Narrative
Full Description
Project narrative
On October 31, 2023, China Communications Construction Company Limited Limited (CCCC) and Nicaragua’s Ministry of Finance and Public Credit signed an EUR 65,960,000 credit facility (deferred payment) agreement for the San Isidro Photovoltaic Plant Design and Construction Project. The loan carries the following borrowing terms: a 10-year maturity, a 2-year grace period, an annual interest rate of 6-month EURIBOR plus a 3.15% margin, a 2% default (penalty) interest rate, a 1.5% (EUR 1,319,200) upfront (management) fee, a 0.7% commitment fee, and an annual agency fee of EUR 70,000 during the loan's repayment period. The loan is backed by a Sinosure credit insurance policy. The borrower is responsible for making sixteen, semi-annual principal repayments of EUR 4,122,500 between December 2025 and June 2033. The borrower is also expected to use the loan proceeds to cover 80% of the cost of an EUR 82,450,000 commercial contract between Empresa Nicaragüense de Acueductos y Alcantarillados Sanitarios (ENACAL) and CCCC, which was signed on October 24, 2023. The purpose of the project is to design and construct a photovoltaic power plant in the town of Las Mangas within the municipality of San Isidro and the department of Matagalpa. The electricity generated by the plant is expected to pump water for ENACAL and thereby deliver clean drinking working to 3.74 million local residents. CCCC is the contractor responsible for implementation.
Staff comments
1. The Spanish project title is el Proyecto de Diseño y Construcción de la Planta Fotovoltaica (para la operación del sistema de ENACAL) en la ciudad de San Isidro, Departamento de Matagalpa. 2. The loan agreement can be accessed in its entirety via https://www.dropbox.com/scl/fi/xaabg4daiph9b4u40djdj/Nicaragua-2023-CCCC-Loan-for-Photovoltaic-Power-Plant-Design-and-Construction-Project.pdf?rlkey=ea31si7ex3egp51ru4n5whgy5&dl=0. 3. AidData has estimated the all-in interest rate by adding 3.15% to average 6-month EURIBOR in October 2023 (4.115%). 4. In a typical receivables financing agreement (or deferred payment agreement), the company that the project owner in the host country has selected as its engineering, procurement, and construction (EPC) contractor is also a lender to the project owner. The company assigns receivables under its EPC contract with the project owner to one of or more banks. Upon assignment of receivables, the bank or banks will release funds to the company so it can discharge its obligations under the receivables financing agreement as a lender. Receivables financing is also known as accounts receivable financing (finance) or A/R financing (finance) or 应收账款融资 (in Chinese). These other terms are used because the accounts receivable of a company (i.e., unpaid invoices) are being used as collateral to unlock working capital—typically in the form of a bank loan (‘receivables loan’). Sellers often face cash flow problems when their buyers do not make full payment at the due date of the invoice. A receivables financing arrangement addresses this problem by allowing them to sell their outstanding invoices to a bank at a discounted rate. This approach allows the seller to receive the remaining invoice amount before the due date of the invoice. The bank either gets its money back at invoice maturity through the seller (acting as a collecting agent) or directly from the debtor.