Projects financed by the EDB
Financing Projects in Kazakhstan’s Rail Sector
Railways ensure Kazakhstan’s access to global markets
Kazakhstan has more than 15,000 km of railway track and a freight fleet of over 44,000 rail wagons and 1,500 locomotives. Fifteen cross-border stations connect its rail system with neighbouring countries (11 on the border with Russia, two on the border with Uzbekistan, one on the border with the Kyrgyz Republic, and one on the Chinese border). However, the demand for new track and rolling stock is growing continuously.
There are 44 landlocked countries in the world. Of these, nine are post-Soviet states and five are members of EDB – Armenia, Belarus, Kazakhstan, the Kyrgyz Republic, and Tajikistan.
The priority of all of these countries, in the context of economic globalisation, is to create an efficient transport infrastructure to properly service their transit traffic. This issue is particularly important to Kazakhstan, a huge country with flourishing export-orientated economy. Oil and oil products, metals, hundreds of other raw materials and semi-finished products and grain are its most significant exports.
Railways account for the bulk of freight traffic in Kazakhstan. Therefore, the development of rail transport and enhanced logistical efficiency and transport capacity will contribute to the advancement of its economy as a whole. For this reason the government is particularly focused on making improvements in this sector. The country is building and electrifying new railways, improving its transport management system, and implementing transport engineering projects.
In cooperation with the French company Alstom, a state-of-the-art electric locomotive plant has been built in Astana’s Industrial Park. Using Alstom’s technology the plant manufactures four-, six- and eight-axle electric locomotives with asynchronous traction motors for freight and passenger transport.
A specialist joint venture, Elektrovoz Kurastyru Zauyty (EKZ), was set up in 2010 to undertake this project. Its founders are Remlokomotiv (a subsidiary of the national rail operator Kazakhstan Temir Zholy, or KTZ), Alstom Holdings (one of the world’s leading manufacturers of railway machinery and equipment), and Transmashholding (Russia’s largest transport engineering company).
Eurasian Development Bank provided funds for construction. EDB provided a 10-year loan facility of KZT 10 billion (more than US $66 million) for EKZ. The overall project cost exceeded KZT 18 billion.
The plant began production in 2012. In December 2012, President of Kazakhstan Nursultan Nazarbayev attended its opening ceremony and launched the first electric locomotive. The plant is expected to produce 100 locomotive units per year. Remlokomotiv has already signed a contract with EKZ for 200 freight locomotives and 95 passenger locomotives for Kazakhstan’s railways by 2020. The contract is worth a total of around EUR 1.3 billion.
EDB participated in the financing of this project because it recognised the importance of the rail industry for Kazakhstan. The project will have a strong, positive effect on the sustainable development of Kazakhstan’s economy and transport infrastructure and will help increase the production of high-tech products. Over the loan period, it will increase the country’s gross output by more than US $222 million a year and will create 650 new jobs.
By strengthening the CIS shared transport system and expanding exports to other CIS countries, the project will help to deepen Kazakhstan’s economic integration with other countries in the region. Up to 40% of output is likely to be exported to other countries which also use the 1,520 mm gauge.
The project has also contributed to an increase in mutual investment between the Bank’s member states. Russia’s Transmashholding was one of its originators and co-investors. In addition, a sizeable share of the locomotive components will be made in Russia.
This is not EDB’s only project in Kazakhstan’s rail sector. In April 2013, EDB and Transtelecom, a subsidiary of KTZ, signed an agreement under which EDB will finance investment to develop the Automated Traction Power Dispatch Control System.
Accordingly, EDB opened a loan facility of KZT 17.5 billion for Transtelecom for a period of 7.5 years. The project cost totals KZT 25.5 billion and involves the development of an automated rail traffic control system in Kazakhstan. KTZ is installing precision devices to measure diesel and electricity consumption by its locomotives. A system is being installed to collect and analyse real-time data.
Analysts predict that the automated control system, when implemented, will result in reductions of up to 13% of diesel consumption and up to 7% of electricity consumption. They expect that the project will give an annual boost to the Kazakh economy of over US $40 million.
In October 2014, EDB increased its share in the financing of this project, lending a further KZT 7.5 billion to Transtelecom in addition to the KZT 17.5 billion the Bank provided in 2013.