyrau region Revenues. According to the law "On budgetary system" the national and local budgets function independently in Kazakhstan, and as a whole they constitute the state budget. The law specifies a complete list of tax revenues to be collected into local budgets, non-tax revenues, operations with the capital, whose income is to go to local budgets, official transfers received. The revenue source of the budget is also the repayment of the loans previously granted from local budgets. The surplus of revenues of local budget over annually approved absolute budget outflows remains at the disposal of the region. th. KZT Budget performance Budget articles 1999 % 1998 % 1997 % ---------------------------- ---------- ----- --------- ----- --------- ----- I. Revenues 16,861,508 99.6 4,849,737 88.9 4,800,886 102.5 ---------------------------- ---------- ----- --------- ----- --------- ----- Income: 16,758,009 101.9 4,843,020 88.9 4,800,602 102.5 ---------------------------- ---------- ----- --------- ----- --------- ----- Tax revenues 16,364,255 103.5 4,091,611 85.2 4,209,130 105.7 Non-tax revenues 373,628 60.6 738,019 118.7 591,472 84.2 Operations with the capital 20,126 104.5 13,390 67.7 - - ---------------------------- ---------- ----- --------- ----- --------- ----- Repayment of the loans, debts 23,499 10.2 6,717 3.6 284 - ---------------------------- ---------- ----- --------- ----- --------- ----- II. Expenses and financing 16,716,013 98.8 4,864,229 86.7 4,895,386 102.5 ---------------------------- ---------- ----- --------- ----- --------- ----- Expenses: 16,592,783 98.7 4,843,316 86.7 4,860,908 102.5 ---------------------------- ---------- ----- --------- ----- --------- ----- State services of general type 280,754 98.6 219,491 95.5 243,238 113.4 Defense 108,913 98.3 63,747 68.9 78,717 91.4 Public order and security 266,704 98.5 185,603 94.4 183,603 100.7 Education 2,996,487 99.6 1,948,719 91.7 2,140,254 106.1 Health maintenance 1,624,450 99.7 436,794 73.2 647,172 99.9 Social insurance and allowance 1,127,701 99.8 1,364,765 86.8 469,326 93.0 Housing 1,318,891 88.3 174,696 91.1 316,049 104.3 Culture, sports and information 495,639 99.5 189,280 90.4 181,907 116.0 Agriculture, water industry, forestry, fishery and environmental protection 54,542 96.2 109,264 62.2 156,006 100.2 Industry, construction and use of mineral resources 30,000 100.0 94,400 73.4 291,505 95.4 Transportation and communi- cation 1,174,652 100.0 - - - - Others 348,134 99.6 56,557 77.7 153,131 100.8 Official transfers 6,765,916 100.0 - - - - Financing 123,230 100.0 20,913 41.4 34,478 102.8 ---------------------------- ---------- ----- --------- ----- --------- ----- III. Deficit (-) / surplus (+) of the budget 145,495 -14,492 -94,500 ---------------------------- ---------- ----- --------- ----- --------- ----- th. KZT Budget performance ---------------------- Budget articles 4 months 4 months 2000 plan 2000 plan 2000 % % -------------------------------- ---------- --------- --------- ----- ---- I. Revenues 16,684,914 7,290,319 7,800,831 107.0 46.8 -------------------------------- ---------- --------- --------- ----- ---- Income: 16,474,254 7,267,981 7,788,184 107.2 47.3 -------------------------------- ---------- --------- --------- ----- ---- Tax revenues 16,161,097 7,102,058 7,565,541 106.5 46.8 Non-tax revenues 298,469 162,635 217,264 133.6 72.8 Operations with the capital 14,688 3,288 5,379 163.6 36.6 -------------------------------- ---------- --------- --------- ----- ---- Repayment of the loans, debts 210,660 22,338 12,647 56.6 6.0 -------------------------------- ---------- --------- --------- ----- ---- II. Expenses and financing 17,684,914 7,934,320 6,648,638 83.8 37.6 -------------------------------- ---------- --------- --------- ----- ---- Expenses: 16,574,914 7,264,320 6,635,638 91.3 40.0 -------------------------------- ---------- --------- --------- ----- ---- State services of general type 249,592 95,699 68,501 71.6 27.4 Defense 99,880 37,371 28,852 77.2 28.9 Public order and security 235,148 79,422 57,476 72.4 24.4 Education 2,559,949 899,251 728,860 81.1 28.5 Health maintenance 1,097,486 349,959 282,290 80.7 25.7 Social insurance and allowance 673,906 214,505 144,784 67.5 21.5 Housing 720,420 122,453 87,639 71.6 12.2 Culture, sports and information 321,927 266,283 209,976 78.9 65.2 Agriculture, water industry, forestry, fishery and environmental protection 80,072 32,767 14,620 44.6 18.3 Industry, construction and use of mineral resources - 960 - - - Transportation and communication 200,000 27,610 22,360 81.0 11.2 Others 333,665 204,224 60,214 29.5 18.0 Debt servicing 275,600 3,750 - - - Official transfers 9,727,269 4,930,066 4,930,066 100.0 50.7 -------------------------------- ---------- --------- --------- ----- ---- Financing 1,110,000 670,000 13,000 1.9 1.2 -------------------------------- ---------- --------- --------- ----- ---- III. Deficit (-) / surplus (+) of the budget -1,000,000 -644,001 1,152,193 -------------------------------- ---------- --------- --------- ----- ---- In 1997 tax revenues accounted for 87.7% of all revenues of the regional budget, in 1998 - 84.4%, in 1999 - 97.1%, in four months of 2000 - 97.0% of all revenues of Atyrau region's budget. Non-tax revenues account for insignificant part of total revenues. Their proportion in total volume of 1997 revenues equaled 12.3%, in 1998 - 15.2%, in 1999 - 2.2%, in four months of 2000 - 2.8%. The revenues that originate from the operations with the capital are also insignificant and vary within 0.3%-0.1%. The government of the country does not provide for any transfers (grants) in favor of Atyrau region. Expenses. In 1999 91.6% of total expenses of the regional budget (after official transfers into the national budget) originated from working in seven directions, among them: housing, health maintenance, education, social services, transportation and communication, law enforcement bodies, culture, sports and information. According to the law of Kazakhstan of November 11, 1999 "On the year 2000 national budget" the budgetary withdrawals (official transfers) for the region are set at KZT9,727,269 th. in absolute terms, or 58.3% of all revenues of the regional budget. Use of the funds from the bond offering Based on the resolution #752 of the government of Kazakhstan, dated May 19, 2000 "On borrowings of local executive body of Atyrau region", and on the basis of the decision #251 of the Akim of Atyrau region, dated December 6, 1999, approved by the decision #17-II of the II session of Atyrau regional Maslikhat of the II call, dated December 7, 1999, the money, raised by the offering of the bonds, will be used to implement a regional investment program of "Reconstruction of Atyrau roads". Both this program, and "Servicing of the debt of local executive bodies" program are among those which are not to suffer deficit of financing by the decisions of the Akim of Atyrau region #363, dated February 28, 2000 and #34-II of the III session of Atyrau regional Maslikhat of the II call, dated March 3, 2000 "On making changes and amendments into the decision #238 of the regional akim "On regional budget for the year 2000"". "Reconstruction of Atyrau roads" project is selected as a high priority one based on the examination conducted by the Department of external economic relations and investment policy of Atyrau region administration. The project was selected for the following reasons: existing network of roads and constructions located on them do not meet technical parameters of providing necessary security for the vehicles using them. 49% of cargo shipments in the region are made using automobile roads. Under unfavorable technical conditions the productivity of the vehicles falls by 70%, transportation costs increase by 45%, fuel consumption jumps by 30%. Upon completion of this program the speed is to increase from 32 km/h to 86 km/h. The project of major overhaul of the roads and sidewalks in Atyrau in 2000 was developed by design and development institution LLP "Kazakhskii Promtransproekt". The general contractor of the project, based on the terms, will be selected at the tender. Risks Among existing risks that may have a negative impact on the bond issuer's financial situation and on its ability of meeting his obligations are the following: 1. Change in state economy policy that concerns the imports and exports, as well as change in tax policy. 2. Change in the legislature concerning redistribution of tax revenues among the national and local budgets and the size of budgetary withdrawals. 3. Decrease in prices of oil and petroleum products may have a significant impact on the regional budget revenues, and consequently, on the ability of the issuer to meet his obligations. 4. There is a possibility of appearing obligations of the issuer on the debts of the subjects located on the territory of region, and which are guaranteed by the government. Since "Reconstruction of Atyrau roads" project is the project of a great social importance, the existing risk of the project related to its incomplete implementation or keeping the deadlines and other parameters are to be considered insignificant, as its expenses are to be compensated from the local budget anyway.