MIGA Backs Modernization of Kazakhstan’s Railway Network
WASHINGTON, October 30, 2023 – The Multilateral Investment Guarantee Agency of the World Bank (MIGA) has issued a CHF 554.7 million (approximately $621 million) guarantee to Citibank N.A., United States and Banco Santander S.A., Spain to cover their loans to the national railway company Kazakhstan Temir Zholy JSC (KTZ). The 10-year guarantee covers the lenders against the risk of non-honoring of the financial obligation by the state-owned enterprise.
KTZ is a vertically integrated group, created by the government of Kazakhstan in 2002, that owns and operates all the state railway network and is the country’s largest owner of rolling stock. The company is embarking on a plan to rehabilitate and repair the national railway network system and update and expand its rolling stock of electric locomotives and passenger cars, which will be partially financed by the MIGA-guaranteed loan.
Kazakhstan, a large, landlocked country with extreme climate conditions, depends on the railway network for its economic activities. KTZ provides economic connectivity for 17 regions in Kazakhstan. It also facilitates transport and trade between Kazakhstan and the outside world. With around 16,000 kilometers of track length, it is one of the 15 largest networks in the world in terms of freight turnover. In 2022, the system transported 94 percent of the rail freight volume and 70 percent of the rail passenger traffic.
“MIGA is facilitating KTZ to access international commercial financing on favorable terms. This will allow a much-needed modernization of Kazakhstan’s railway network and improve KTZ’s financial sustainability,” said Hiroshi Matano, MIGA Executive Vice President. “This project will enhance the reliability, quality, and speed of railway services, and help in the modernization of its rolling stock, benefiting the population and boosting national economic development. In addition, the project will help KTZ take a significant step toward its low-carbon pathway strategy.”
Given Kazakhstan’s strategic location, both within Central Asia and as a bridge between Europe and Asia, it plays a key role in international transit railway freight traffic. The project will contribute to the government’s plan to turn the country into the largest transit and logistics hub in Central Asia.
“MIGA support has secured funding at favorable terms from Citibank and Banco Santander which represents a strategic opportunity for KTZ to embark on our investment program that will not only enhance our operational efficiency but also contribute to the socioeconomic development of our region,” said Dair Kusherov, KTZ Chief Financial Officer.
“Citibank is honored to have arranged this noteworthy transaction for KTZ, which will support the modernization and improved performance of Kazakhstan’s national railway system. The deal leverages Citibank’s longstanding presence in Kazakhstan and partnership with MIGA to demonstrate Citibank’s ongoing commitment to promoting economic growth around the world,” said Julie Monaco, Global Head of Public Sector Group for Citibank.
“This transaction represents a major achievement for all parties involved. KTZ’s investments are critical for the transit and passenger corridor between the Far East and Europe. We are pleased to have worked with Citibank and MIGA on the first non-honoring transaction in Kazakhstan, and we look forward to partnering with KTZ, MIGA, and Citibank in future transactions,” said Guillermo Hombravella, Santander Global Head of Export & Agency Finance.
The modernized railway network will enhance domestic supply chains and regional connectivity within Kazakhstan by providing better quality and reliability of freight and passenger service. In addition, an important share of the goods for the project will be procured locally, benefiting domestic suppliers and creating employment opportunities.
MIGA was created in 1988 as a member of the World Bank to promote foreign direct investment in emerging economies by helping to mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war and civil disturbance; and offering credit enhancement to private investors and lenders. Since its creation, MIGA has issued over $76 billion in guarantees across 123 developing countries, supporting more than 1,000 projects. Over the past decade, MIGA’s guarantees have generated more than 156,000 jobs in developing countries.
Citibank N.A. is a subsidiary of Citi Group Global Market Inc., United States of America, and is one of the largest banking institutions in the world with US$2.4 trillion assets as of December 31, 2022, and by far the largest international banking franchise among U.S. peers. The group has physical presence in over 160 countries with global customer base estimated at 200 million customers and employing more than 220,000 staff.
About Banco Santander
Santander Corporate & Investment Banking is a Santander global division that supports corporate and institutional clients, offering tailored services and value-added wholesale products while adhering to responsible banking standards that contribute to the progress of society. Santander is committed to fulfilling its clients’ needs, surpassing their expectations and helping them to achieve their goals. For that reason, Santander invests heavily in developing tailor-made solutions and in providing local expertise, fully integrated coverage and cross-border capabilities.
Elizabeth Howton, (202) 458-5922 or firstname.lastname@example.org
For more information, please visit: https://www.miga.org