Bank of China provides $100 million loan for Almaty Ring Road Project

The Almaty Ring Road Project was originally conceived in 2002. The tender for the project – with advisory support from the EBRD and IFC – was transparent and met international standards. A Public-Private Partnership (PPP) tender was formally announced on January 14, 2015 to select a concessionaire using a two-stage procedure. The first stage results were announced on April 7, 2015, with the selection of 9 consortia out of 27 international and local applicants. Then, on February 7, 2018, a concession agreement for the construction and operation of the BAKAD was concluded with a Turkish-Korean consortium consisting of Alsim Alarko Sanayi Tesisleri ve Ticaret A.S. (Turkey), Makyol Insaat Sanayi Turizm ve Ticaret A.S. (Turkey), SK Engineering and Construction (Korea), and Korea Expressway Corporation (Korea). In August 2020, BAKAD Investment and Operation LLP — a special purpose vehicle and joint venture of Alsim Alarko Sanayi Tesisleri ve Ticaret A.S. (Turkey), Makyol Insaat Sanayi Turizm ve Ticaret A.S. (Turkey), SK Engineering and Construction (Korea), and Korea Expressway Corporation (Korea) — signed a set of parallel loan agreements worth $585 million with the Eurasian Development Bank, the European Bank for Reconstruction and Development (EBRD), Islamic Development Bank (ISDB), the London and Almaty branches of Bank of China, and PGGM Vermogensbeheer B.V. (PGGM): a $225 million (“A”) loan with the EBRD with a 15.5-year maturity, a “B” loan of $125 million syndicated to Bank of China ($100 million) and PGGM ($25 million) with a 15.5-year maturity, a $135 million loan from the Eurasian Development Bank with a 15.5-year maturity, and a $100 million murabaha (loan) from ISDB with a 14.5-year maturity. The precise interest rates attached to all of these loans are unknown. However, the estimated interest rate applying to these loans was LIBOR plus a 3% margin. The $742.6 million PPP project is being financed according to a debt-to-equity ratio of 79:21. The project sponsors agreed to put a combined $158 million of equity into the project. This limited recourse commercial project finance transaction has several features – payments in case of early contract termination; access to international arbitration in case of a dispute; lender step-in provisions; strict performance criteria for the availability payments based on provision of lanes; and safeguards against any attempted future nationalization – some of which required changes to existing Kazakh legislation. Furthermore, the availability payments are pegged to the US dollar and repayment of construction costs is skewed to the first 14 years of the 15-year-and-10-month operations period. The project involves the construction of a 66 km toll motor road (‘BAKAD’) providing a bypass route around the city of Almaty. The road will cross 11 rural municipalities (Okrugs) of the Almaty Region (Oblast) in Karasaysky (27.5 km, PK0 – PK275), Iliysky (19.26 km, PK275-467) and Talgarsky (19.24 km, PK467- PK660) Districts. The motor road will have 4 to 6 lanes with concrete-cement and asphalt-concrete pavement. Based on the national road classification system, BAKAD is a I (one) A1 road with 4-6 traffic lanes. Construction works on the 66 km road comprise 51.5 km of six-lane and 14.5 km of a four-lane highway, 20 bridges, eight interchanges and 22 overpasses. The key objectives of the project are to direct traffic away from Almaty thus reducing the city’s pollution levels; and reduce traffic congestion, excess mileage and road accidents. In addition, the project will be a significant part of the New Silk Road connecting Western China with Western Europe – turning Kazakhstan into a logistical hub and improving the country’s access to global markets. An EPC consortium of companies — consisting of Alsim Alarko Sanayi Tesisleri ve Ticaret A. Ş., Makyol Inşaat Sanayi Turizm ve Ticaret A. Ş., and SK Engineering & Construction Co. Ltd. — is responsible for project implementation. Construction began on June 1, 2018.

Additional details

1. This project is also known as the BAKAD Project. 2. An interest rate of LIBOR plus a 3% margin is identified in this official source (https://www.dropbox.com/s/8ot1f2rnnfezqjo/391444026-BAKAD-Roadshow-London-IFC-Presentation.pptx?dl=0). AidData estimated the all-in interest rate by adding 3% to average 6-month LIBOR in August 2020 (0.313%) 3. White & Case was sponsor counsel, while Allen & Overy and local firm AEQUITAS provided lender counsel. 4. Although a toll road project, the Kazakh government is taking the traffic risk – the 20-year BAKAD design, build, finance, operate, maintain, and transfer concession is largely availability-based. However, there is a mechanism by which the sponsors get a share of toll revenue if certain construction milestones are fulfilled ahead of schedule. And that is a very real possibility – the sponsors have put a combined $158 million of equity into the scheme, which enabled them to begin construction prior to financial close. 5. The EBRD reportedly played a major role in organizing the financing package for this project and bringing it to financial close. 6. The Chinese project title is “道路的建设和运营”大阿拉木图环路（BAKAD）项目. The Russian project title is Большая Алматинская кольцевая автомобильная дорога.

Number of official sources

9

Number of total sources

18