A banking syndicate has been advised by Allen & Overy on providing USD 585 million debt financing for the development of a 66-kilometre ring road near Almaty in Kazakhstan.
The project is Kazakhstan’s first public-private partnership and the first large infrastructure development to be finished with private capital outside of the commodities sector.
In addition, the development is anticipated to be a forerunner to the development of more concession projects in the future.
The total cost of the project is estimated to be approximately USD 750 million. The European Bank for Reconstruction and Development (EBRD) is considering a senior loan of approximately USD 225 million to cover the cost that will not be provided by the international banking syndicate.
This limited recourse financing, which will be structured via two tranches, will be provided by both the EBRD and the Eurasian Development Bank. In addition to the two tranches, there will be a custom-built instalment sale structure, made to meet specific Shariah requirements of the Islamic Development Bank.
BAKAD Investment and Operation, a limited liability partnership established in Kazakhstan, is responsible for the project’s construction, which is being developed under 20-year concession agreement, signed two years ago.
Some of the equity funding will be made available by Turkish sponsors Alarko and Makyol, as well as Korean sponsors SK Engineering & Construction and Korea Expressway Corporation.
One of the objectives of the project is to direct traffic away from Almaty, reducing the city’s pollution levels. Other reasons for the development include the reduction of traffic congestion and road accidents, in an attempt to improve the competitiveness and capacity of trans-Kazakhstan travel routes.
An Allen & Overy London banking partner, Lorraine Bayliss, said in a statement: “This transaction will put Kazakhstan firmly on the map for future international investment, and enable increased regional and international trade both within Kazakhstan and between Europe and Asia.”
She added that it had been a “highly complex financing during an unprecedented time for the global economy”.
Bayliss led the advisory team, alongside projects, energy, natural resources and infrastructure partner Henry Sohn, with help from senior associates Christopher O’Hara and Seán McGrenaghan, and associates Joanna Mobed and Jecolia Tong.
Also advising was partner Hakkı Gedik, counsel Sajjad Khoshroo, senior associate Utku Ünver and associates Géza Orbán and Dimitri Kolias.
The development banks also received advice on Kazakhstan legal aspects from AEQUITAS Law Firm.
In the wider construction and transit space, Gowling WLG is acting on the development of the United Kingdom’s HS2 interchange site.