Project finance takes shape in Kazakhstan
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Project finance takes shape in Kazakhstan

The central Asian republic may still be developing suitable funding channels, but a pick-up in deals is expected, given an economy that continues to grow and an appropriate legal framework. Patrick Gill reports.

By Patrick Gill

PROJECT FINANCE IN the strict sense of the term has not yet developed in Kazakhstan but this is expected to change as the market grows. Despite the lack of pure project finance, with the establishment of a special purpose vehicle, companies have no shortage of financing options for their investment needs. Bank loans, bond issues and initial public offerings are tried and tested ways of raising capital that have served Kazakh companies well. Part of the reason why project finance has not taken off is that the Kazakh banking sector is well enough developed to offer cheaper alternatives. With a diversifying economy and an improving legal framework, there is the potential for larger-scale, classic project financing, bankers say.

“We have seen very little true project financing, where the financing structure was based on the performance of the project itself,” says Jurgen Rigterink, head of ABN Amro in Kazakhstan. “But this is changing now. ABN is currently analysing a couple of large deals of over $1 billion relying on the fundamentals themselves, instead of having a guarantee from a sponsor. This will develop further this year. Furthermore, we expect a significant increase in public-private partnerships, particularly related to improving the country’s infrastructure.”

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