Connecting Kazakhstan. Connecting the World 16:00 18:00 20:00 22:00 24:00 02:00 JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 1 JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Strategy Joint-Stock Company ‘National Company ‘Kazakhstan Temir Zholy’ – the largest vertically- Strategy 8 About the Company: integrated holding company in the Republic of 10 Chairman’s statement 11 Strategy Kazakhstan with assets of more than 13.5 billion 12 2013 results 16 2013 events U.S. dollars. 20 Operating activities and Company development: 20 Message from the Chairman of the Managing Board (President) Innovation 24 Company overview We meet the requirements of the economy and the We are putting a lot of effort into 24 Railway infrastructure innovation, having our own Research 25 Freight transportation population for transportation services, are and Development Centre, Transport 25 Containerisation Sustainable development Academy, Design Bureau and 26 Passenger transportation implementing major infrastructure projects, enterprising innovators. 27 Investment activity See page 29 29 Innovation manufacture railway engineering products and are 31 Development of Kazakhstan’s transport and logistics system creating the transport and logistics system in 31 Prospects for 2014 Kazakhstan. Sustainable development 32 Social policy 33 Occupational safety Our business units form the ‘core’ of an integrated 34 Personnel policy 35 Environmental protection transport process, connecting shippers from 35 Corporate social responsibility Corporate governance Kazakhstan, as well as Europe and Asia, with all Corporate governance regions of the country and the rest of the world. 38 Board of Directors 48 Managing Board Vision 52 Corporate risk management We see ourselves as Kazakhstan’s 56 Ownership structure highly effective national transport Financial statements corporation, which complies with best international business practices and meets the requirements of the Sole 62 Statement of management’s responsibilities Shareholder. 63 Independent auditors’ report 64 Consolidated financial statements See pages 8-9 74 Notes to the consolidated financial statements Financial statements Connecting Thanks to efficient logistics, the container train times from China to Europe via Kazakhstan have been reduced to 13 days. See pages 7-8 2 3 JSC ‘National Company ‘Kazakhstan temir zholy’ JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Annual Report 2013 Connecting Strategy on the railway... Fourteen regular transit container Containers are transported shuttle trains currently operate on high-speed container trains, between Europe and Asia. according to a strict schedule, using Sustainable development We operate a mainline railway network stretching over the electronic processing of shipping documents, with an average speed of 14,800 km. We also manage a seaport, 11 airports in 997 km per day, and in some sections Kazakhstan, a Special Economic Zone: ‘Khorgos-Eastern – up to 1,100 km a day. Gates’ and the ‘Khorgos’ International Centre for Boundary Cooperation. We plan to create a network of regional logistic centres, connecting Kazakhstan with the world’s leading transport ‘hubs’. Corporate governance Financial statements 231.2 +2.3% bn tonnes-km increase in the average service speed of freight traffic freight (up to 42.83 km/h) 4 5 JSC ‘National Company ‘Kazakhstan temir zholy’ JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Annual Report 2013 Connecting Strategy through The completion of three terminals in A dry-cargo marine company has been ports… 2014 will increase the volume of created and two dry cargo vessels transshipment in the port of Aktau with a deadweight of Sustainable development from 16.5 to 19 million tonnes. 5,000 tonnes have been purchased – The development of backbone infrastructure, ‘Turkestan’ and ‘Becket-Ata’. The Kazakhstani dry cargo carriers allow interstate division points and the Aktau the implementation of the ‘own Seaport on strategic international routes cargo – own port – own fleet’ model. can increase Kazakhstan’s export and transit potential. Corporate governance Financial statements 10 +3.1% m tonnes above plan of traffic through the port of Aktau 6 7 JSC ‘National Company ‘Kazakhstan temir zholy’ JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Annual Report 2013 Connecting Strategy through airports… The implementation of the strategy The business model for managing We have developed a strategy for the development of has provided for an increase in the the network of airports is aimed at number of subsidised regular flights generating net income, increasing Sustainable development 11 airports, together with a detailed study of the financial in the airports of Kokshetau and revenues from non-aviation services Petropavlovsk from six to 25 per by 30% against the same indicator in performance and complex interaction of airports and the week, which increased revenues by 2013. multimodal company. The results of this identified a need for 150 million tenge per year. regional airports in terms of transport and logistics solutions. Corporate governance Financial statements +15% expected growth of passenger and cargo traffic in managed airports in 2014 8 9 JSC ‘National Company ‘Kazakhstan temir zholy’ JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Annual Report 2013 ABOUT THE COMPANY Strategy A robust and growing business Trucking Container transportation Innovation Sustainable development JSC ‘National Company ‘Kazakhstan Temir Zholy’ (KTZ) is a vertically integrated transport holding company, comprised of business units that together deliver an integrated transport process. Mission As the mainstay of our country’s transport KTZ is authorised by the President and the Much attention is paid to the organisation of Since 2009 KTZ has made a significant infrastructure, we ensure that an adequate transport Government of the country to create a container transportation. As a result of active contribution to the development of foundation is provided for sustainable economic growth. We create value for shareholders, customers and society transport and logistics operator of the work on promotion of services, 14 regular Kazakhstan’s strategic industries: heavy Corporate governance as a whole, by providing quality and competitive international level. Last year, such an container shuttle trains are currently in machinery, units and parts for railway rolling transport and logistics services for the transportation of operator – JSC ‘KTZ Express’ – began its work. transit between Europe and Asia. stock. people and goods as well as providing mainline railway network services. The container train ‘Chongqing – Duisburg’ operates one In general, the Company oversees and implements the Today, the Aktau seaport, four airports and seven more day a week. The advantage of this project is completion of 14 projects of the State Program of Forced Industrial- Vision airports pending, SEZ ‘Eastern Gates – Khorgos’ and an integrated waybill CIM/SMGS which reduces the Innovative Development (SPFIIMED). We see ourselves as Kazakhstan’s highly effective ICBC ‘Khorgos’ are under the management of KTZ and clearance of containers at the border with the EU. 7830 national transport corporation, which complies with ‘KTZ Express’. TEU in the composition of 89 trains has passed through international best business practice and meets the the Chongqing – Duisburg route. 467 m tenge requirements of the Sole Shareholder. Kazakhstan temir zholy offers Kazakhstan logistics products using the capabilities and potential of all these capital investment links in the transportation chain. This results in the The volume of China Post – Europe containerised cargo in 873.5 bn tenge development of the rail network, as well as sea and air 2013 grew by corridors at the same time. revenue from main activities – 8.6% increase 84% Financial statements compared to 2012 (from 3,572 to 6,568 TEU) 115.6 bn tenge 231.2 bn t-km tariff freight turnover net income The Company carries about 43% of the country’s total goods Key facts from the Company’s history Construction of Continuation of the Creation of the Creation of the Republican Creation of Trans-Siberian Railway construction of the 1,444 km largest railway in State Enterprise JSC ‘National Company’ 1896 passing through the 1930 Turkestan – Siberian Railway 1958 the USSR Kazakh 1997 ‘Kazakhstan Temir Joly’ by 2004 Kazakhstan Temir Joly territory of Kazakhstan. (Turksib). Railways. merging Almaty, Tselinnyi and ‘Ulttyk Kompaniyasy.’ West Kazakhstan railways. 10 11 JSC ‘National Company ‘Kazakhstan temir zholy’ JSC ‘National Company ‘Kazakhstan temir zholy’ Annual Report 2013 Annual Report 2013 ABOUT THE COMPANY Strategy Chairman’s statement Dear colleagues, partners and Sustainable development clients Strategy By the resolution of KTZ’s Board of Directors, on 3. Development of an effective portfolio and An ambitious national project: Kazakhstan – New Silk 7 May 2010, the KTZ Development Strategy was production assets structure Road – was launched in 2013, aimed at both reviving approved up to 2020. Kazakhstan’s historic role and transforming the country The Government’s intent to liberalise the railway into the biggest transit hub in the Central Asian region. KTZ’s main objective is to maximise the total industry and the institutional changes related to this JSC ‘National Company ‘Kazakhstan Temir Zholy’ (KTZ) shareholder capital: this being the indicator