Almaty Railway Bypass Project

Project description 

The Government of Kazakhstan developed a Concept for the development of Transport and Logistics Potential in the country until 2030 with the objective of turning Kazakhstan into a large transit and logistics hub in Central Asia. Under this transport concept, the Middle Corridor – a strategically important trade route linking China, Central Asia, the Caspian region, and Europe – 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 end, 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, the largest city in Kazakhstan, while enhancing cargo transportation along the Middle Corridor (the “Project”). The Project cost,  estimated at CHF 272 million, will be financed by loans from the International Finance Corporation (“IFC”), Asian Infrastructure Investment Bank (“AIIB”), and Standard Chartered Bank to KTZ. These loans will also be guaranteed by the Joint-stock Company “Sovereign Wealth Fund “Samruk Kazyna” (“Samruk Kazyna”), the sole shareholder of KTZ. 

MIGA’s Non-Honoring of Financial Obligations of a State-Owned Enterprise (NHFO-SOE)  cover is to guarantee the financial obligation of Samruk Kazyna, that  provides a guarantee on up to CHF 83.53 million ten-year loan from Standard Chartered Bank  to KTZ to finance the construction of the Almaty Bypass. 

MIGA Gross Guarantee Amount is CHF 88.94 million (USD 113.02 million), covering the loan principal amount and future interest. 

KTZ is a vertically integrated group and is a 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  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 21 strategic SoEs (including KTZ) to support the welfare of the economy. Samruk Kazyna’s assets account for around 30% 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 the 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 which contributes to consolidating the growth of the Middle Corridor with significant benefits to Kazakhstan.

The Project is consistent with the WBG priorities in Kazakhstan as detailed in the Country Partnership Framework (CPF) FY2020-2025. It 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 was able to access international commercial financing for its infrastructure project at advantageous terms to improve the financial sustainability of the company.