A bond investment of KZT 45.8 billion in favour of the National Company "Kazakhstan Temir Zholy" JSC (KTZ - Kazakhstan Railways).
Issue of the local currency bond will allow KTZ to:
- refinance its maturing hard currency and Russian rouble financial debt;
- free up capital to finance the modernisation of the Middle Corridor infrastructure.
ETI score: 63
The Project supports capacity improvement on the East-West corridor and to support the Middle Corridor development. It also promotes access to skills for young people in the transport and logistics industry by introducing two new National Occupational Skills Standards ("NOSS") and new or improved accredited learning programmes in partnership with the Academy of Logistics and Transport on the basis of the developed NOSS.
KAZAKHSTAN TEMIR ZHOLY NATIONAL COMPANY JSC
KTZ is a vertically-integrated holding company that manages railway infrastructure and operating freight and passenger train services in Kazakhstan. KTZ owns and operates the railway network of 16,000 km in total length, more than 1,720 locomotives, 47,300 freight and 2,300 passenger wagons. KTZ is fully state-owned through Sovereign Wealth Fund "Samruk-Kazyna" JSC (Samruk-Kazyna). In 2021 KTZ reported revenues of US$ 3.12 billion (€2.82 billion) and EBITDA of US$ 906 million (€ 820 million).
EBRD Finance Summary
Total Project Cost
The EBRD offers financing structure, effectively bridges a financing gap due to adverse market conditions and risk mitigation. In the current market environment the EBRD's participation will be critical for KTZ to reach expected subscription level and support investors' confidence. This is EBRD's first investment in a local currency bond in Kazakhstan, and firts issuance of TONIA-linked bonds by a loacal company.
Environmental and Social Summary
Categorised B (ESP 2019) and this is a capital market transaction with due diligence being limited to publicly available information. The proceeds of the new bonds would be used to refinance the Client's existing bonds issued in 2014 for general corporate purposes, and are not envisaged to be directed at specific physical assets or any new CAPEX investments. Therefore, ESDD was focussed on assessing the risks and impacts associated with the KTZ's existing E&S management systems, practices and compliance record and review of the risks associated with the existing operations. This has been done through review of documentation and reporting which the client has produced on previous projects. Past annual E&S reporting from KTZ has been satisfactory. Overall, KTZ continues to have capacity and capability to implement the PRs.
The Company proactively focusses its efforts on enhancing its ESG performance and aligning it in line with good international practice, supporting the move towards a low-carbon competitive economy and wider use of the digitalisation. KTZ continuously works to improve their internal EHS capacity, enhance managerial leadership and overall management of industrial safety, occupational health and safety practice and environmental protection. The Company considers safety as one of its primary objectives and is committed to Vision Zero in both day-to-day operations and at the top management level to bring the number of accidents down. Further corrective measures required at the corporate level to meet the EBRD Performance Requirements (PRs) will be addressed through the Side Agreement.
The indicative anticipated KTZ's Capex investment programme for 2022-2026, that would be financed by KTZ's own resources mostly, includes predominantly new rolling stock for passenger and freight transportation, incl. electrical trains, modernisation of the existing infrastructure as well as the development and construction of the train station complex in Nur-Sultan. To ensure any risks and impacts associated with KTZ's current and future operations are adequately addressed, the Side Agreement with the client would need to clearly specify that (i) after subscription, the Bank will require the Client to comply with the PRs, and (ii) any high risk projects or projects categorised "A" in line with the EBRD's E&S Policy 2019 will not be financed through this bond refinancing. The Bank will monitor the project through review of annual E&S reports and site visits, as required.
Technical Cooperation and Grant Financing
Company Contact Information
Kunayev Str 6D, Nur-Sultan, 010000, Kazakhstan
PSD last updated
29 Jul 2022
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