Project financing

The Bank offers the services of organizing project financing transactions, in particular for the implementation of large investment projects in the framework of Public Private Partnership.

Project financing refers to a form of financing of an investment projects, in which the lender considers the cash flows generated by operation of the project rather than the general assets or creditworthiness of the borrower as the basis for the repayment of the loan. Therefore, creditors, while evaluating the probability of the repayment, assess not the shareholders of the project, but the viability of the project itself.

Typical Structure of Project Financing Scheme

The Government of Kazakhstan and a company jointly with other financial institutions establish a Project Company (Special Purpose Corporation - SPC) in the form of a joint-stock company. Certain privileges for boosting the effectiveness of the project company (tax privileges etc.) should be stipulated by the legislation.

The SPC organizes tenders for construction services and delivery of necessary equipment. The Project Company concludes the appropriate agreements and contracts.

The SPC organizes a tender among foreign banks for financial consultant and organizer of the financing transaction for the whole project. The Development Bank of Kazakhstan acts on the behalf of the Republic of Kazakhstan. The SPC issues a mandate for organization of borrowings for project financing.

The SPC concludes contracts with various potential consumers of the project’s services rendering on completion of object construction under the project. The project company opens a special account, where receipts from the services provided are accumulated and from which obligations are served.

The foreign bank (banks) jointly with DBK attracts borrowings: Secured Eurobonds issuing program, credit lines, co-financing.

The borrowed funds go to the payment for the construction services, the equipment delivery, etc. through the account of the SPC.

After object commissioning, the receipts from the consumers go to the special account, which is used for servicing the borrowed funds.