Bank of China contributes to the kr.1.03 billion NOK unwrapped term loan tranche of a kr.8.2 billion NOK syndicated loan for the Rv.555 Sotrasambandet Road Public-Private Partnership (PPP) Project (Linked to Record ID#104677)

Project narrative

On March 16, 2022, financial close was reached on a deal in which a syndicate of eight banks — including the Bank of China (BOC) — entered into a kr8.2 billion NOK (€790 million EUR; $914.4 million USD) syndicated loan agreement with Sotra Link AS — a Norway-incorporated special purpose vehicle (SPV) wholly-owned owned by SPV Sotra Link HoldCo AS, a joint venture of England and Wales-incorporated Ibsen Investment Holdings Limited, a wholly-owned subsidiary of Australia-incorporated Macquarie Corporate Holdings Pty Limited, a wholly-owned subsidiary of Macquarie Financial Holdings Pty Limited (MFHPL), a wholly-owned subsidiary of Australia's Macquarie Group Limited (70% equity stake), South Korean civil engineering company SK Ecoplant Co., Ltd. (20% equity stake), and Astaldi Concessions S.p.A., an Italy-incorporated wholly-owned subsidiary of Italian industrial group Webuild S.p.A. (10% equity stake) — for the Rv.555 Sotrasambandet Road Public-Private Partnership (PPP) Project. This loan was divided into four tranches: a kr.2.33 billion NOK ($259 million USD) milestone bridging loan tranche, a kr.4.18 billion NOK ($464 million USD) wrapped term loan tranche with a maturity period of 14.5 years and 35% insurance coverage provided by Korean Trade Insurance Corporation (K-Sure), a kr.1.03 billion NOK ($114 million USD) unwrapped term loan tranche with a maturity period of 14.5 years and an interest rate based on a floating rate plus a margin of 180 basis points (bps), and a kr.655 million NOK ($73 million USD) equity bridge loan (EBL) tranche with a maturity period of five years and three months (5.25 years). The proceeds of the MBL were to be used as a short-term instrument to pay contractors while paying for the Norwegian public sector to provide capital grants, while the rest of the debt facility was to fund construction costs alongside the kr.1 billion NOK ($111 million USD) annual payments from the Norwegian government. The eight lenders all contributed to the kr.4.18 billion NOK and kr.1.03 billion NOK tranches; their contributions to the other tranches are unknown. Record ID#104677 captures BOC's contribution to the kr.4.18 billion NOK tranche. Record ID#104679 captures BOC's contribution to the kr.1.03 billion NOK tranche. In addition to BOC, the following lenders contributed to the loan syndicate: CaixaBank S.A., Crédit Agricole Group, DZ Bank AG, Export-Import Bank of Korea (KEXIM), Korea Development Bank (KDB), KfW IPEX-Bank GmbH, and Banco Santander, S.A.. KfW IPEX-Bank provided a circa kr.700 million NOK (€70 million EUR) to the loan syndicate, although to which specific tranche(s) are unknown. KEXIM also provided a guarantee for 13% of the debt, though the specific tranche(s) are unknown. The proceeds of the loan were to be used by the borrower to support the financing, design, construction, and multi-year maintenance of the Rv555 Sotrasambandet Road, a network of roads, tunnels, and bridges from Kolltveit in the west to Storavatnet in the east in Vestland County, western Norway intended to improve mobility between Bergen and the island of Sotra. New construction involved 9.4 kilometers of road (including 4.6 kilometers in a tunnel), including a four-lane section of the Rv.555 and 0.7 kilometers of road on the FV562 (Askøyvegen), 24 kilometers of two-lane roads and access roads, eight kilometers of new pedestrian and bicycle paths, the 954 meter-long, four-lane Sotra suspension bridge across the Raunefjord with a width of 29.5 meters and a main span of 592 meters and a separate bicycle and pedestrian path, 19 other bridges and viaducts, 11 overpasses and underpasses, 21 tunnel portals, six two-level intersections, 11 kilometers of rock tunnels, and a new park-and-ride system and public transports terminals at Straume and Storavatnet. The existing mainland connection between Bergen and Sotra, Norwegian National Road 555, was not dimensioned for all the daily traffic that traveled it; the new Sotra Link on the other hand, would reduce travel time by about 20 minutes while providing more opportunities to walk, cycle, or use public transit. The project was expected to improve accessibility and traffic safety and strengthen Øygarden’s and its surrounding area’s position for regional and national business opportunities. Due to the Climate Budget at the tender stage, the project's construction included a heavy focus on sustainability, with intended reductions of a quarter of the carbon dioxide emissions during production, supply, and construction. The PPP contract had a total value of kr.19.8 billion NOK (€2.0 billion EUR), €1 billion EUR of which was for design and construction. kr12.9 billion NOK ($1.3 billion USD) was capex and kr.7.9 billion NOK ($835 billion USD) was availability payments. In addition to the kr.8.2 billion NOK debt, the sponsors provided kr.3.3 billion NOK ($337.5 million USD) in equity. Sotra Link AS would operate and maintain the project as a toll road over a 25-year PPP contract and concession awarded by the Norwegian Public Roads Administration (NPRA) after it began operations. Intertoll Norge AS, a subsidiary of Hungarian Interoll-Europe, would be responsible for maintenance of the road for 25 years after opening. It was the largest transport contract in Norwegian history. It was the largest single contract ever awarded by the NPRA, the largest infrastructure PPP contract signed in the European Economic Area (EEA) since 2017, and the largest and most complicated road infrastructure project in Norwegian history. The project was financed entirely in Norwegian kroner to eliminate foreign exchange risk. NPRA shortlisted three consortia for the project in May 2020, but finding all bids exceeding the approved cost of the project of kr.8.9 billion NOK ($974.15 million USD) approved by the Norwegian parliament in May 2018, it halted the tender process. Then, in August 2020, it requested that the each of bidders provide three separate bids covering three price points, finding that the lower price points felt the government's price point with a few amendments doing away with expensive and complicated tunneling. One of the consortium, led by Vinci, dropped out due to the increased cost of bidding (€10-15 million EUR). Then, in 2021, NPRA went to the Norwegian parliament to propose a higher price to benefit the public in the long term. Then, in September 2021, NPRA awarded the Sotra Link consortium the PPP contract. After elections, the new parliament approved a more expensive kr.19.8 billion NOK project price. Sotra Link Construction JV ANS (SLCJV) — a Norway-incorporated joint venture between Webuild (35% equity stake), SK ecoplant (30% equity stake), and Spanish company FCC Construcción (35% equity stake) — was responsible for about 25% of the construction work, with the remainder outsourced to subcontractors (primarily Norwegian). Volue ASA provided its Gemini Terrain+ software to merge drawings, quantities, and other information from contractors. The expected and planned completion date was June 1, 2027. Construction began in March 2023. The first concrete caissons, ten meters-long and weighing 228 tons, were installed on or around September 28, 2023. In June 2023, the Norwegian Labour Inspection Authority (Arbeidstilsynet) published a report about the conditions at the construction site, identifying illegal employment contracts given by Sotra Link Construction; it requested that Sotra Link AS rectify these contracts. 15 employees resigned from the company, many citing a workplace with lack of trust and a culture of fear and sexual harassment; former employees spoke to newspaper Bergens Tidende and discussed how there was no training plan, a habit of management causing employees to break into tears and use of manipulative tactics. Sotra Link Construction director promised an internal investigation in response.