The Eurasian Development Bank (EDB) continues to build on its participation in projects in Kazakhstan. In general, to date the bank's investment portfolio has accumulated nearly $11 billion worth of 240 projects, and Kazakhstan's share makes up 36.2% in it. Deputy Chairman of the Management Board Amangeldy ISENOV spoke about plans to participate in the second stage of the Saryarka gas pipeline construction project and plans for cooperation with the state fund Samruk-Kazyna.
- Tell us about the EDB project portfolio, in particular, about the share of Kazakhstan. Do you plan to increase or decrease it, if so, when and how much?
- In the past three years we have entered a new growth trajectory, our current investment portfolio almost doubled in the period 2018-2020 - from $2.3 to $4.4 billion. To date, EDB's investment portfolio has accumulated nearly $11 billion worth of 240 projects. The share of Kazakhstan is 36.2% in it or about $4 billion involving 88 projects. The total annual volume of operations for 2021 is expected to reach $1.7 billion, or 50% higher than the target figure envisaged by the bank's strategy.
Undoubtedly, there are plans to increase the portfolio share in Kazakhstan. First of all, this is about financing the pool of the construction of hospitals in public-private partnership format in accordance with a memorandum that we signed with the Kazakh Ministry of Health. In addition, we plan to expand the green financing market and cooperation with the state fund Samruk-Kazyna.
Just recently in Kazakhstan the bank took part in landmark projects such as the construction of an international airport in the [city] of Turkestan nearing $165 million, of which our input is $134 million, the construction of the Big Almaty Ring Road (BAKAD) as part of the syndicate of other international development institutions. This project cost is over $743 million, EDB's input is $135 million. As part of another syndicate, we are financing the expansion and modernization of Almaty International Airport worth nearly $40 million.
Consultancy support for a project to develop a three-dimensional geographic information system in Kazakhstan is one of the important and very interesting projects. At the expense of our Technical Assistance Fund we will provide technical assistance for the investment project preparation on creating such a system in 17 of Kazakhstan's major cities. Currently there are no such city geoportals in the republic, a similar system has been implemented only in Nur-Sultan through the Smart City concept.
Another important project we are considering and are keen to finance is the reconstruction and expansion of the Astrakhan-Mangyshlak main water pipeline, the main source of water for residents of Atyrau and Mangystau regions. In early June we signed an agreement and are ready to provide about 120 billion tenge (429.10 tenge/$1). The reconstruction and expansion of the Astrakhan - Mangyshlak main water pipeline will solve the emerging water supply problem in western Kazakhstan.
- Can you tell us in more detail about stepping up on cooperation with Samruk-Kazyna?
- We are currently scrutinizing a pool of projects with them. In addition, we could consider issues of direct investment, joint participation in projects through direct investment, including in renewable energy sources . All this depends on the needs, format, configuration of deals, on where this is needed or not needed in principle, but we should have such a tool and need to develop it.
- Is there any new data on green financing or energy?
- The amount of green projects in the current investment portfolio is over $500 million or 11% of the total amount of the bank's current investment portfolio, including seven projects in Kazakhstan worth $240 million.
This year we have financed a number of projects that are important for the socio-economic development of the country. In particular, this is a loan agreement for the construction of a gas turbine unit with a waste heat boiler at Aktobe Thermal Power Plant worth 16 billion tenge. The issue of upgrading existing power plants and building new capacities is one of the most key issues for the development of the region, both in terms of economy and ecology. In addition, up to 120 jobs will be created during the construction and installation work.
Also on December 2, within the framework of the Eurasian Congress we signed a cooperation agreement with Samruk-Energy JSC and Almaty Power Stations JSC, whereby we confirm our interest and readiness to arrange financing for the project Upgrading the Almaty Thermal Power Plant-3 based on the combined cycle gas turbine with the plant capacity increase of up to 450 MW.
- How is the work on green financing being carried out in the light of the fact that this tool has been on everyone's lips not for the first year and Kazakhstan is striving to firmly introduce it.
- Currently the bank is doing some work on the development of the ESG agenda and financing of relevant projects in the bank's member countries in the field of infrastructure, renewable energy, housing and utility services. The next logical step in this direction is the enhancement of expert assessment in the field of green economy. This is a very important point, which will send a clear message to the market and position the bank as a green institution. Projects in this area are being worked out, and one needs to understand that these are two preparatory platforms. The bank must redesign its configuration and build up business processes, the project approach must be adapted. This work is now being actively carried out by the bank.
At the end of September we approved a policy on issuing green and social debt instruments. The document was devised in order to ensure the implementation of projects in the field of sustainable development.
The policy outlines the goals and conditions on issuing green and social bonds. It also outlines the goals and conditions on raising funds through other forms of borrowing in the capital markets, REPO and derivative financial instruments.
- What is meant by altering reconfiguration?
- Working with a consultant to make the bank compliant with green energy and economy principles and policies. We already have projects that are green by all criteria. We cannot formally include some of them in the register yet, because certain verification procedures must be followed. This work is currently being carried out. Accordingly, it will then be possible to talk not only about the green projects content part as such, but also about official recognition. The availability of the project "greenness" must be confirmed by certain criteria. We are creating the competence center and in this part we are embedding a circle of partners in our business processes. The blueprint for the partnership circle are the AIFC Green Finance Center and Samruk-Kazyna. They are staunch supporters of "green" financing.
- Regarding the possibility that EDB could finance the production of an anti-COVID vaccine. Are there any moves?
- It was a statement of our readiness, we have not been not contacted on this issue. In terms of healthcare, on December 2 we signed an agreement with the Industrial Development Fund to implement projects to develop the country's healthcare system, including the purchase of ambulances worth 10 billion tenge.
- And what about the construction of the second stage of the Saryarka gas pipeline project?
- We are ready to finance the construction of the Saryarka gas pipeline second stage. Firstly, it is an honor for us to participate in such projects, we are glad that we were useful during the implementation of such a large-scale project. Here we work well and continue to cooperate with the Development Bank of Kazakhstan. This is our anchor and strategic partner in Kazakhstan, it is part of the coalition of development banks, whose cooperation agreement was signed in December 2020. Therefore, if the project initiator is ready, we shall be keen to engage in the project examination procedures. So far, there have been no specific and substantive proposals on the specifics of the deal but our partners and clients know that we are ready.
- It was reported earlier that the holding Baiterek is considering the opportunity for investing EDB's funds to finance the affordable housing program. In particular, it was planned to attract about 300 billion tenge.
- In June 2021 loan agreements were concluded between EDB and Kazakhstan Housing Company (KHC), under which EDB provided KHC with financing in Russian rubles for 5 years for activities as part of the state program on providing households with affordable housing. And just recently we signed a joint mandate letter on the issuance of social and green bonds on Astana International Exchange (AIX). The issuer will be KHC. EDB will act as an underwriter, financial advisor and investor.
- Are there any plans or desire for joint projects with other the EAEU's countries, besides Russia?
- In June 2021, the bank's board adopted a strategy for 2022-2026. In the new strategic period we will focus on implementing Eurasian mega-projects, stepping up activities in the countries of minority shareholders, developing digital competency, consolidating investment resources, promoting the UN Sustainable Development Goals and using ESG approaches.
EDB plans to finance projects in Kazakhstan totaling nearly $3.8 billion within the next 5 years. We will focus on the implementation of mega-projects aimed at helping Kazakhstan's socio-economic growth and other EDB member states. One of them is the Eurasian Transport Framework, which includes the international transport corridors North-South and Europe-Western China, opening up new opportunities for cargo transportation and increasing the comfort of long-distance travel for local residents.
Another project is the Eurasian Commodity Distribution System aimed at ensuring food security of the countries where EDB operates, reducing agribusiness costs and food prices.
One more important project is Central Asia's water and energy management, the basis of which contains an interconnected system of hydroelectric facilities, power plants, power networks and the Aral Sea basin reclamation management, which was created earlier. Previously this management functioned as a single complex with the priority use of water resources for the needs of agriculture for irrigation - about 90% of all water consumed.
The bank's total investment in the megaprojects is to be at $1.2 billion.
- Thank you for the interview!
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