From the point of view of the activity of the entire railway industry, which has passed a hundred-year milestone, the term is not long. But the “peculiarity” of Shar - Ust-Kamenogorsk railway section, the construction and operation of which is carried out by "Dosjan temir joly" joint-stock company, is that this is the first project in the industry implemented with the involvement of private investments, i.e. according to the concession scheme.
A huge role in the successful implementation of the project and its stable operation would not have been possible without professionals in the respective sphere who have been working in the industry for decades.
Today's meeting is a confirmation of this, as the participants will be Chairman of the Board of Directors of "Dosjan temir joly" JSC Marat Medeubayev and adviser to the Chairman of the Board of "Dosjan temir joly" JSC Boris Issinamanov.
Boris Alexandrovich is one of the “masters” of the railway industry, who has worked in the system for more than 55 years!
With his direct participation hundreds of kilometers of railways in Kazakhstan were constructed.
The Khromtau-Altynsarino section in western Kazakhstan was one of the first. Then there was participation in the construction of Zhetygen - Khorgos, Shalkar - Beineu, Zhezkazgan - Saksaulskaya sections. For success in work, he was awarded the Badge of Honor and III degree Barys orders, and was also awarded the title of Honorary Railway Worker.
Marat Medeubayev headed the locomotive economy of the Republic for many years, was awarded the Kurmet order, the «honorary railwayman’ badge, is listed in the Book of Honor "Bolat Zholdyda Danybekbekerleri", he spent more than 35 years in the industry and continues to work for the benefit of the railway of Kazakhstan.
Marat Medeubayev, Shar-Ust-Kamenogorsk section, the first project in the history of the Republic of Kazakhstan, built with participation of private capital, which is operated on a concession basis. Please tell us if the risks were justified, because before that the entire railway in Kazakhstan was built at the expense of the state.
M.M.: The domestic railway industry has a centuries-old history. Throughout the entire period of activity, it has carried out and continues to carry out important state tasks for the implementation of cargo and passenger transportation not only in the country, but also abroad.
We all know how difficult it was at that time to develop the economy only by means of and at the expense of the state.
It was necessary to attract investment. The Government of the Republic of Kazakhstan has developed a Development Strategy of the Republic of Kazakhstan until 2030, which provided for this.
In March 2005, in accordance with the Strategy and Government Decree, "Dosjan temir joly" joint-stock company (hereinafter referred to as the Company) was created, the main purpose of which was the implementation of the project for the construction and operation of Shar - Ust-Kamenogorsk railway line, and already in 2009 the cargo and then passenger traffic was opened.
The construction of the line made it possible to avoid lengthy border and customs procedures that were carried out when crossing the border with the Russian Federation and thereby reduce the delivery of goods and passengers to destinations by 10-15 hours.
B.I.: Currently, about 9 million tons of cargo per year are transported along the railway section. And there are prerequisites for its increase, since the region’s transportation needs are steadily growing, the number of container traffic is increasing.
I would like to note that one of the largest enterprises of the republic - Kazzinc company, also carries out the transportation of its goods through Shar - Ust-Kamenogorsk section.
Also, passenger traffic was organized at the section, including high-speed transportation, which ensures the delivery of passengers from the Eastern region to the cities of Nur-Sultan, Almaty, Semey, Pavlodar, etc.
Today we can say with great confidence that the Company operating Shar - Ust-Kamenenogorsk railway line is a stably operating enterprise that is the “locomotive" of the economy and is one of the largest taxpayers in East Kazakhstan.
Any enterprise starting work from scratch, at the beginning of its activities, encounters certain difficulties. Did "Dosjan temir joly" have any?
M.M.: To tell the truth, the Company did not immediately reach a positive dynamics in transportation and the economy as a whole.
As you have already noted yourself, the construction of Shar - Ust-Kamenogorsk railway section is the first project in the transport industry of Kazakhstan that was implemented with the involvement of private capital, in other words, under the concession scheme.
There were difficulties both during the construction period and during the operation period at the initial stage.
The legal framework was not sufficiently developed. There was no technical documentation on interaction with the National Carrier represented by "NC "KTZ" JSC, consignors and consignees.
What steps have been taken to make the company work? Have any goals or objectives been set?
M.M.: The company has operated, but operated at a loss.
All that it earned in carrying out its activities, all income, was spent to repay loans and buy bonds.
Given the current situation, it was decided to develop the Development Strategy of "Dosjan temir joly" JSC for the period of 2018-2028, i.e. until the end of the concession and its full implementation.
Thus, the Company has set specific goals and objectives for further successful production and financial activities.
The first is to ensure the safety of train traffic, by impeccably following all the rules and regulations on ensuring the safety of train traffic and safety measures, overhaul of the subgrade and maintaining the state of the rail gauge at a level of no more than 40 points.
The second is focusing on the operation of the railway line and stopping non-core activities by outsourcing them. It should be noted that this objective of the Strategy fully corresponds to the Concession Agreement signed in 2005, which provides for the involvement of contractors for the operation of the railway line.
In this regard, in mid-2018, the maintenance of the railway line and in 2019 the management of certain types of business processes was outsourced.
From a financial point of view, today the main goals and objectives of the Company are:
formation of a financial basis for providing compensation payments by optimizing the structure of operating expenses and linking them to cargo turnover;
full repayment of the principal debt of the concessionaire before the expiration of the concession agreement in accordance with the developed financial and economic model;
return on investments to Shareholders of the Company by paying dividends.
These, as I understand it, are long-term plans. When are the results expected?
B.I.: I want to note that the implementation of these tasks has borne fruit, almost a year after the start of implementation.
The positive dynamics of the state of the route speaks for itself.
So in 2017, the average route condition score was 48 points, in 2018 - 36.5 points, and according to the results of 11 months of 2019, it fell to 26.
For people who are not connected with the railway, speaking in simple terms from “strike workers”, the railway line has moved into the category of “outstanding workers” and such an assessment is given not by people, but by impartial equipment on a monthly basis.
M.M.: Taking into account the measures taken to optimize operating costs, reduce production costs by outsourcing non-core activities and more rational use of material resources, the main goals of the Strategy were achieved, which allowed achieving positive economic indicators.
So, in 2018, for the first time since the start of operation, real net profit from operations was obtained, which allowed for partial redemption of the main bond in the amount of 1 billion KZT, as well as the accumulation of funds for the timely fulfillment of obligations on bonds and loans.
A significant positive moment in the Company’s activity is the fact that there was no default on a bond loan, as out of thirteen coupon periods, i.e. for 13 years, nine defaults were made for untimely fulfillment of obligations, five of which were paid with the involvement of the republican budget.
In general, it is expected that the economic effect from the implementation of the Development Strategy before the end of the concession period will exceed 1 billion KZT.
The results of the work that the Company is showing today probably would not have been achieved without the corresponding personnel potential. How is this issue resolved in "Dosjan temir joly"?
B.I.: Currently, the railway line is provided with the specialists, both in production and management personnel, who from the first day ensure the stable operation of Shar - Ust-Kamenogorsk railway line.
But the Company is actively attracting young professionals.
And today, I believe, all the necessary conditions for fruitful activity have been created.
This includes compulsory training for young professionals, and continuing education for employees in all spheres.
In addition, in order to implement the Development Strategy and ensure the efficient operation of the company, key performance indicators (KPIs) and a motivation system in accordance with labor market standards have been introduced for each employee.
At all levels of the organizational structure, from administrative to production personnel, a social package is provided for by the Collective Agreement, and a system of incentives for conscientious work is operating too.
Thus, the results of the work that turned out to be the best over the past two years show that the Company is moving in the right direction.
The Company's railway workers adequately cope with the tasks, and according to some production and financial indicators in the industry, after their completion, stable positive dynamics is expected.
Thus, the annual increase in cargo turnover is expected to be at the level of 2-3%, and revenue from transportation - 7-8%, which will allow the Company to ensure timely fulfillment of bond and loan obligations to the Government, shareholders and private investors, as well as provide for certain modernization expenses assets, the introduction of new technological solutions in the sphere of railway transport.
M.M.: Taking this opportunity, I want to congratulate all Kazakhstanis on the upcoming holiday - Independence Day of the Republic of Kazakhstan! This holiday is rightfully considered a symbol of freedom and power of our state. Over the years of independence, we have achieved worldwide recognition and great progress. Today a new generation is growing up, absorbing the spirit of freedom, success and victory.
A generation that glorifies our Kazakhstan with its good deeds and achievements!
I wish you good health, prosperity and stability! May peace, harmony and mutual understanding always reign in your house, and your work be of great benefit.