Deputy Chairman of the Management Board of EDB Amangeldy ISENOV:
NO NEED TO SPEED UP THE INTRODUCTION OF ISLAMIC FINANCE IN KAZAKHSTAN
The development of Islamic and «green» financial tools has to be natural; both government agencies and potential market participants have to show equal interest in this process. In any case, one should not speed up this process. Deputy Chairman of the Management Board of the Eurasian Development Bank (EDB) Amangeldy ISENOV talked about that in an interview with Interfax-Kazakhstan.
- EDB and the Islamic Corporation for the Development of the Private Sector have agreed to develop Islamic finance in Kazakhstan. What work is being done in this area? Will we see Islamic tools from EDB in the next year or two?
- The agreement has been signed and here this is more about how to assist in principle with the promotion of Islamic products in Kazakhstan's financial market. It is mainly about treasury operations, hedging tools. I’m not going to assess the prospects only because that Islamic finance has a number of specific characteristics, and here one needs to talk about changing some mental approaches. Therefore, I cannot assess how actively this will move on. But intentions of both the state and potential participants in this market are serious enough.
- What tools can be in demand?
- This is the issue of changing patterns in people's heads. If a product is interesting, if it is in demand on the market, it will reach people. What cannot be cured must be endured. Probably, if Islamic tools are really needed, they will show up. But there is no need somehow to forcibly speed up this.
- Is there an interest?
- Maybe there is some interest, but it is not enough in order to move forward the entire system.
- And what can you say about the "green" tools?
- Here one should understand what the "green" tools are. Mainly environmentally [friendly] products are marked “green”, which lead to a reduction in emissions, greenhouse gases, and so on in the course of implementation. Accordingly, those financial instruments that are used to finance such projects receive the "green" status. Actually, there are many criteria, there is international accreditation, confirming the status of a “green” project, and, accordingly, a financial tool within the framework of this project.
But it seems to me that this is a promising issue since in one way or another people feel climate change, this is something that cannot be ignored.
If to speak straight about EDB we have signed a memorandum with Astana International Financial Center (AIFC) and a separate focus has been made on the green finance topic. I think we’ll see how feasible it is because the wishes of AIFC alone or one bank are not quite enough. In any case, someone is needed who would state and address a project. For our part, we are ready to do what in our power in solving and discussing whatever issues to help address [this]. But in any case, there is no one-way traffic here - someone is needed who would come up with a project, promote, defend and substantiate it.
- For now are there no such projects?
- For good reason I started with what project we call green. Actually, if we are talking about renewable energy sources, it is also possible to call them "green", right? No emissions, no greenhouse gases. To this end, for example, at the bank we have a good pool of projects related to solar and wind energy. But these projects have no international “green” accreditation. While being "green" actually they are not as such formally. As far as I know, getting such a status is really expensive.
- Does EDB take actions in this area, or having signed the memorandum is it awaiting projects?
- We do not sign a memorandum for the sake of a memorandum. By signing this or that document, even if it is declarative in nature, we declare our intentions and move towards these intentions. As for the projects within the framework of the memorandum with AIFC, we considered several projects, but, unfortunately, some points did not allow us to address these projects as "green".
- Will there be some other terms for obtaining loans for such projects?
- Currently we provide for no selected breaks due to the presence of the word "green" in a project. All depends on the project itself. There are many other components that are involved in its pricing, which can impact the bid.
- It was reported in March that the telecoms operator Kcell expects to extend an EDB loan until 2024 and increase its volume to $ 90 million (34 billion tenge) while reducing an interest rate to 11.5%. Is the loan extended on Kcell's terms?
- All documents under this deal have been signed; the loan has been extended for Kcell on the stated terms. This is a big step both for the bank and for Kcell since this is about financing the large meaningful project. Actually the bank takes part in the implementation of the LTE system. Kcell is an anchor client for us, and the terms we reached and the signed agreements and changes to the base loan documents demonstrate our wishes to translate relations with this client into a long-term basis and develop further prospects.
- For what purposes will Kcell allocate borrowed funds?
- A company such as Kcell always needs investment, it was about that. I cannot speak about some details because there is such a thing as confidentiality. Any deal is primarily an expression of goodwill by all sides and here was the goodwill of the company and the bank.
- How do you assess Kazakhtelecom’s upcoming SPO?
- I can say that Kazakhtelecom’s upcoming SPO is definitely a good signal to the market. The company is global, big, and serious. As bankers speak, a very high-quality borrower. Therefore, at the same time the SPO will show the interest of potential investors and give a definite signal to the market. This is a positive development.
Going in for things like an IPO is a long conscious procedure in which both the legal vertical structure and financial and economic aspects matter. It is very important to observe the balance of interests of all participants, both potential and current.
- It was reported that EDB would provide up to 56.2 million Euros to Russia’s Hevel for solar power projects in Kazakhstan. Have funds already been provided and when will the construction start?
- At the moment, the client is in the process of ensuring the condition precedent; the documents are all signed. We expect that the client’s active investment phase will begin, probably, in the 4th quarter of this year. The amount is the same all set out in the signed agreement.
- DBK and the EDB were planning to buy out bonds of the design company Astana Gas KMG - the company responsible for the construction of the Saryarka gas pipeline. Did you buy out bonds? If so, in what amount?
- The project is unique from many points of view. These include syndication, elements of project financing, the use of a financial tool such as bonds, the participation of the national development institute, and participation of the international financial entity in the person of EDB. That is a very complex, I would say, unique project structure. Naturally, the capital-intensive thing, but, I think, if everything is fully ready, the deal will soon take place. Funding is not yet open, we are entering the finish straight.
- Were the EDB and DBK funds to be the last part of the financing structure?
- Yes, the structure of the deal is such that at first shareholder capital was involved, and then funds were borrowed for the design company. In principle, it is taking place as intended.
- Will you buy out the full volume of bonds worth 51 billion tenge (383.99 tenge/ $1) or will you buy out in tranches?
- Here we are talking about the concrete issue, so we plan to buy out in full.
- It was said in September that EDB plans to sign an agreement on financing a project for the Djamgyr deposit in Kyrgyzstan together with a Kazakh company. What is the status quo of this project?
- The project is at a stage at which I cannot comment on something due to undertaken commitments. It is difficult to say about the deadline because usually in such projects there are a lot of influencing factors, including the presence or absence of an institutional or strategic investor, everything is being done and sought as needed. The presence of the project characteristics that would satisfy the requirements of a funding entity, competence of the project initiator himself - all this must be confirmed documentarily. Therefore, for the time being that degree of development is not available in order to substantively comment on something.
- Can you say about the bank’s projects - what projects are in development, are there projects with international investors?
- Lately we have signed a loan agreement with Transtelecom. This is a client's investment program regarding the purchase of six diagnostic mobile centers, a very interesting and necessary project. In addition, the bank plans, in terms of retrospective planning, long-term participation in the BAKAD [Big Almaty Ring Motor Road ] project. If we are asked if we want to participate, we will say “yes”, something we have already stated. We are part of the pool of potential lenders.
– Thank you for the interview.
July, 2019
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