Project description
The Government of Kazakhstan developed a Concept for the development of Transport and Logistics Potential in the country until 2030 with a focus on turning Kazakhstan to a large transit and logistics hub in Central Asia. Under this transport concept, the Middle Corridor has been receiving considerable attention due to its potential to enhance regional connectivity and promote economic integration. The Middle Corridor serves as a transport route connecting Central Asia countries and China and Europe through Kazakhstan, Azerbaijan, the Caspian Sea and Georgia.
Notwithstanding its geographical importance, the Middle Corridor remains underdeveloped as it has more border crossings, more transshipment, operational inefficiencies, and infrastructure bottlenecks
Toward this, the national railway company, Joint-stock Company “National Company “Kazakhstan Temir Zholy” (“KTZ”) has developed an investment plan for the development of the Middle Corridor, including the construction of the Almaty Railway Bypass Project, a 130 km electrified railway line bypassing the logistics bottleneck around the Almaty City, the largest city in Kazakhstan, while enhancing cargo transportation along the Middle Corridor (the “Project”). The Project cost is estimated at US$ 304 million will be financed by loans from International Finance Corporation (“IFC”), Asian Infrastructure Investment Bank (“AIIB”), and Standard Chartered Bank to KTZ and the loans will be guaranteed by the Joint-stock company “Sovereign Wealth Fund “Samruk Kazyna” (“Samruk Kazyna”), the sole shareholder of KTZ.
The proposed MIGA non-honoring of a State-Owned Enterprise obligations (NHSOE) cover is to guarantee the financial obligation of Samruk Kazyna, that will provide a guarantee on up to CHF 106 million ten-year loan from Standard Chartered Bank (and other financial institution yet to be identified) to KTZ to finance the construction of the Almaty Bypass.
MIGA Gross Guarantee Amount will be up to CHF 125 million, covering the loan principal amount, future interest and other related transaction costs.
KTZ is a vertically integrated group and is 100% state-owned enterprise (via Samruk-Kazyna). The group owns and operates all the state railway network and is the country’s largest owner of rolling stock. KTZ plays a key role in the national and regional transport system, providing economic connectivity with 14 regions of Kazakhstan, and with five neighboring countries, rendering KTZ as one of the 15 largest railway companies in the world in terms of freight turnover.
Samruk Kazyna is a State-Owned Sovereign Wealth Fund in Kazakhstan mandated to control and manage twenty one SoEs in Kazakhstan (including KTZ) to improve the welfare of the economy. Samruk Kazyna’s assets account for almost 40% of the country’s GDP.
Environmental Categorization
The Project is a Category A under MIGA’s Policy on Environmental and Social Sustainability (2013). This is a joint Project with International Finance Corporation (IFC); in accordance with MIGA AIP, the MIGA disclosure is linked to IFC disclosure. Click here to view the Environmental and Social Review Summary prepared by the IFC for their proposed support to the Project.
Development Impact
The key expected benefits of the Project are related to increasing access through alleviating bottlenecks and improving rail track capacity to accommodate growing long haul freight traffic both within Central Asia and from China to Europe. In addition, the Project is expected to increase the resilience of freight transport domestically, regionally, and globally through better railway infrastructure connectivity that contributes to consolidating the growth of the Middle Corridor with significant benefits to Kazakhstan.
The Project aligns with the WBG priorities in Kazakhstan as detailed in the Country Partnership Framework (CPF) FY2020-2025. The Project is strongly aligned with the CPF’s objective of “Strengthening connectivity infrastructure and regional service delivery for better local and regional integration. The Project is also contributing to the Systematic Country Diagnostics pillar of Integration and Connectivity by focusing on the maintenance of transport infrastructure.
With MIGA’s support, KTZ will be able to access international commercial financing for its infrastructure project at advantageous terms to improve the financial sustainability of the company.
