Aggressive financial policy resulting from ambitious capital expenditure plans; Additional operational challenges presented by a significant grid rehabilitation project; and Limited financial flexibility for 2004-2005. Strategic importance to and support from central government; Favorable tariff regulation; and Potential for strong growth in electricity demand. The rating on Kazakhstan Electricity Grid Operating Co. (JSC) (KEGOC), the fully state-owned monopoly operator of the Republic of Kazakhstan's (foreign currency BB+/Stable/B; local currency BBB-/Stable/A-3) high-voltage electricity transmission grid, reflects: The business risks associated with its relatively high concentration of generators and consumers in the electricity sector of Kazakhstan; its aggressive financial policy; and the expected deterioration of its financial flexibility from 2004-2005, when it starts to repay the principal on its long-term loans. These
