The company’s plans to service the passengers “from door to door” and the conditions the company has to satisfy before going public were spoken about by Ulf Wokurka, an Independent Director and Member of the Board of Directors of national railway operator Kazakhstan, and Temir Zholy (KTZ) in an exclusive interview with The Astana Times.
The Samruk Kazyna Sovereign Wealth Fund is the sole shareholder of KTZ (est.1997), a national transport and logistics holding, the largest operator of Kazakhstan’s railway network and one of 15 largest railway companies in the world (223 billion tonne-kilometers in 2021).
Over 110,000 citizens are provided with jobs by KTZ.
According to Ulf Wokurka, KTZ has recently adopted a five-year passenger transportation development concept, developed jointly by KTZ and a German consultancy company with the aim to improve the passenger transportation experience.
The passenger train services’ timetables are going to be adjusted according to adjacent transportation service providers (e.g. airlines and bus services) over the next five years.
Both the relevant airline and KTZ are interested in the resulting increased customer satisfaction as it will increase passenger numbers.
A new mobile application of KTZ for passengers will make the new services for traveling “from door to door” ready for booking.
Cooperation with leading taxi service providers, with Air Astana, and with large inter-city bus transportation providers will also be necessary.
The negotiations of a respective agreement with Air Astana, Kazakhstan’s flagship air carrier have already been started.
The construction of several transport hubs around major cities and regional centers is planned and rail tracks and rail stations are going to be modernized, as well as new tracks are going to be constructed.
A second track will be added to the road between the Chinese border and the north of Balkhash Lake.
Alternative sources of financing are necessary for KTZ to reduce its dependence on foreign borrowing. For example, the National Fund (a sovereign wealth fund that is operated by the National Bank of Kazakhstan) can be an important source for these long-term investments into the future.
One of those factors that have so far prevented the company from seeking a public listing has been the significant debt burden of KTZ.
Several companies are comprised in JSC NC KTZ. It is necessary to decide which of them should go public. Profitable segments, such as the provider of freight transportation services, are currently cross-subsidizing less profitable or even loss-making companies within the KTZ group.
The impact of such plans on the company’s future debt service capacity is another implication to be duly considered within any decision making on a possible partial privatization or going-public.
Prior to aiming for an IPO, it is necessary to define the future terms and conditions under which KTZ and other railroad companies will compete for their share in the market for freight transportation services on both domestic and cross-border transportation routes.
The stability of freight transportation passing through Russia has been questioned as a result of the ongoing military operations in Ukraine, consequently, the volume of goods across the territory of Russia has fallen.
Steps to minimize the impact of the military conflict on its operations have been taken by both sides. For instance, external borrowings have been optimized and funding sources have been diversified to mitigate the currency risks. Measures are taken by KTZ to reduce its operational costs, as well as to resume negotiations with suppliers and other business partners in order to prevent unexpected price hikes for purchased equipment, spare parts and services.
One of these measures is developing alternative transportation routes (e.g. Trans-Caspian international transportation route (TITR) which runs through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and on to Europe and unites around 20 transportation companies, owners of the infrastructure, and carriers from Azerbaijan, China, Georgia, Kazakhstan, Romania, Turkey, and Ukraine). KTZ has been its regular member since 2017 and can provide an alternative to the Russian route for the transit of goods from China to Europe or export from Kazakhstan.