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THE ORDER OF THE CHAIRMAN OF THE AGENCY OF THE REPUBLIC OF KAZAKHSTAN ON REGULATION OF NATURAL MONOPOLIES

of September 29, 2005 No. 286-OD

About approval of the Instruction for calculation of rate arrived to regulated base of the involved assets of the subjects of natural monopoly rendering gas transportation services on bulk distribution lines

(as of February 5, 2009)

According to the subitem 3) of Item 1 of article 13 of the Law of the Republic of Kazakhstan "About natural monopolies and the controlled markets" and the subitem 6) of Item 21 of the Regulations on the Agency of the Republic of Kazakhstan on regulation of natural monopolies approved by the order of the Government of the Republic of Kazakhstan of October 12, 2007 No. 943, I ORDER:

1. Approve the enclosed Instruction for calculation of rate of profit on regulated base of the involved assets of the subjects of natural monopoly rendering gas transportation services on bulk distribution lines.

2. To department on regulation and control in the sphere of pipeline and water sewer systems of the Agency of the Republic of Kazakhstan on regulation of natural monopolies (Askarova A. G.) provide in the procedure established by the legislation state registration of this order in the Ministry of Justice of the Republic of Kazakhstan.

3. To department of administrative work and analysis of the Agency of the Republic of Kazakhstan on regulation of natural monopolies (Esirkepov E. O.) after state registration of this order in the Ministry of Justice of the Republic of Kazakhstan:

To provide 1) in accordance with the established procedure its publication in official mass media;

2) to bring it to the attention of structural divisions of the Agency of the Republic of Kazakhstan on regulation of natural monopolies and subjects of the natural monopolies rendering gas transportation services on bulk distribution lines.

4. To impose control of execution of this order on the vice-chairman of the Agency of the Republic of Kazakhstan on regulation of natural monopolies Nefedov A. P.

5. This order becomes effective from the date of state registration in the Ministry of Justice of the Republic of Kazakhstan.

 

Chairman B. Sagintayev

Approved by the order of the Chairman of the Agency of the Republic of Kazakhstan on regulation of natural monopolies of September 29, 2005 No. 286-OD

The instruction for calculation of rate arrived to regulated base of the involved assets of the subjects of natural monopoly rendering gas transportation services on bulk distribution lines

1. General provisions

1. This Instruction for calculation of rate arrived to regulated base of the involved assets of the subjects of natural monopoly rendering gas transportation services on bulk distribution lines (further - the Instruction) is developed according to the Law of the Republic of Kazakhstan "About natural monopolies and the controlled markets" and other regulatory legal acts of the Republic of Kazakhstan.

2. The instruction disaggregates the mechanism of calculation of the admissible profit level which is part of rates of the subjects of natural monopoly rendering regulated transportation services of gas on bulk distribution lines (further - the gas transmission organization), and considered in case of their calculation and approval.

3. The instruction is entered for the purpose of reasonable calculation and the possibility of profit earning providing effective functioning of the gas transmission organization.

4. The profit rate on regulated base of the involved assets is determined by authorized body by consideration and approval of rates of the gas transmission organization.

5. In the Instruction the following basic concepts are used:

dividends - the part of net profit of the company distributed on the common share;

the loan capital - loan and obligations of the company with repayment period more than one year;

mother company - the company which holds controlling stock of the gas transmission organization;

the accounting period - four consecutive quarters preceding date of application by the gas transmission organization for settlement of a tariff of gas transportation services for bulk distribution lines;

the preference capital - the capital created due to release of preferred shares;

equity - the asset cost of the company belonging to founders (shareholders) less obligations to creditors and shareholders according to preferred shares;

capital structure - proportion of the loan capital, the preference capital and equity (common shares) in structure of financing of the company;

country risk - uncertainty in future income because of possible changes of political and economic country situation;

weighted average capital cost - the weighted average value of necessary regulations of the income on long-term obligations, preferred shares of the company, common shares where weight are determined as shares of each source of financing in target capital structure;

cost of equity - the size characterizing the return rate reflecting investment risks of investors in investment into common shares of the company;

the cost of the preference capital - the size characterizing the return rate reflecting investment risks of investors in investment into preferred shares of the company;

the cost of the loan capital - the cost of attraction of external financing;

authorized body - the state body performing management in spheres of natural monopolies and in the controlled markets.

Other concepts and terms used in this Instruction are applied according to the legislation of the Republic of Kazakhstan.

2. Determination of rate arrived to regulated base of the involved assets

6. The profit rate after the taxation is calculated based on reasonable and effective capital structure, and is determined as weighted average cost of different types of the capital by the following formula (1):

Формула 1 к Приказу от 29.09.2005 года №286

where:

rd - the cost of the long-term loan capital;

re - cost of equity;

rp - the cost of the preference capital;

ZK - the long-term loan capital;

RK - the paid preferred shares;

SK - the paid common shares;

To - the general capital, is determined as the amount of ZK + by RK + SK;

t - taxation rate (corporate income tax).

7. The profit rate to the taxation is determined as profit rate after the taxation divided on (1-t).

8. In case of determination of capital structure capital structures of the gas transmission organization, its mother company and "group proxy" of the similar companies are considered.

9. The existing capital structure of the gas transmission organization is used under following conditions:

1) this capital structure is economically reasonable and does not infringe upon consumer interests of services of the gas transmission organization;

2) the gas transmission organization performs external borrowing irrespective of mother company.

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