REFERENCE: KazTransOil CJSC (Kazakhstan) - development strategy

/IRBIS, information of the KASE Listing commission, Aug 27, 01/ - The following information is published due to the passing the listing procedure of the Kazakhstan Stock Exchange (KASE) under category "A" by first issue euronotes of KazTransOil CJSC. Among the main strategic tasks of KazTransOil CJSC - increase in competitiveness, reliability and safety of oil transportation system; construction of new pipelines to increase effectiveness of transportation services in different export trunk lines; decrease in tariffs on transportation without lowering the quality of services. High priority direction of the strategic plan is the investments. In support of planned investments of the company, on August 13, 1999 the Government made a resolution #1159, where it has set the amount of dividends paid by the company annually not more than 10% of its net income till the year 2006, and remaining profit is to be used to investing and servicing the debt of the company. When making a strategic plan, the company took into consideration that the introduction of CPC pipeline will take away the oil extracted in Western Kazakhstan by the members of CPC. Therefore, the company plans to expand the network of oil pipelines to transport oil from other regions. Kenkyak-Atyrau oil pipeline Oil producing regions of Aktobe and Kumkol have no access to either CPC or Atyrau-Samara pipelines. In the opinion of the company's management, the construction of Kenkyak-Atyrau oil pipeline, which will allow it to transport oil from Aktobe region in addition to existing Atyrau-Samara route and CPC, will increase the revenues of Aktobe branch, since the only alternative to it in Aktobe region is the oil pipeline of KazTransOil CJSC to Orsk refinery and railroad. The company plans to construct Kenkyak-Atyrau pipeline in 2001 and put it into service in 2003. The cost of construction is estimated between $172-193m depending on the sources. KazTransOil CJSC plans to use the part of revenues from euronotes issue to finance this project. Introduction of SKADA system In the opinion of KazTransOil CJSC management, introduction of SKADA system (structural dispatch control and data collection system) and programs for controlling activities (SAP R/3), as well as improvement and modernization of telecommunications will lower the cost of services. SKADA system will let to make automated control over the pumping stations and pipelines of the company and helps to conduct wide scale monitoring of transportation services. The control over the pumping stations and heating stations will be made automatically from remote terminals through central dispatching point. SKADA system also helps to control the leaks and it is equipped with fire protection and gas protection devices. Introduction of the first part of SKADA system is to cost $43m to be completed in late 2002. The most important part for the SKADA system was the improvement of telecommunication system of the company, which costs $33.6m and will be completed in late 2002. Change in tariffs calculation method The part of the company's strategic plan is the change in tariffs calculation method by introducing variable price component. Presently, the revenues of KazTransOil CJSC from oil transportation is the function of one ton of transported oil for each 1,000 km, multiplied by the tariff (in USD) with a fixed cost component. Now, the company is trying to have the Natural Monopoly Regulation, Competition Protection and Small Business Development Agency of Kazakhstan (Antimonopoly Agency) to approve the new method. The expenses compensation and return on assets components will remain the same as in previous tariff coefficients. The new method will incorporate fixed and variable components, which will make it more flexible and therefore, more competitive. Fixed component will cover some financial expenses, excluding the oil transportation distances, variable component will take into account the transportation distance. Expansion of Aktau sea port In 2000 the company purchased an equipment for establishing a new fleet in Aktau from Japanese Mitsui & Co Ltd. for $16m. The purchase of the equipment was financed by the Japanese Bank for International Cooperation, granted under the guarantee of the Ministry of International Trade and Industry of Japan, and counter guarantee of KAZKOMMERTSBANK OJSC, which had been repaid in June 2001.