FREQUENTLY ASKED QUESTIONS

Below we list quick answers to the most common questions asked by our prospective partners.

Q – What does economic development/impact mean and what kind of projects qualifies for this requirement under KIDF mandate?
A – Economic development is an improvement in economic well-being of a society, usually measured by positive changes in quantitative characteristics such as new jobs created, increase in tax revenues and qualitative characteristics such as localization, growth in skills of local population, etc. A typical project that creates new jobs or produces for export or substitutes import or brings new technologies and know-how qualifies for economic impact requirement.

Q – How does KIDF define a strategic investor?
A – KIDF’s ideal strategic co-investor is a global industry player with revenues over $1bn or a regional leading player with substantial track record and expertise in selected industry.

Q – Can KIDF invest in a project purely with an institutional investor or IFI?
A – It is a strong requirement by KIDF’s mandate for all projects to have a strategic investor (the one with substantial positive track record of investment and operations in the industry) with a long-term view (no plans to sell its stake).

Q – Does a technology, engineering or equipment supplier qualify for a foreign partner/investor requirement under KIDF mandate?
A – Equity participation (particularly one with a defined exit) of such partners will be considered as a part of product/services promotion vehicles. Thus, such partnerships would not qualify under KIDF mandate. Again, KIDF coinvests only with entities that have substantial track record in a product or service of a joint venture being created.

Q – Does KIDF account for in-kind equity contributions (intellectual property rights, engineering and consulting services, technical assistance, equipment, land, buildings, etc) made by foreign investor as its share in an ownership structure of joint venture?
A – KIDF’s approach to calculation of respective shares of partners in a joint venture is to account only for pure cash investment made by foreign investor and KIDF.

Q – Does a foreign entity with ultimate beneficiaries from Kazakhstan qualify for a foreign partner/investor requirement under KIDF mandate?
A – A foreign partner has to be a leading industry player with expertise and history. Structuring of local capital through an entity in foreign jurisdictions would not qualify as a foreign direct investment under KIDF mandate.

Q – What currency does KIDF use in an investment agreement and for calculation of minimum expected rate of return?
A – KIDF uses tailored approach to every case as to match a currency structure of an expected cash flow. Therefore, KIDF is quite flexible on currency choice for transaction documentation and actual wire transfer in financing scheme.

Q – What is the average and maximum investment horizon for KIDF?
A – As per current Investment Policy Statement the maximum term for KIDF investment is 20 years for infrastructure projects and 10 years for other projects. We expect the average numbers for portfolio to be close to (15) and (7) years respectively. KIDF prefers to invest in partnerships that develop into sustainable operations over the long run.

Q – What is the maximum and minimum threshold for investment projects that KIDF can participate in?
A – KIDF’s minimum exposure is $5m. Given IPS constraint that KIDF’s share in equity cannot exceed the one of foreign partner, it implies a minimum project size of at least $10m for pure equity financed project and approximately not less than $25m for a project with debt financing. The maximum amount of KIDF contribution in one project is limited to 20% of its capitalization (current level is $265.2m consequently $52.5 m is a maximum exposure). Meanwhile, it would reach $200m per project once a target capitalization of $1bn is achieved.

Q – What level of cost would a foreign investor expect to be associated with KIDF funding?
A – KIDF provides funding on equity basis. Which means that KIDF would be a partner with full shareholder rights in a business being created. Thus, KIDF would expect to receive its share of earnings of a joint venture, yielding the same return as a foreign investor would earn. KIDF would not consider participation in projects where a rate of return on KIDF’s invested capital would be lower than a required rate of return on equity investment in a particular industry (defined as cost of equity in international practice and derived from publicly available market data). An investment in a project yielding a rate of return below associated cost of equity would require KIDF to record a loss and respective impairment in its financial statements under International Financial Reporting Standard 9.

Q – What purposes can KIDF funds be used for?
A – KIDF funds, in combination with a foreign partner’s contributions and debt, can be applied to engineering, materials, construction, equipment and working capital in a development project. KIDF funds CANNOT be used for a purchase of interest/stakes/shares in or repayment of debt of other entities (no cash-out of project being invested).

Q – At what stage KIDF can join a project?
A – KIDF can participate in discussions at any stage, but KIDF will summarize its corporate decisions on a project only when it will be near debt financing closure (i.e. the project has a land plot, permissions, project documentation, binding debt financing terms).

Our executive office team would be happy to answer all additional inquiries you might have on KIDF policies and operations (please, refer to Contacts section).

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