The European Bank for Reconstruction and Development (EBRD) is set to invest more than $100m (KZT50bn) in Kazakhstan Temir Zholy (KTZ or Kazakhstan Railways) bond issue for boosting the operator’s financial resilience.
The issue, which will be listed on the Kazakhstan Stock Exchange (KASE), marks EBRD’s debut investment in the country’s local currency bond.
Kazakhstan’s state-owned railway operator will use the investment to execute crisis response measures, such as the reorganisation of its transit freight operations.
This is anticipated to combat Covid-19 headwinds, as well as the ongoing geopolitical tensions.
The national operator will also restructure its balance sheet with the capital.
It is said to be “the first issue of a bond with TONIA-linked coupon by a local company.”
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With over 1,720 locomotives and 46,200 freight cars, KTZ is the owner and operator of a 16,000km railway network.
The operator will utilise the funding to upgrade crucial infrastructure along the Middle Corridor for railway container transit.
Up to 95% of freight traffic between China and the EU moved via the Northern Corridor till now.
Transport demand through the Middle Corridor has grown as more international carriers are seeking alternatives to this corridor.
The corridor connects Kazakhstan to Azerbaijan, Georgia and Turkey through the Caspian Sea.
EBRD Kazakhstan head Huseyin Ozhan said: “By investing in the local bond issue of Kazakhstan Railways, the EBRD is improving the sustainability of a major domestic company.
“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 transportation.”
Last month, EBRD repurposed €50m of an existing loan to Ukraine’s operator UkrZaliznytsya to continue offering essential cargo, passenger transportation and evacuation services.