CONSTRUCTION-PERIOD CREDIT RISK MANAGEMENT FOR LARGE INFRASTRUCTURE PROJECT FINANCE IN KAZAKHSTAN

Abstract

Large infrastructure projects create public value after construction has converted financing, permits, designs, equipment and civil works into an operating asset. For a bank, this conversion period concentrates credit risk because operating cash flow is limited, exposure rises with drawdown, and several events can delay completion or increase debt. This study examines the transmission channels and directional implications of construction risk for probability of default, loss given default, exposure at default, expected credit loss and prudential capital in Kazakhstan. It combines document analysis, project finance theory, lifecycle process mapping and a fully synthetic three-scenario case; it does not estimate those risk parameters or capital amounts. The proposed framework covers engineering, procurement and construction performance, cost overrun, delay, foreign-exchange mismatch, permits, offtaker obligations, environmental and social performance, drawdown control, independent review, contingency, debt service reserves, sponsor completion support, direct agreements and covenants. The analysis indicates that contractual allocation, evidence-based disbursement and forward-looking monitoring should operate together. The framework links each material risk to a measurable indicator, decision right, funding source and remedial action, providing a practical basis for banks financing transport, energy, water, municipal and industrial infrastructure in Kazakhstan.

Keywords: project finance, construction risk, credit risk, infrastructure, Kazakhstan, drawdown control, DSCR

Әдебиеттер тізімі

1. Republic of Kazakhstan. (2006). Law No. 126, On Project Financing and Securitization. Adilet Legal Information System. https://adilet.zan.kz/eng/docs/Z060000126_
2. Republic of Kazakhstan. (2015). Law No. 379-V, On Public-Private Partnership. Adilet Legal Information System. https://adilet.zan.kz/eng/docs/Z1500000379
3. Republic of Kazakhstan. (2021). Environmental Code of the Republic of Kazakhstan, Code No. 400-VI. Adilet Legal Information System. https://adilet.zan.kz/eng/docs/K2100000400
4. Republic of Kazakhstan. (2018). Law No. 167-VI, On Currency Regulation and Currency Control. Adilet Legal Information System. https://adilet.zan.kz/eng/docs/Z1800000167
5. European Bank for Reconstruction and Development. (2022). Strategy for Kazakhstan 2022 to 2027. https://www.ebrd.com/home/what-we-do/where-we-invest/kazakhstan.html
6. Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market. (2026). The Agency Presented the Results of the Regular AQR for 2025. Official release. https://www.gov.kz/memleket/entities/ardfm/press/news/details/1152793?lang=ru
7. Basel Committee on Banking Supervision. (2025). Basel Framework, CRE20: Standardised Approach, Individual Exposures. Bank for International Settlements. https://www.bis.org/basel_framework/chapter/CRE/20.htm
8. IFRS Foundation. (2025). IFRS 9 Financial Instruments. https://www.ifrs.org/content/dam/ifrs/publications/html-standards/english/2025/issued/ifrs9.html
9. Sorge, M. (2004). The nature of credit risk in project finance. BIS Quarterly Review, December, 91-101. https://www.bis.org/publ/qtrpdf/r_qt0412h.pdf
10. Flyvbjerg, B., Holm, M. K. S., & Buhl, S. L. (2003). How common and how large are cost overruns in transport infrastructure projects? Transport Reviews, 23(1), 71-88. https://doi.org/10.1080/01441640309904
11. Grimsey, D., & Lewis, M. K. (2002). Evaluating the risks of public-private partnerships for infrastructure projects. International Journal of Project Management, 20(2), 107-118. https://doi.org/10.1016/S0263-7863(00)00040-5
12. World Bank Group, Asian Development Bank, and Inter-American Development Bank. (2017). Public-Private Partnerships Reference Guide, Version 3.0. https://openknowledge.worldbank.org/entities/publication/e64a94b9-b0cb-51a3-b8dd-36bd7944284f
13. Brealey, R. A., Cooper, I. A., & Habib, M. A. (1996). Using project finance to fund infrastructure investments. Journal of Applied Corporate Finance, 9(3), 25-39. https://doi.org/10.1111/j.1745-6622.1996.tb00296.x
14. Kleimeier, S., & Megginson, W. L. (2000). Are project finance loans different from other syndicated credits? Journal of Applied Corporate Finance, 13(1), 75-87. https://doi.org/10.1111/j.1745-6622.2000.tb00043.x
15. Esty, B. C. (2004). Why study large projects? An introduction to research on project finance. European Financial Management, 10(2), 213-224. https://doi.org/10.1111/j.1354-7798.2004.00247.x
16. Yescombe, E. R. (2014). Principles of Project Finance (2nd ed.). Academic Press.
17. European Bank for Reconstruction and Development, Independent Evaluation Department. (2025). Evaluation of EBRD Local Currency Financing: Country Case Studies. https://www.ebrd.com/content/dam/ebrd_dxp/assets/pdfs/evaluation/2025/local-currency-operations-country-case-studies.pdf
18. European Bank for Reconstruction and Development. (2025). Kazakhstan Aktobe to Ulgaisyn Road: Board Report. https://www.ebrd.com/content/dam/ebrd_dxp/documents/project/55068/Kazakhstan-Aktobe-Ulgaisyn%20Road%20%28redacted_final%29.pdf
19. Gatti, S., Kleimeier, S., Megginson, W. L., & Steffanoni, A. (2013). Arranger certification in project finance. Financial Management, 42(1), 1-40. https://doi.org/10.1111/j.1755-053X.2012.01210.x
20. Hainz, C., & Kleimeier, S. (2012). Political risk, project finance, and the participation of development banks in syndicated lending. Journal of Financial Intermediation, 21(2), 287-314. https://doi.org/10.1016/j.jfi.2011.10.002
21. Blanc-Brude, F., & Strange, R. (2007). How banks price loans to public-private partnerships: Evidence from the European markets. Journal of Applied Corporate Finance, 19(4), 94-106. https://doi.org/10.1111/j.1745-6622.2007.00163.x
22. Equator Principles Association. (2020). The Equator Principles, EP4. https://equator-principles.com/app/uploads/The-Equator-Principles_EP4_July2020.pdf
23. International Finance Corporation. (2012). Performance Standards on Environmental and Social Sustainability. https://www.ifc.org/content/dam/ifc/doc/2010/2012-ifc-performance-standards-en.pdf
24. European Bank for Reconstruction and Development. (2024). Environmental and Social Policy 2024. https://www.ebrd.com/home/news-and-events/publications/institutional-documents/environmental-and-social-policy-2024.html

Дәйексөз келтіру үлгісі

Chen J. CONSTRUCTION-PERIOD CREDIT RISK MANAGEMENT FOR LARGE INFRASTRUCTURE PROJECT FINANCE IN KAZAKHSTAN // Central Asian Scientific Journal. – 2026. – No. 4(32), Vol. 1. – Pp. 159–172.