ERLAN ATAMKULOV President of Kazakhstan Temir Zholy

Temir Zholy the biggest company in Kazakhstan, one of a handful railway companies in the world that is working profitable and which is in the midst of restructuring, expansion and modernization. It wants to outsource its non-core assets in the competitive market and only keeps the core strategic activities. Our readers are keen in understanding how Temir Zholy succeeds in operating profitable in a country that is that capital intensive because of the vastness of the territory. Secondly what is the main outline of the restructuring program and thirdly all the investment opportunities that exist and what partnerships you are mostly interested in?

First of all, Kazakhstan Temir Zholy is a national company, which is a major transportation outline. We transport over 70 % of the commodities and over 50 % of the passengers. And by land our major lines are over 15 thousand kilometers long and with all of the station lines and roads the distances are over 30 thousand kilometers. We have over 80 thousands wagons from which 50 thousand are publicly owned and 30 thousand are privately owned. We have about 3000 locomotives and the main thing is that this year we finalized the restructuring of the company. We separate and privatized the entire social infrastructure; we privatized all of the repair and servicing works, so all of the works related with the repair of the stock (wagons and locomotives) are privatized. Starting from 2005 we are the only company in the former Soviet Union, where for the first time passenger transportation is subsiding from the republic department, this is the first case in the post soviet union area. This year we have about 80 million dollars targeted at subsidizing passenger traffic. Three joint stock companies were established, which are a 100% owned by the state. Those are firstly the railway networks, the second is the joint stock company that gathers all the wagons and the third one is a joint stock locomotive which unites all the locomotive companies. Separately we have established a joint stock company for passenger transportation. All of the rating agencies that work in Kazakhstan acknowledged our rating at the level of sovereign state rating, moreover the financial deal, which took place in 2004, with General Electric, is acknowledged as the best financial deal of the year. Together with General Electric we are modernizing our diesel-locomotives and in 2006 this program will be finalized. Under this program we will disburse 254 million dollars. Temir Zholy and General Electric are developing plans to build a plant for diesel-locomotive production. 2006 we will mark the start of production of this plant. We are very actively engaged in the organization of the rolling stock, in 2006 we will start manufacturing of the cargo wagons and this year we already started producing the passenger wagons. At this point and on average we load 610 thousand tons of commodities a day. For us this is very important because we are the major backbone, transportation backbone, of the economy, that is why we do everything to make sure that we are as efficient in our work as possible. All of the investment projects, which were implemented and will be implemented are targeted and designed to increase the efficiency of the work and increase the performance of the railroads. In 2005 we electrified over 200 km of our main line rail network and in 2006-2008 we plan to electrify over 1000 km of our outlines. For us it is very important that our information as in formative capacities is at the level to meet the international standards. That is why in 2005 we built over 700 km of optic fiber cables adjusting to the railway roads, now we can watch online the work of all the stations on the railways. Between 2006 and 2008 we plan to lay over 4000 km of optic fiber cable. In 2006 we will connect Russia and China, we are further planning to build over 2000 km of new railway roads within Kazakhstan. 2005 we constructed railroads of 400 km within 16 month, which connect our north traffic corridors. The revenues of this year will be 2,4 billion dollars, of course it's a great pleasure to receive such revenues. This year we started the construction of a new private road, which will connect the east side of the country with industrial regions. Annually the transit load increases by 40 -45 % a year. We increased our transit potential a number of times, there are certain constraints, which we have seen and want to eliminate. An idea, which was initiated by President Nazarbayev, was to build the standard gauge through the territory of Kazakhstan. We will start this project next march and probably in the east of Kazakhstan at the border to china we are going to construct 2.5 thousand km of the standard European line. This project was very much supported by China and now we are talking with Russia and the Ukraine so that project continues through their countries and therefore straight to Europe. I think that this could be very interesting for American investors, for American carriers. We made calculations that a container from an eastern port in China will reach Europe within 8 to 9 days. While at this point by sea it takes 40 to 65 days; that is why for us this project is incredibly interesting. We will increase the transit potential of Kazakhstan by 5 to 7 times. Today through the border cross at dostik alaschenko we load 11 million tons of cargo. Right now the amount of both sides reaches 15 million tons, by constructing this road and even the first part of it the 350 km will allow us to receive and transit 30 million tons of cargo. That is why all the major investment projects are targeted exclusively to increasing the transit capacity of the state. Of course we have a lot of domestic internal projects, but the major projects in which we would like to mobilize investments are those that are mentioned and the most important one is the construction of the road. We solve many of our internal problems in a very efficient way. Today the average salary of a railway worker is among the top salaries in the industry. Three years ago 128 thousand people worked on our railroads. Today 79 thousand people work for us. We work in a very transparent way; all of our reports are accessible. We introduced the Europeans our world standard in our account system; we are absolutely transparent, understandable and comprehensible for the investors. In 2006 we plan to attract about 1 billion dollars with a Eurobond. This is in brief about the national company. What is interesting to us, is that we have never presented the project of the European standard line, you will be among the first people who will be able to present this project. That is why for us it is also of great interest that our project can be presented and expressed on the pages of such a prestigious publication as yours. Moreover on this project an agreement between President Nazarbayav and the Head of China was signed, that as is why this project is extremely interesting if we require 6 to 8 billion dollars. We are using our own funds and the funds of our private investors and our pension funds. We will start this project this project in March 2006.