SK Engineering & Construction (SK E&C) announced on Feb. 13 that it signed a financial agreement on financing the Almaty Circular Road Project in Kazakhstan with a creditors group consisting of multilateral development banks (MDBs), including the European Bank for Reconstruction and Development (EBRD), on Feb. 12.
SK E&C formed a consortium with Korea Expressway Corp. and two Turkish firms, Alarko and Makkyol. In February 2018, the consortium signed an agreement on the construction and operation of the ring road in Almaty with the Ministry of Industry and Infrastructural Development (MIID) of Kazakhstan. The project’s total cost is US$750 million, with construction accounting for US$540 million. It is the largest public-private cooperation infrastructure project in Central Asia.
The SK E&C-led consortium succeeded in raising US$580 million through project financing. MDBs including the EBRD, the Islamic Development Bank (IsDB), and the Eurasian Development Bank (EDB), participated in the creditor group. The remaining cost will be financed by shareholders' investments.
This project is meaningful in that SK E&C has expanded its business scope to Central Asia beyond the infrastructure markets in Europe and Southeast Asia. As it is the first public-private cooperation project in Kazakhstan, SK E&C explained, the Kazakh government had to amend the related laws to make it possible for the consortium to raise funding through the financial agreement.
The Almaty Circular Road Project involves building a 66-km round-trip four- to six-lane road, 21 bridges and eight interchanges to alleviate traffic congestion caused by population growth in Almaty, Kazakhstan's economic capital. The project will be carried out in a build-operate-transfer (BOT) method. The Kazakhstan government will pay a fixed income to the consortium based on the availability payment (AP) method during its operation of the road after completion, so there is no risk of changes in operating income due to a traffic forecast failure. The project period is 20 years, 50 months for construction, and 15 years and 10 months for operation of the road.
SK E&C will execute the project in an engineering, procurement and construction (EPC) method with the two Turkish companies and operate it with Korea Expressway Corp. Participants will also receive dividends from equity investment in addition to profits from construction. SK E&C's construction and equity stake is 33.3 percent.