The State Initiates, the Market Scales: A Case Study of Cooperation between DBK and Halyk Bank

JSC Development Bank of Kazakhstan (a subsidiary of the Baiterek Holding, hereinafter – DBK or the Bank) is successfully implementing its strategy to attract private capital into the financing of large-scale industrial projects.

KAZ Minerals Aktogay LLP is a large-scale mining and processing complex and one of the largest open-pit copper mines in Central Asia.

Located in the Abai Region, the complex currently includes two sulphide concentrators with a combined processing capacity of 50 million tonnes of ore per year, as well as a plant producing cathode copper from oxidised ore. It is a modern, low-cost operation employing advanced mining and beneficiation technologies, including automated process control systems across the mining and processing facilities.

The history of this project is a clear illustration of DBK’s new approach to financing capital-intensive industrial projects, where state development institutions and commercial banks do not compete but instead complement each other in a sequential and structured manner.

DBK began financing the Aktogay mining and processing plant in 2016, at the most complex and high-risk stage of construction and commissioning. Today, the project represents one of the largest investments in DBK’s portfolio.

With the Bank’s support, a new concentrator was constructed as part of the second phase of the project. This enabled the processing capacity of sulphide ore to be doubled from 25 million to 50 million tonnes per year and resulted in the creation of more than 2,100 permanent jobs.

Today, the Aktogay mining and processing plant demonstrates strong operational and financial performance. The first financing facility was fully repaid within the agreed timeframe, and the first phase of the project has reached its planned payback.

An even more illustrative step was the early repayment of obligations under the second facility to DBK through funds provided by Halyk Bank. This constituted a full refinancing transaction: Halyk Bank acquired the company’s outstanding debt to DBK and assumed responsibility for servicing a project that has already achieved economic sustainability. In doing so, Halyk Bank entered the project at the operational stage, where risks had been minimised and cash flows were highly predictable.

This mechanism directly reflects the instruction of the President to actively involve excess liquidity of commercial banks in the real sector of the economy. In practice, this means that a state development institution assumes the initial project risk, while second-tier banks step in once the project has been successfully implemented.

“Refinancing the obligations of the Aktogay mining and processing plant by Halyk Bank enables us to efficiently utilise the available liquidity of private banks. This frees up DBK’s resources to support new industrial initiatives from the ground up and to fulfil our core mandate of stimulating economic growth,” said Marat Yelibayev, Chairman of the Management Board of the Development Bank of Kazakhstan.

The funds released as a result of the transaction will be channelled by DBK into financing new capital-intensive projects at early stages of development. In this way, an investment cycle is formed: DBK enters projects at the initial stage, brings them to a stable operational phase, subsequently transfers them to commercial banks, and reinvests once again into the economy.

Source: JSC Development Bank of Kazakhstan