China Eximbank provides $50.5 million buyer’s credit loan for 357 km Quifangondo-Caxito-Uige-Negage Highway Rehabilitation Project (Linked to Project ID#34030, #34853)

On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议). Following the signing of the framework agreement, on March 2, 2004, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola. All borrowings under the MLFA, which is an oil prepayment facility, carried the following estimated borrowing terms: a 21.5 maturity, a 1.5 year grace period, an interest rate of 3-month LIBOR plus a 1.5% margin, a 0.3% management fee, and a 0.3% commitment fee. The facility was split between a $1.0 billion Phase I facility and a $1.0 billion Phase II facility. Availability of the Phase II facility was subject to confirmation by the lender on or prior to the date falling five years after satisfaction of the conditions precedent to the MLFA and was made available by China Eximbank during that period. The MLFA is a framework agreement under which the Government of Angola and China Eximbank may conclude individual buyer’s credit loan agreements (ILAs or subsidiary loan agreements) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts. The first tranche of the facility was released in December 2004. The facility was fully drawn down as of December 31, 2017. Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank. The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices. Under the agreement, 70% of works have to be contracted with Chinese companies and the same proportion of construction material, equipment and labour has to be contracted in China. Loan disbursements were made on a project-by-project basis. Tendering, management and payments were jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (which coordinated the various Angolan line ministries responsible for supervising the projects). The Angolan Ministry of Finance submitted the projects for tendering; China Eximbank selected Chinese candidate firms for the projects; and a joint commission made the final firm selections. The process was managed by an office in the Angolan Ministry of Finance -- known as Gabinete de Apoio Técnico (GAT) -- that was specifically created to manage the MLFA with China Eximbank. In February 2005, China Eximbank and the Government of Angola signed a $190,515,690.59 subsidiary buyer’s credit loan agreement under the November 2003 MLFA for the 357 km Quifangondo-Caxito-Uige-Negage Highway Rehabilitation Project (as captured via Project ID#34853). The proceeds of this loan were used to partially finance a $211,684,100.65 commercial contract with China Road and Bridge Corporation (CRBC), which was signed on February 8, 2005. Then, on July 19, 2007, China Eximbank entered into another $500 million MLFA with the Government of Angola (captured via Project ID#34030). The MLFA was meant to finance 'complementary actions' to the 2004 MLFA (captured via Project ID#42029). The 2007 MLFA facility financed a total of 18 contracts, which supported projects originally undertaken through the 2004 MLFA. ILAs approved through the 2007 MLFA carried the following estimated borrowing terms: a 21.5 maturity, a 1.5 year grace period, an interest rate of 3-month LIBOR plus a 1.5% margin, a 0.3% management fee, and a 0.3% commitment fee. Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank. The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices. On July 19, 2007, the Government of Angola also received a supplementary $50,702,850.00 buyer's credit loan from China Eximbank under the July 2007 MLFA for 'complementary actions' related to the 357 km Quifangondo-Caxito-Uige-Negage Highway Rehabilitation Project (as captured via Project ID#66). The proceeds of the loan were used to partially finance a supplementary commercial contract with CRBC worth $56,336,500.00. The purpose of the project, which employed 1336 Angolan workers and 367 Chinese workers, was the rehabilitation of a 357 km highway between Quifangondo and Negage via Caxito and Uige. The starting point of the road is in the town of Kifangondo, a northern suburb of Luanda City. It extends northward through the city of Caxito, the capital of Bengo Province and the city of Uige, the capital of Uige Province. The road terminates in the city of Negage, an important agricultural town within Uige Province. The contract supporting the project went into effect on December 13, 2005 and the originally expected project handover date was June 30, 2008. The project officially commenced on December 13, 2005; and a project handover ceremony took place on August 30, 2008. The project was later inspected on March 8, 2014 by MOFCOM (ECCO) officials.

Additional details

1. This project is also known as the 371 km Kifangondo-Caxito-Uige-Negage Highway Rehabilitation Project or the 221 Road Project. The Chinese project title is 安哥拉吉方刚多－卡西托－威热－加吉道路修复项目 or 基凡冈都 --卡希托 -- 威热 -- 内加热公路. 2. In July 2020, AidData asked Dr. Lucy Corkin, a leading expert on Chinese lending to Angola, whether the second, third, and fourth master loan facility agreements (MLFAs) that the Angolan Government signed with China Eximbank in 2007 and 2009 were structured as a buyer’s credit loans like the first MLFA that the Angolan Government signed with China Eximbank in 2004. Dr. Corkin noted that the second, third and fourth MLFAs were treated more like ceiling increases to the initial facility. Therefore, for the time being, AidData categorizes the second, third, and fourth MLFAs as buyer's credit loans. 3. The 2003 framework agreement (中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议) specified that Sinosure would be signing relevant agreements with the Government of Angola. Therefore, AidData has coded Sinosure as an accountable agency and as providing insurance for the loan. 4. AidData considers this loan to be collateralized in a de facto sense. The cash deposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account. 5. For the time being, AidData assumes that the same maturities (21.5 years), grace periods (1.5 years), management fees (0.3%), and commitment fees (0.3%) that applied to the individual loan agreements under the March 2, 2004 MLFA also applied to individual loan agreements under the July 19, 2007 MLFA. This issue warrants further investigation.

Number of official sources

6

Number of total sources

11