The provision of a syndicated loan of up to US$ 229.4 million to finance: (i) capital expenditure programme of Almaty International Airport ("ALA"), including the construction of a new passenger terminal and (ii) the refinancing of the acquisition of ALA and the associated fuel business entity Venus Trading LLP ("VT" ) by a consortium of investors led by TAV Airports.
The Project aims to expand the airport infrastructure and improve service levels at the Almaty International Airport complex. In terms of passenger numbers, ALA is the biggest airport in Kazakhstan (served 6.4 million passengers in 2019), yet does not meet international airport infrastructure standards. With the construction of a new international terminal, the modernisation of the domestic terminal, and the adoption of IATA's Optimum Level of Service standards, the airport will be able to provide better quality aeronautical services and expand its commercial space to offer a wider scope of non-aeronautical services. The involvement of TAV Airports, a global and experienced airport operator, will improve the connectivity, service quality and will help develop ALA's potential as a major regional transit hub.This Project will be the first large-scale foreign direct investment (FDI) in the airport infrastructure sector in Kazakhstan and the largest across the Central Asia region.
ETI score: 65
ETI score: 65
The Project's expected transition impact stems from expanding current airport infrastructure, improving service quality (Primary Quality i Integrated); introducing new accredited learning opportunities for young women and men via the client's TAV Academy programme; and opening up new employment opportunities for people with disabilities, in line with international best practices (Secondary Quality i Inclusive).
ALMATY INTERNATIONAL AIRPORT JSC
The Project sponsors are TAV Havalimanlari Holding A.i. ("TAV Airports," 85 per cent) and Kazakhstan Infrastructure Fund C.V. ("KIF") managed by VPE Eurasia GP Limited (15 per cent).
TAV Airports is a leading airport operator established in 1997 and currently has 14 airports in its portfolio. TAV Airport's major shareholder is Aeroports de Paris (46.1 per cent), other shares are free-float (44.5 per cent), owned by Tepe Insaat Sanayi A.S. (5.1 per cent) and other minority shareholders with less than 5 per cent.
KIF is a Kazakhstan-focused private equity infrastructure fund, managed by VPE Eurasia GP Limited, which is a special purpose vehicle fully owned by VGL Limited (the holding company for VPE Capital). VPE Capital is a CIS-focused private equity fund and asset manager, presently managing two separate private equity funds: the VPE Russia Fund and KIF.
EBRD Finance Summary
Up to US$ 229.4 million
The loan will consist an A loan of up to US$ 150 million for the Bank's own account, and a B loan of up to US$ 79.4 million, which will be syndicated to commercial banks.
Total Project Cost
Estimated to be around US$ 737 million
Total Project Cost consists of: (1) up to US$ 415 million of the acquisition cost, (2) more than US$ 200 million of capital expenditures, and other costs. The Project is envisaged to be financed through a combination of equity, debt and operational cash flows.
The Bank will provide long-term financing, which is presently not available from local commercial banks. The Bank's willingness to participate in the financing and capex programme provides comfort to commercial lenders, reduces uncertainty and fills the market's financing gap in a challenging context with COVID-19 crisis significantly affecting airport sector globally. The Bank will support achieving higher standards through its conditionalities (e.g. ESAP, LARF, IATA LoS). The Bank's support will enable the Airport to reform human resources policies and practices to stimulate employment of people with disabilities and women workers aligned with the EBRD's Economic Inclusion Strategy and Strategy for the Promotion of Gender Equality.
Environmental and Social Summary
Categorised B (2014 ESP). The ESDD which covers airport acquisition refinancing, and a capex programme for the construction of a new terminal, has been undertaken by a set of independent consultants. The ESDD comprised a site visit and review of Almaty Airport current operations, management systems and permits; and a review of plans for future passenger terminal redevelopment. The ESDD was supported by specialist studies related to legacy issues such as noise and aviation safety; noise modelling covering the period 2019-2040; life and fire safety; cultural heritage; and the potential need for land acquisition and resettlement. The Bank is familiar with the client and ESDD has confirmed that the client has the institutional capacity and commitment to deliver the Project in line with EBRD's Performance Requirements. A review of airport operations showed that the Project is largely compliant with national requirements within the airport site. Redevelopment of the terminal building will require a national EIA, which will be developed in due course accommodating the Lender's and EU requirements.
The Project's main E&S risk relates to the location of residential premises in close proximity to the airport. These buildings were mostly constructed in the last 15 years due to the lack of a formally established and enforced Sanitary Protection Zone (SPZ) around the airport. During the night, some 7,040 households are currently exposed to high noise levels, which exceed limits defined by national legislation and WHO guidance. By 2040, the number of households exposed to elevated noise levels is expected to increase by 667 to 7,707 as result of airport capacity increase. EU/ICAO Protocol has been applied to the Project design when addressing legacy noise issues, requiring certain operational improvements (reduction of APU time, shift of night time traffic to northern runway), appropriate ambient noise level monitoring and extensive stakeholder engagement. The client has committed to applying for the establishment of a SPZ and to deploying an extensive building insulation programme to achieve WHO recommendations (40dBA indoors for moderate sleeping condition quality when exposed to aircraft noise). Mitigation measures will minimise the potential impacts on residents' health and represents an improvement on the current situation. Establishing a SPZ will prevent further construction in the area, limiting the number of people exposed to noise. However full compliance with national and WHO noise standards cannot be met due to proximity of residential areas to the airport and lack of technical ability to mitigate LTO (landing and take-off) aircraft noise. Therefore a derogation from PR3 is sought in relation to the noise impacts.
The proximity of residential properties to the airports has also been examined for aviation safety and risks posed by potential plane crash to residents. The results of the independent assessment concluded that the airport operations are compliant with ICAO requirements and national requirements; however to address future risks a Safety Protection Zone needs to be established to limit further influx of residents and businesses within the designated area related to take-off and landing operations and to appropriately manage the land surrounding the airport to limit safety risks. Establishment of both a Sanitary Protection zone and a Safety Protection Zone will be covenanted in the Government Support Agreement (GSA). In addition, under the GSA the Government of Kazakhstan is expected to commit to follow the EBRD ESP PR5, assuming that the Government proceeds with resettlement/land acquisitions of 6 770 properties within 4 km of the Aviation Safety Zone. This commitment will be reflected in the GSA and the Land Acquisition and Resettlement Framework (LARF). In case the Bank is unsuccessful in securing Governments approval of the GSA and LARF, the project will not proceed.
As part of the terminal expansion, the existing building of VIP terminal will need to be relocated. This building has both historical and cultural significance and protected under the national legislation. A Cultural Heritage study, conducted by an international specialist firm, confirmed that: (a) VIP terminal is not critical cultural heritage; (b) the building relates to a replicable cultural heritage, and its main structural elements can be salvaged for subsequent preservation; (c) types of expertise required to preserve the replicable elements of the building ex situ or reintegrate them into the building of a new terminal. The government supported key recommendations of PR8 study, and the client re-confirmed its commitment with regards to the preservation of the key structural elements of the VIP building. Key mitigations measures and commitments related to PR8 are reflected in ESAP.
Other E&S aspects of the Project and current operations include personnel and community health and safety, emergency preparedness, historic land and ground water contamination, air emissions and waste management, supply chain and contractors E&S management, labour requirements and resource efficiency. No retrenchment is planned by the client; on contrary, more staff will be engaged to support the expansion of the airport and its operations.
The ESAP covers the establishment of formalised E&S management systems for airport operations and inclusion of relevant environmental, H&S and labour requirements for Contractors (inclusive of COVID-19 risk management) and regular auditing of their performance; development and implementation of an extensive noise management plan; further studies and management of historical ground contamination; implementation of a relevant waste management system (inclusive of appropriate disposal of any potential radioactive waste); implementation of life and fire safety audit findings in the new terminal design; and incorporation of cultural heritage assessment recommendations. The sponsors will undertake extensive remote consultations with the key stakeholders, especially with the local communities living around the airport, as part of the restructured SEP.
The new terminal will be the first EDGE Advanced certified sustainable airport terminal in the Central Asia region. Adoption of climate mitigation, water efficiency and material efficiency techniques, documented by commitment for obtaining an EDGE certification at performance exceeding 40 per cent beyond the Baseline as defined by national regulation requirements, aligns the project with the GET approach, and the GET share is 40 per cent.
The Bank will monitor the Project through review of semi-annual E&S reports and site visits by Bank representative as appropriate.
Technical Cooperation and Grant Financing
Post-signing: Inclusion TC assignment will support the client in revising their human resources policies and practices to expand recruitment, training and integration of disabled workers in response to the Covid-19 pandemic crisis and in line with international best practices. The estimated cost of the assignment is up to € 75,000, to be financed from the Inclusion Technical Assistance Framework, funded by the EBRD Shareholder Special Fund (SSF).
Cost Sharing: The client will contribute towards the TC assignment's cost (10 per cent of the total TC budget) as a parallel cost sharing contribution.
Company Contact Information
+90 530 780 91 87
42 Mailina street, Turksibskiy district, Almaty, Republic of Kazakhstan, post code 050039
PSD last updated
02 Nov 2020
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Environmental and Social Policy (ESP)
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More information on the EBRD’s practices in this regard is set out in the ESP.
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Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
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