KTZ Local Currency Loan

Location:

Kazakhstan

Project number:

46852

Business sector:

Transport

Notice type:

Public

Environmental category:

B

Approval date:

17 Sep 2014

Status:

Signed

PSD disclosed:

18 Jul 2014

Translated version of this PSD: Russian

Project Description

The EBRD is considering a local currency facility for Kazakh Railways’ (KTZ) and its fully owned subsidiaries KTZ Express, KT Shipping and Locomotive to finance KTZ Express’s and KTZ Shipping’s logistics and infrastructure programme, which includes a number of components (purchase of dry cargo vessels for logistic operations and KTZ’s equipment for emergency response and equipment for routine maintenance works on existing rail lines of KTZ. Part of the financing will be directed for balance restructuring of Locomotive’s liabilities.

Transition Impact

The Project will continue the Bank’s support of the railway reform programme and will be focused on more widespread private participation and eventually private ownership within KTZ Group. In line with the Government’s plans to reduce the state involvement in the economy and strengthen its foundations by increasing private sector participation, the Bank will support KTZ to sell its ownership to the private sector appropriately: by (i) providing a technical assistance for developing an Action Plan (including the timetable and required institutional changes before privatisation) for privatization of key operating subsidiaries of KTZ; and (ii) supporting the privatisation of KTZ’s non-core assets/companies, including wagon construction and repair/maintenance. These will strengthen the government plans to transfer KTZ’s assets to competitive environment

The Client

KTZ (100 per cent owned by Samruk-Kazyna) is a vertically integrated company that manages railway infrastructure and operates freight and passenger train services. KTZ plays a key role in the Kazakh national transport sector with leading position in freight and passenger traffic. KTZ Express, Locomotive and KTZ Shipping are 100 per cent owned by KTZ.

EBRD Finance

Senior loan of up to EUR 120 million equivalent in Kazakh tenge.

Project Cost

€120 million.

Environmental Impact

Categorised B. This is a loan to the existing client KTZ and its subsidiaries, and part of the environmental and social due diligence (ESDD) has been completed in 2014 under the earlier Eurobond operation (Project Sakura) with support from independent external consultants. ESDD identified that while KTZ is working on improving its corporate EHS management systems, standards and practices, its performance in implementing previously agreed ESAPs under the existing loans is not yet up to the expected standard and requires improvement to bring Company’s and its operating subsidiaries’ performance in compliance with EBRD’s requirements. The Bank has updated KTZ’s own ESAP and also agreed a new corporate ESAP for KTZ’s logistics operations subsidiary KTZE, requiring it to develop corporate EHS management systems, build its internal management capacity and provide training for staff, develop its contractor management and supervision procedures, and implement E&S Procedures to structure the logistic infrastructure projects financed from the Eurobond proceeds to meet EBRD PRs.
Due to the focus of the KTZ local currency loan mainly on purchase of equipment for logistics operations and for emergency response, with no new construction involved, it is not expected to be associated with any major E&S sensitivities or risks.

Recent addition of KTZE’s subsidiary KTZ Shipping to the group of borrowers in connection with the dry cargo vessels purchase and operation will require it to adopt and implement the measures related to shipping operations included in the corporate ESAP for KTZ Express. These measures include, among others, developing corporate EHS management systems, building internal management capacity and providing training for staff, operating the vessels in compliance with international conventions and IMO requirements relating to maritime safety and environmental protection, as well as implementing contractor management and supervision procedures in line with EBRD PRs. In particular, tender documents for the procurement of the 2 dry cargo vessels are required to include specifications for compliance with the provisions of international conventions and IMO requirements. Since the operation and maintenance of the vessels will be contracted to an external company, the contract conditions will also need to include requirements to operate the vessels in compliance with the provisions of international conventions and IMO relating to safe operation and management of vessels and pollution prevention.

A review of the currently contracted operator for the dry cargo vessels, MARINEST LLP, showed that it is certified for compliance with MARPOL and SOLAS requirements and the International Maritime Code for the safe operation of ships and for pollution prevention (ISM Code) for the cargo ships. MARINEST also has a valid IMO certificate for Safety management System and reportedly has already been operating two dry cargo vessels on behalf of KTZ Shipping for the past year.
The Bank will continue closely monitoring KTZ’s and its respective subsidiaries’ performance and implementation of the agreed ESAPs through reviewing annual reports and carrying out monitoring visits, when deemed necessary.

 

Technical Cooperation

The technical cooperation package in connection with the project is expected to include technical

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

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