THE European Bank for Reconstruction and Development (EBRD) is boosting the financial and operational resilience of Kazakhstan Railways (KTZ) by investing up to Tenge 50bn ($US 104.79m) in a local currency bond issue to be listed on the Kazakhstan Stock Exchange.
The investment will help KTZ restructure its balance sheet and implement a range of crisis response measures, including reorganisation of its transit freight operations. This is needed to cope with the after-effects of the Covid-19 pandemic, the ongoing disruption resulting from the war in Ukraine, and other tensions between states along the Northern Corridor linking China with the EU via Kazakhstan, Russia and Belarus.
Political difficulties impacting on the Northern Corridor include Chinese opposition to a recent strengthening of relations between Lithuania and Taiwan, and tensions between Poland and Belarus over the issue of migrants attempting to enter the EU.
KTZ will use the new capital to modernise key infrastructure along the Middle Corridor for multi-modal traffic between China and the EU via the Caucasus, the Caspian and Black seas, Turkey and Bulgaria.
The Middle Corridor will help Chinese goods reach the EU market in almost half the time compared with movement by sea.
Until recently, up to 95% of freight traffic between China and the EU travelled along the Northern Corridor. But as international carriers are increasingly looking for alternative routes, demand for transport along the Middle Corridor has increased significantly.
This is the EBRD’s first ever investment in a local currency bond in Kazakhstan and the first issue of a bond with Tonia linked coupon by a local company. Tonia is the Tenge overnight index average rate developed jointly by the National Bank of Kazakhstan, the EBRD and the country’s leading financial institutions as a benchmark rate for lending instruments.
“By investing in the local bond issue of Kazakhstan Railways, the EBRD is improving the sustainability of a major domestic company,” says Mr Huseyin Ozhan, head of Kazakhstan at the EBRD. “It is also contributing to better regional and international connectivity and trade security, as the Middle Corridor offers one of the few realistic alternatives for China - Europe rail freight transport.”