Eastcomtrans loan

Location:

Kazakhstan

Project number:

43675

Business sector:

Transport

Notice type:

Private

Environmental category:

B

Approval date:

26 Nov 2014

Status:

Repaying

PSD disclosed:

30 Sep 2014

Original PSD

Project Description

The EBRD is considering an extension to an existing loan facility to Eastcomtrans LLP, the Kazakhstan-based rail wagon leasing and freight-forwarding company. The first loan documentation
was signed in December 2014 for an amount of up to USD 130 million structured as an A/B loan, USD 30 million of which was in Kazakhstan Tenge. The current extension is for an amount of up to USD 40 million or its equivalent in Kazakhstan Tenge.

Project Objectives

In 2015, the Kazakhstan economy was negatively impacted by a significant drop in crude oil prices and a resulting sizeable devaluation of Kazakhstan Tenge. The combination of these along with other factors resulted in reduced access to capital, increased inflation and uncertainty regarding Company's growth. This was accompanied by a decline in lease rates for wagons due to economic slowdown in Russia, devaluation of Russian ruble and resulting oversupply of wagons.The operation
will enable the Company to sustain uncertain economic conditions expected in the following several years and smooth the Company's debt repayment schedule by extending the duration of existing obligations.

Transition Impact

The Transition Impact is derived from support of key sector reforms through wider private ownership, setting standards of modern business practices and promoting competition and diversification in the railway sector. Currently the state-owned Kazakh Railways is the major player with around 50 per
cent market share in freight turnover and a 46 per cent share in rolling stock. With the support for private sector it is expected that the freight turnover by private sector would be increasing towards volumes over 50 per cent.
Setting standards of modern business practice. The project will introduce modern business practices to a private company operating in the rolling stock leasing sector in Kazakhstan. The company will work closely on improving corporate governance by developing and adopting a code of ethics, remuneration policies, disclosure policies and a corporate governance code. The company will also maintain at least two independent directors in its supervisory board.

Promoting competition and diversification in the railway sector. ECT will continue to diversify its client base and will aim to increase its share of auxiliary services to above 30 per cent by December 2018.

The Client

EASTCOMTRANS LLP
Eastcomtrans LLP is a private railway operator domiciled in the Republic of Kazakhstan. The company owns and leases over 12,000 wagons including gondolas, LPG and oil cisterns with an
average age of ca. 5-6 years. Its operating divisions are primarily based in the cities of Almaty, Astana and Aktau.

EBRD Finance

USD 90,829,600.00 The existing loan consists of the two senior secured loans on behalf of EBRD including: (1) A loan
of USD 25 million and (2) C loan of 5.45 billion in Kazakhstan tenge. The extension will constitute an amount of up to USD 40 million or its equivalent in Kazakhstan tenge.

Project Cost

USD 153,318,400.00

Environmental Impact

Categorised B. The environmental and social due diligence on the original transaction undertaken by the ESD team identified that the expansion of the Company's rolling stock fleet will not result in significant environmental or social impacts. The Company has robust process and labour safety procedures in place. Clauses on compliance with relevant environmental, health and safety requirements will be included in contractual documentation. The Company has assigned health and safety responsibilities to a number of managers and employees, and regularly provides health and safety training to its workers and an induction for all new employees. The agreed ESAP contains measures aimed at streamlining existing health and safety provisions along with environmental procedures into an integrated management system to benchmark the performance of the Company against relevant national and international standards as well as applicable Performance Requirements; developing a system for tracking the use of railcars against agreed route, cargo type and volume; and developing a procedure for registering accidents and incidents and development of a grievance mechanism for employees. The Company is on track with implementing the ESAP and submits satisfactory reporting on environmental and social issues. The company makes in-house evaluation of the third-party depots to ensure their compliance with licensing, HSE requirements,environmental policies and procedures, hazardous waste management and utilisation and other issues. The Company is in the process of developing EHSS policy and procedures. ESD is in regular contact with the Company and provided them with guidance for any potential future retrenchment.

Technical Cooperation

None.

Company Contact

Aida Yelgeldiyeva
yelgeldiyeva@ect.kz
 

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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