[Cancelled] China Eximbank provides $320.1 million for Tranche 2 of buyer’s credit loan for Aerial Express Project (Linked to Project ID#42577 and ID#67775)

On September 3, 2010, the Government of Ukraine’s State Investment Agency and the Export-Import Bank of China (China Eximbank) signed a loan framework agreement regarding the Aerial Express Project. Then, on July 5, 2011, China Eximbank and SC "National Project "Airexpress" (Ukrainian: «Дирекція з будівництва та управління національного проекту «Повітряний експрес») — a project company and special purpose vehicle (SPV) wholly-owned by the Government of Ukraine — signed a $372,313,538 buyer’s credit loan agreement [№ BLA201123] for the Aerial Express Project. The borrowing terms of this loan were as follows: a 15 year maturity, a 3 year grace period, and an interest rate of 6-month LIBOR (0.414% in July 2011) plus a 3.5% margin. Ukraine’s Cabinet of Ministers issued a sovereign guarantee in support of the loan on June 16, 2011. SC "National Project "Airexpress" also purchased buyer’s credit insurance from Sinosure on July 25, 2012 (at an additional cost of $36.39 million). The China Eximbank loan was split into two tranches. The first tranche was worth $52,123,895 and it was earmarked for design and preparatory work (phase 1 of the project). The second tranche was worth $320,189,643 and it was earmarked for construction activities (phase 2 of the project). The borrower was to use the proceeds of the loan to finance two separate EPC contracts with China National Complete Engineering Corporation (CMCEC) that were signed on April 18, 2011. One EPC contract was for Phase 1 and the other EPC contract was for Phase 2. The purpose of the Aerial Express Project was to construct an 4.752 km passenger railway from Boryspil International Airport (BIA) to the capital city of Kiev. It was also supposed to involve the installation of supporting electricity systems, information systems, signaling system, water supply and drainage systems, two new train stations, and one electricity substation. A formal groundbreaking ceremony took place on December 28, 2011. However, construction did not begin until 6.5 years later. The first tranche of the loan fully disbursed in July 2013 and shortly thereafter many questions arose about the use of these funds. Law enforcement officers uncovered large-scale fraud involving the purchase of land, and Ukraine’s Center for Transport Studies (CTS) reported on November 21, 2013 that employees of SC "National Project "Airexpress" stole $20 million from the first tranche of the China Eximbank loan and spent the remaining $32,123,895 without producing a final project design. Consequently, China Eximbank never disbursed the loan’s second tranche. The Government of Ukraine also had difficulty meeting its repayment obligations related to the loan’s first tranche. The Chinese Economic and Commercial Office in Ukraine initially reported that Ukraine’s Ministry of Finance had failed to honor its sovereign guarantee. Then, in July 2014, China Eximbank agreed to grant SC "National Project "Airexpress" an additional 2-year loan repayment holiday (i.e. grace period) on the first tranche of the loan. The Government of Ukraine — as the guarantor of the loan — eventually stepped in and fully repaid the ($52,123,895) first loan tranche. It also unsuccessfully attempted to reallocate the second loan tranche to the Podil-Voskresensk Bridge Project and the Kiev Subway Extension Project. Additionally, the Government of Ukraine initiated talks with Sinosure regarding the possibility of recovering approximately $30 million via insurance payments, but the outcome of these negotiations is unknown. Project ID#67775 captures the first tranche of the loan and Project ID#42577 captures the July 2014 rescheduling of the first tranche of the loan. Project ID#42494 captures the de facto cancellation of the second tranche of the loan. On June 17, 2015, responsibility for the Aerial Express Project was transferred from SC "National Project "Airexpress" to the Ukrainian Ministry of Infrastructure. The State Administration of Railway Transport of Ukraine (Ukrzaliznytsia) subsequently assumed responsibility for the EPC contract from CMCEC and it was charged with financing a scaled-down and rescoped version of the project. Construction began on May 22, 2018 and Ukrzaliznytsia announced on November 30, 2018 that the first trains had left from Kiev to Boryspil airport. Vladyslav Kaskiv, the former Head of Ukraine’s State Agency for Investment and National Projects, was closely involved in the Aerial Express Project. He put on an international wanted list in March 2016. He was detained in Panama in September 2016. A local court set his bail at $600,000. The Government of Panama refused to grant Kaskiv a political refugee status, and has was later extradited to Ukraine. Subsequently, Kaskiv was released on bail. As of May 2020, his case was pending before the High Anti-Corruption Court of Ukraine.

Additional details

This project is also known as the Ukrainian Air Express Airport Railway Project and the Rail Transit linking Borispol International Airport Project and the Kyiv Boryspil Express Project. The Ukrainian project title is "Дирекція з будівництва та управління національного проекту "Повітряний експрес" та інших інфраструктурних об'єктів Київського регіону”. The Chinese project title is 空中快车 or 《空中快车》项目.

Number of official sources

22

Number of total sources

51