Moody's: Azerbaijan Railways needs significant investments

The development of the Middle Corridor opens up strategic opportunities for the corporate sector of Azerbaijan, Kazakhstan and Georgia, Report informs referring to the international rating agency Moody's.

The countries of the region are already benefiting from the growth of trade and investment. 

"Beyond railways, sectors such as logistics, construction, energy, and port operations are seeing increased demand because of infrastructure development. Other domestic companies will benefit from improved regional connectivity and logistics. Export-oriented sectors, particularly producers of agricultural goods, coal, metals, and fertilizers, are well-positioned to capitalise on improved access to Chinese and European markets, as well as strengthened interregional trade links.

The region's national railway operators, National Company Kazakhstan Temir Zholy JSC (KTZ, Baa2 stable), Azerbaijan Railways, and Georgian Railway, play a central role in this transformation and are its key beneficiaries. Their strategic position allows them to capture growing freight flows, including high-margin transit operations, and expand their multimodal services.

However, the scale of investment required to support this transformation brings significant credit difficulties. A large portion of these operators' rail networks requires significant ongoing maintenance and upgrades. Infrastructure bottlenecks, outdated logistics facilities and fragmented customs procedures further complicate transit. All three operators are undertaking large-scale investment programs to unlock capacity and improve service quality.

National railway operators in Azerbaijan and Georgia also require substantial investment and rely on state support through direct public financing or policy-driven incentives to sustain infrastructure development and manage high leverage levels. Azerbaijan Railways completed the major modernisation of the Baku-Tbilisi-Kars railway line in 2024, increasing its cargo throughput capacity from one million to five million tons per year, and will continue to invest in infrastructure, rolling stock, digitization, and multimodal development. State support remains critical to its financial sustainability, given its heavy reliance on government equity injections and debt financing. According to Azerbaijan Railways, major infrastructure projects in the sector are primarily implemented through public funding. The government also completed a large debt-to-equity conversion in 2024 to strengthen the company"s capital structure," Moody's added.