SK Construction Successfully Secures 700 Billion KRW PF Financing for Almaty Ring Road Project in Kazakhstan

▲ Aerial view of Almaty Ring Road, Kazakhstan (Provided by SK Engineering & Construction)

[Asia Economy Reporter Lee Chun-hee] The Almaty Ring Road project, Kazakhstan's first infrastructure Public Private Partnership (PPP) involving SK Engineering & Construction, is set to commence full-scale construction. With a total project cost of $750 million (KRW 887.3 billion) and construction costs of $540 million (KRW 638.7 billion), it is the largest PPP project in Central Asia.

On the 12th, SK Engineering & Construction announced on the 13th that it signed a financial agreement for funding the Almaty Ring Road project with a consortium of multilateral development banks (MDBs) including the European Bank for Reconstruction and Development (EBRD), the Islamic Development Bank (IsDB), and the Eurasian Development Bank (EDB) in Nur-Sultan, the capital of Kazakhstan. Last February, SK Engineering & Construction formed a consortium with Korea Expressway Corporation, Turkey's Alarko, and Makyol, and signed an implementation agreement with Kazakhstan's Ministry of Industry and Infrastructure Development for the construction and operation of the Almaty Ring Road.

With the signing of this financial agreement, the consortium succeeded in raising $580 million (KRW 686.3 billion), which accounts for 77% of the total project cost, through project financing (PF). The remaining project costs will be covered by equity contributions from the shareholders.

An SK Engineering & Construction official explained, "It is significant that we have expanded our business scope beyond existing infrastructure markets in Europe and Southeast Asia to Central Asia," adding, "As Kazakhstan's first PPP project, this financial agreement was achieved after the Kazakhstan government made strenuous efforts, including revising related laws, with active cooperation from the lenders."

The Almaty Ring Road project aims to alleviate traffic congestion caused by the population increase in Almaty, Kazakhstan's economic capital, by constructing a 66 km-long 4 to 6-lane dual carriageway ring road, 21 bridges, and 8 interchanges (ICs). The project will be carried out under a Build-Operate-Transfer (BOT) scheme, where the road will be operated for 15 years and 10 months after completion before being transferred to the Kazakhstan government. The expected construction period is 50 months, with a total project duration of 20 years. Additionally, the project adopts an Availability Payment (AP) method, where the government guarantees fixed revenue, eliminating operational income fluctuation risks due to traffic volume forecasting errors.

SK Engineering & Construction will perform EPC (Engineering, Procurement, and Construction) together with Turkey's Alarko and Makyol, while also managing operations jointly with Korea Expressway Corporation. As an equity investor, SK Engineering & Construction will receive dividend income from its shareholding in addition to construction profits. SK Engineering & Construction holds a 33.3% stake in both construction and equity investment.

Currently, SK Engineering & Construction is conducting four other infrastructure development projects overseas besides the Almaty Ring Road project. It completed and operates the Eurasia Undersea Tunnel in Turkey in December 2016, and is constructing the ?anakkale Bridge, the world's longest suspension bridge, which was jointly awarded with Daelim Industrial and is scheduled to open in 2022. The Silver Town Tunnel project in the UK also signed a financial agreement last November and is preparing for construction.

SK Engineering & Construction President Ahn Jae-hyun said, "The Almaty Ring Road project, Kazakhstan's first PPP, has successfully concluded the financial agreement thanks to the active investment participation of MDBs," adding, "We will do our best to create a new success model in the Central Asian market following Turkey, the UK, and other European markets."