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Presentation for Investors February 15, 2010

Presentation for Investors February 15, 2010. Contents. Executive summary Macroeconomic and Sector Overview Ownership Structure and Group Overview Business Overview and Strategy Investment Projects Financial Profile. Executive summary. Executive summary.

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Presentation for Investors February 15, 2010

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  1. Presentation for Investors February 15, 2010

  2. Contents • Executive summary • Macroeconomic and Sector Overview • Ownership Structure and Group Overview • Business Overview and Strategy • Investment Projects • Financial Profile

  3. Executive summary

  4. Executive summary • We are pleased to welcome investors to this presentation • Purpose of this presentation is to brief you on the latest developments of ICA, provide an update on its financial performance and to discuss business strategy, financial policy and financial projections • 100% Government owned through KazMunaiGas and KazTransGas with tangible evidence of government support • Monopoly operator for gas transmission in Kazakhstan with no plans to allow competition or privatization • Only feasible route for gas transit from Central Asian producers to European consumers • Crucial link for Gazprom’s imports from Turkmenistan and Uzbekistan • Long-term concession agreements in low risk business • ICA’s 2009 financial results benefited from increase in international transit tariffs • Notwithstanding the global economic downturn, ICA is continuing to demonstrate strong financial performance and sound financial position • ICA is undertaking certain actions to weather downturn and is accordingly progressing important strategies and initiatives, which include revision of the capex programme, improving ICA’s liquidity management.

  5. Macroeconomic and Sector Overview

  6. Kazakhstan: Strong Market-Oriented Macroeconomic Environment GDP Growth (%) 2009 Economic Overview • Population 16.2 mm • GDP per Capita USD 8,451 • GDP growth (real) 1.1% • Trade balance/GDP 13.91% • Total Debt/GDP 103.5% Gross International Reserves and Inflation Evolution of Tenge Against US Dollar Source: EIU, CIA

  7. Energy Sector Outlook Global Conditions Kazakhstan Market 2009 • Proved gas reserves 3.7tcm • Gas production 35.6bcm • Gas reserves/Production 104 years • Proved oil reserves 35.1bn barrels • Oil production 1.5 mln barrels per day • Oil reserves/Production 63 years • With world oil prices rebounding from their early 2009 level due to global downturn, consumers tend to be willing for less expensive natural gas for energy needs. Thus, natural gas is expected to be the fastest growing component of world primary energy consumption • The world energy gas consumption is expected to increases from 104 trillion cubic feet in 2006 to 153 trillion cubic feet in 2030 Expected Domestic Gas Production and Consumption (bcm) Global Consumption Growth Rates Source: BP 2007 Statistical Review of World Energy Average predicted % growth rate until 2025 Source: Annual energy outlook 2004, International Energy 2005 Outlook Source: Wood Mackenzie

  8. Natural Gas Demand Drives ICA’s Transmission Volumes • Despite the current weakening of the global demand for energy due to the economic slowdown, in the longer term European demand for gas is expected to increase up to 700 bcm by 2030 from 540bcm in 2005, 480 bcm of which will be European import demand • The gap between Russian company Gazprom’s domestic production and exports commitments will be between 200 and 300bcm in 2010: • 200bcm will be sourced by Gazprom internally • Given Gazprom’s low growth of long-term gas production, the additional 100bcm will be sourced from Uzbekistan, Kazakhstan, and Turkmenistan. The 25-year supply contract in 2003 between Russia and Turkmenistan supports this assumption • Gazprom’s demand for gas from Turkmenistan and Uzbekistan is driven in turn by the demand for gas in Russia, Ukraine, Poland as well as in Europe • Volumes of domestic Kazakh gas may also significantly increase over the next 4-5 years (mainly due to exploration of the Kashagan oil field discovered in 2000) • Transported volumes of gas and demand for transit capability are expected to increase in the short and medium terms ICA will remain the sole route for transportation of gas from Central Asia to European markets irrespectively of who will be operating under gas supply contracts (Gazprom, Ukraine, Kazakh-based gas exporting producers) Source: World Energy Investment Outlook Source: World Energy Investment Outlook

  9. Ownership Structure and Group Overview Ownership Structure and Group Overview

  10. Ownership Structure - 100% (Indirectly) Government Owned Government of Kazakhstan 100% JSC “Sovereign Wealth Fund “Samruk-Kazyna” 100% JSC “NC KazMunaiGas” 100% JSC “KazTransGas” 100% JSC “Intergas Central Asia” Government support Government Control Supportive Regulatory Environment Prudent Shareholder with Long-Term Strategic Vision • Government stake – 100% capital and 100% control • Consideration towards company’s interests • Control over investment and dividend policy • Implicit government support in negotiations with off-takers, suppliers and transit countries • Unique status of exclusive agent for Kazakh gas exports • It is the Government policy that all new major pipeline projects be led by KazTransGas • Key strategic role of ICA as a sole operator of natural gas pipeline infrastructure in Kazakhstan • Approval of key financial and financing parameters of KazTransGas • History of reinvesting earnings into business development and modest dividends Data as of February 15, 2010

  11. Group Structure – An Overview KazMunaiGas (KMG) • KazMunaiGas is the National Oil and Gas Company of Kazakhstan, which is wholly-owned by the Sovereign wealth fund JSC («Samruk-Kazyna»), which is in turn 100% owned by the Government • KMG is in charge of all the government’s commercial activities in the oil & gas industry, including prospecting, development, production, transportation, services, holding the monopoly over oil & gas pipelines in Kazakhstan and controls 60% of crude production and 100% of gas transportation • KMG plays an active role in approving strategic decisions and business plans of KazTransGas KazTransGas (KTG) • KazTransGas was established in accordance with the Resolution of the Government of the Republic of Kazakhstan No. 173 dated February 5, 2000 • KTG is a 100% subsidiary and one of the three main businesses of the KMG Group • The main goal of KTG is to manage the state’s strategic interests in the gas industry of the country and there are no plans for privatization • 50% of revenues relate to the stable and profitable business of gas transmission. The main source of revenues is International Transit, which represents USD 822million, or 90% of gas transmission in 2009

  12. Group Structure – An Overview Intergas Central Asia • Intergas Central Asia, JSC (“ICA”) was incorporated in June 1997 and currently, being a member of KazTransGas group of companies (a subsidiary of the NC KazMunayGas) has the primary responsibility to operate and manage the gas transportation networks of Kazakhstan granted to ICA under the terms of concession. • The principal activities of Intergas Central Asia focus on operation and maintenance of the main gas transportation system securing transmission of natural gas to domestic consumers and international gas transit. • Notably, Intergas Central Asia controls and manages the main gas pipeline transportation system of the Republic of Kazakhstan with the total length of gas pipelines in excess of 11,000 km. Given the on-going reconstruction the throughput capacity of the pipelines has been invariably increasing. • Within Kazakhstan, ICA is responsible for transportation of natural gas through 10 main gas pipelines serviced by 22 compressor stations equipped with 284 gas compressor units of various types and models. • The most important in terms of transmission volumes is the main gas pipeline Central Asia-Center (“CAC”) with the aggregate length of 4,892 km in one-line estimation. • In addition, ICA operates three underground gas storages (“UGS”), the biggest being Bozoi UGS located in Aktobe region. Others are Poltoratskoye UGS located in the Southern-Kazakhstan region and Akyrtobe UGS in Zhambyl region. Underground gas storages are used to smooth the seasonality of gas demand supplying extra natural gas in winter and during the periods with lower gas imports.

  13. Organisational Structure of KTG JSC «KazTransGas» Service companies Production and distribution of heat and power energy Domestic distribution and supply of natural gas Gas and Gas Condensate Production Main pipeline transmission of natural gas Intergas International B.V., 100% JSC KazTransGas Aimak, 100% Amangeldy Gas LLP, 100% Samruk-Energo, 8,4% Intergas Finance B.V., 100% JSC KTG-Almaty, 100% JSC KazTransGas LNG, 100% KazTransGas AG, Lugano, 50% Gazinservis LLP, 100% JSC «Intergas Central Asia», 100% KTG- Tbilisi, 100% Center for HR Development, 5.5% Center for HR Development, 5,5% JV KyrKazGas, 50% JV Asian Pipeline, 50%

  14. Corporate Governance Overview KazTransGas as a parent company conducts a policy of consistent improvement of corporate governance in ICA: • KTG has created the following documents which were approved by KMG: • Corporate Governance Code • Statute on Board of Directors (2 out of 5 directors are independent) • Policy on Risk Management • Statute on Risks Committee • Rules of Risk Management Process Organization • ICA has a well-defined five-year business plan (up to 2014) approved by its shareholders • ICA current performance is aligned with long-term strategic goals through strategic scorecards approved by KMG • ICA management performance is expected to be evaluated based on achievement of key performance indicators in 2009

  15. Business Overview and Strategy

  16. Principal business is transportation of natural gas and, to a lesser extent: management, maintenance and operation of the gas transportation system storage of natural gas and provision of technical services to third parties sales of natural gas to related parties Only route for gas transit between Central Asian producers and European consumers Robust and consistent cashflow generation 2009 total revenue: USD 893.880mm Increased 2009 revenues were mainly driven by international tariff increases with increased volumes of transported gas per kilometre Intergas Central Asia – An Overview ICA Overview ICA Revenues 2004-2009 Other 0.5% Transportation 99.5% Transmission Revenues Breakdown 2009 By Transportation By Orientation By Client Kazakh Gas (domestic) 1.9% Domestic Transportation 1.9% Export 7.5% Other 9.6% Kazakh Gas (outside) 7.5% Kyrgyz Gas 0.2% Russian Gas 10.2% Central Asian Gas 80.2% International Transit 90.6% Gazprom 90.4% KZT/USD exchange rate in 2009 assumed to be 150.0 * All conversions assume an exchange rate of 1 USD = 120.3 KZT, which was the closing rate of exchange as at 31 December 2007 on the KASE as reported by the NBK

  17. Active pipelines Gas fields Gas Pipeline System of ICA Selected pipeline network parameters • Approx. 11,000km of pipelines • 22 compressor stations • 122 gas distribution stations • Active storage capacity of 4.2bcm • Total transported volumein 2009: 91.1bcm Soyuz & Orenburg—Novopskov (Soyuz & Orenburg—Novopskov Main Line) Throughput capacity: 27bcm Length: 424km & 382km RUSSIA RUSSIA Central Asia Centre (5 pipelines) (CAC Main Line) Throughput capacity: 56bcm Length: 886km RUSSIA KAZAKHSTAN Bukhara Gas–Almaty (BGR-TBA Main Line) Throughput capacity: 4bcm Length: 1,585km Bukhara–Ural (Bukhara–Ural Main Line) Throughput capacity: 2bcm Length: 1,175km UZBEKISTAN KYRGYZSTAN TURKMENISTAN CHINA Gazly–Shymkent (BGR-TBA Main Line) Throughput capacity: 1bcm Length: 314km Source: ICA Source: ICA Source: ICA

  18. Gas Pipeline System of ICA Source: ICA

  19. Concession Agreements • ICA carries out its operations on the basis of the concession agreements, pursuant to which ICA has the right to operate the natural gas transportation system of Kazakhstan Rights Obligations • Operate the main gas transportation system in Kazakhstan • 20 years (15+5) starting in 1997 • Agreement is renewable thereafter with two further 5-year extensions if agreed by parties • Transfer of shares at the end of the concession period • A legally binding framework • Right to use the land related to the assets covered by the concession agreement • New (replaced) equipment becomes ICA’s legally owned asset • Annual payment to the Government • Concession payment of KZT 2.1 bln annually in 2008 up to 2017 • Invest USD 30 million per year and not less than USD 450million in aggregate during 1997-2017 in order to maintain and upgrade the transportation system • To date, ICA’s has invested over USD 1billion in total • Contingency of New Investment obligations

  20. Tariffs & ARNM* Methodology ICA Tariffs • ARNM: Agency for Regulation of Natural Monopolies • ** $1.6 is a tariff for Kyrgyzstan

  21. Tariffs & ARNM Methodology (Cont’d) • International gas transmission: • Tariffs are not subject to regulation because of the concession agreement but are arrived at through negotiation • Tariffs are set in US dollars and ICA has the ability to negotiate directly with its counterparties • In July 2001, the VAT rate on international transit was reduced to zero from 20% based on intergovernmental agreements • Since the beginning of 2009, the international tariffs have been increased by 21.4% (gas transit to Gazprom) which ensures a sufficient level of profitability. In 2010, Intergas and Gazprom have reached an agreement to keep international transit tariff at the level of 2009 of $1,70 for 1000 м3 for 100km. • Domestic gas transportation: • Domestic tariffs are regulated and set with political considerations in mind • The methodology and the approval process for domestic gas transportation tariffs are established by one of Kazakhstan’s main regulatory bodies, ARNM (Agency for Regulation of National Monopolies) • ICA and the rest of the KTG Group benefit from the Government in principal supporting future increases in domestic (regulated) tariffs, although tariffs have not changed since 2003 and have historically been kept at artificially low levels • Only a small portion less than 3% of ICA’s revenues is exposed to regulated tariffs • Main principles of the ARNM tariff methodology: • Cover all economically feasible expenses • Cover all taxes and other payments to the state budget • Ensure minimum rate of return necessary for company’s sustainable operations

  22. Main Counterparties • Gazprom is the main recipient of gas transmitted by KTG/ICA under the Russian, Uzbek and Turkmen gas transit contracts • The contracts for gas transportation are signed by ICA and the owners of the gas. The owner of Russian, Uzbek and Turkmen natural gas is Gazprom • The tariff for gas international transit is set in accordance with the agreement between ICA and Gazprom • The 5-year contracts signed with Gazprom in November 2005 stipulate the following volumes for 2009: • Counterparty regions are becoming stronger • Turkmenistan strongly depends on gas exports and demand for its gas remains strong. Gas exports are the key source of hard currency proceeds, and the Kazakhstani route is the only export route currently available to them • On December 12th, 2009 first thread of the main gas pipeline Kazakhstan-China which transports gas from Turkmenistan to China through Kazakhstan territory has been launched. ICA carries out maintenance service of first thread of the gas pipeline with projected gas transit volume of about 6 bln m3 in 2010. Second thread of the gas pipeline is currently under construction and plans to be launched by the end of 2012 with increased volumes of gas up to 30-40 bln m3. Gazprom Volumes Breakdown for 2009 Transit Volumes Breakdown 2009 TCO 3.540 bcm Domestic 7.914 bcm Kyrgazgas 0.239 bcm KazRosGas 6.474 bcm Gasprom 72.92 bcm

  23. Gas transportation volumes dynamics Gas transportation volumes (mln m3) • In 2009 ICA transported total volumes of 91.1 bcm of gas • International gas transit volumes accounted for 80% of the all gas transported • In 2010 ICA expects reduction in Central Asian gas transit • In 2010 Gazprom and Turkmenistan agreed to transport gas up to 30 bcm • Despite reduction in gas transportation, Gazprom agreed to stick to take-or-pay condition of 80% transmission volumes specified in contract

  24. Relationship with Gazprom • Gazprom is an owner of natural gas that is transported by Intergas in accordance with terms of Russian, Turkmen and Uzbek gas transportation contracts • Five year contract with Gazprom was signed in 2005 with take-or-pay condition in respect to 80% of projected volumes. Take-or-pay condition for 80% of projected volumes apply to both Turkmen and Uzbek gas. The contact specifies following volumes: Turkmen gas: 45,2bcm, Uzbek gas: 10,0bcm, Russian gas: 50,6bcm • In 2010, Intergas and Gazprom have reached an agreement to keep international transit tariff in the order $1,70 for 1000 м3 for 100km. Previously the tariff was increased in 2009 to $1,70 (+21.4%) • Gazprom is a strategic partner for Kazakhstan in a geopolitical context and an important provider of hard currency • ICA (as a part of the KMG group) and Gazprom are both empowered by Kazakhstan and the Russian Federation to negotiate the contracts • Ultimately, the end consumers of the gas transmitted by ICA under its contract with Gazprom are European customers • Gazprom’s counterparty risk for ICA is minimal: - Gazprom is more dependant on ICA than ICA on Gazprom, as Gazprom has to meet requirements from its European customers - Russia’s need for ICA’s gas volumes ensures that if Gazprom were ever to fail, an appropriate replacement would be created and transmission would not be interrupted

  25. Medium-Term Contract with Gazprom will Provide Greater Stability to ICA’s Credit Profile Main Conditions of Gazprom’s Contracts Main Implications • Transit from Turkmenistan and Uzbekistan to the Russian border • Transmission tariff remained at the level of 2009 USD 1.70 for 1000 bcm per 100 km. • Contract has been signed for 5 years (2006 – 2010) • 80% of transmission volumes is guaranteed by “take or pay” condition • Transit through northwest of Kazakhstan • Transmission tariff remained at the level of 2009 USD 1.70 for 1000 bcm per 100 km. Contract has been signed for 5 years (2006 – 2010) • Gazprom’s own production has for years remained stable • Enhancement of throughput capacity of gas transportation system • Throughput of the CAC pipeline is projected to initially increase from current 56 bcm to 60 bcm and then ultimately to 80 bcm • ICA revenues are expected to increase to USD 1bln by 2010 • The tariff increase negotiated with Gazprom was specifically to enable ICA to undertake major investment projects that will benefit both companies

  26. Well Defined Strategy Strategy: • ICA’s strategy is driven by the government’s aim and goals for the gas industry and for ICA to continue to maintain its unique position as the sole route between Central Asian producers and European customers Fundamental strategy documents: • Gas Industry Development of Kazakhstan until 2015 • Program of Gas Industry Development of Kazakhstan for 2004-2010 • 5-year rolling business plan updated annually with budgets Business Plan 2010-2014 Key Goals Implementation • ICA has already invested about USD 1 billion in maintaining reliance; • Direct future investment towards upgrading the transit capacity and evaluating possibilities of new routes; • Feasibility of new transit routes, including a route from CAC pipeline to southern Kazakhstan and China • Maintain and enhance reliability and performance of existing pipeline; • Increase the throughput capacity of existing pipeline system to support expected growth in export volumes; • Adopt the latest information technologies for management of the pipeline network; • Develop new pipeline systems to diversify customer base

  27. Major Investment Projects

  28. Major Investment Projects • Construction of Turbocompressor station #4 of Compressor station Makat • Goal: upgrade gas pipeline and reduce maintenance costs • Project cost: USD 200-250 mln • Stage: feasibility study was completed, project documentation is at the stage of implementation • Project start date: 2010 • Project end date: 2012 • Financing: ICA considers options of funding the project either by cash generated from operations or conducting trade financing transaction • Increase of Turbocompressor station # 5 of CAC pipeline-5 • Goal: upgrade gas pipeline and reduce maintenance costs • Project cost: approximate USD 400-500 mln • Stage: feasibility study is at the stage of implementation • Project start date: 2011 • Completion date: 2014 • Financing: ICA considers options of funding the project either by cash generated from operations or conducting trade financing transaction

  29. Financial Profile

  30. Capital Structure and Debt Maturity Profile • ICA has both ordinary and preferred shares, with the latter paying an annual dividend of a minimum 1% of nominal value – a small dividend payment was made in November 2009 of KZT 0,248mln in respect of the preferred shares which has limited impact on cash flow. Dividend payout historically has been low, allowing for the internally generated cash to be used for investments • ICA’s long term debt is mainly for investment projects (increase of throughput capacity for the gas transmission network, the most profit generating asset) • In December 2008 ICA redeemed USD 71mln of its USD Bond 2011 and in February 2009 USD 60mln of its USD Bond 2017. Both repurchases were financed by the company’s cash and were prompted by market conditions and attractive pricing ICA’s forecasted long-term debt (all on an unsecured basis): Source: ICA

  31. Debt Maturity Profile Debt breakdown By scheduled debt repayments, $mln By interest rate split, 1H 2009 By currency split, 1H 2009 Floating rate 7.4% USD 100% Fixed rate 92.6% Source: ICA Financials • Scheduled debt repayments spread out across the years, however 2011 and 2017 years are relatively high repayments due to maturity of USD Bond 2011 and 2017 • In 2008 ICA established Accumulation Fund for Eurobonds debt repayment in which ICA accumulates free cash as set in debt repayment schedule. Cash is invested in the highly liquid financial instruments such as cash at bank accounts, deposits and considers investing in very low risky securities such as government notes • Significant portion of interest rate on debt is fixed interest rate, which indicates very low exposure to changes in interest rates • Current debt is dominated in USD poising substantial foreign exchange book losses in the case of Tenge devaluation

  32. Intergas’ Income Statement* Sales EBITDA Net Income Coefficients *Source:Financials & Business Plan of ICA for 2010 - 2014 * KZT/USD Exchange rate is 120.77for 2008 and 150 for 2009-2010 * 2009 Figures are expected

  33. Intergas’ Balance Sheet and Cash Flows Statements* Net Funds from Operations Assets Financial Debt Ratios * Source:Financials & Business Plan of ICA for 2010 – 2014 (2009 Figures are expected) * KZT/USD Exchange rate is 120.3 for 2007, 120.77for 2008 and 150 for 2009

  34. Intergas’ Covenant compliance of Bank Facility and KMG Bank Facility Financial Covenants KMG Financial Covenants * Source:Financials & Business Plan of ICA for 2010 – 2014 (2009 Figures are forecast) * KZT/USD Exchange rate is 120.3 for 2007, 120.77for 2008 and 150 for 2009

  35. 2008 – 2010 capital investment strategy includes Maintaining and enhancing reliability and performance of existing pipeline while increasing throughput capacity Further investment dependents on growth of transportation volumes No pipeline capacity expansion until firm agreements on tariffs and volumes are achieved Conditional projects Significant modernisation and re-construction of existing network, including upgrading technology & telecom systems Upgrading the CAC (Central Asia Center) pipeline Financing from internally generated funds and external sources USD 30mn of investments per year under the concession agreement and not less than USD 450mn in aggregate Starting from 2008 operating cash flows were able to fund capex since the significant portion of capex was maintenance capex. In 2009 100% of total capex is maintenance capex. As a result, CFO/Capex ratio was improved Capital Expenditures ICA Maintenance CAPEX - Development CAPEX Program & Requirements Source: ICA financials and business planfor 2010-2014 (2009 Figures are expected)

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