Narrative
Full Description
Project narrative
On December 21, 2023, China CAMC Engineering Co., Ltd. (CAMCE) and Nicaragua’s Ministry of Finance and Public Credit signed two credit facility (deferred payment) agreements: an RMB 1,438,420,906.22 credit facility agreement for Section A of the Punta Huete International Airport Reconstruction, Expansion, and Upgrading Project (as captured via Record ID#107086) and an RMB 1,436,231,236.69 credit facility agreement for Section B of the Punta Huete International Airport Reconstruction, Expansion, and Upgrading Project (as captured via Record ID#107143). Both loan agreements were ratified by the National Assembly of Nicaragua on February 9, 2024. The loans carry the following borrowing terms: a 15-year maturity, a 4.5-year grace period, an annual interest rate of the Loan Prime Rate (LPR) for a period exceeding 5 years (published by the National Interbank Funding Center of the PRC) plus a 1% margin (approximately 5.2% at the time that the loans were issued), a 1.3% upfront fee (RMB 18,699,471.73 for the Section A loan and RMB 18,671,006.08 for the Section B loan), a 0.5% arrangement fee (RMB 7,192,104.53 for the Section A loan and RMB 7,181,156.18 for the Section B loan), a 1% management fee, a 0.7% commitment fee, and a 2% default (penalty) interest fee. Both loans are backed by Sinosure credit insurance policies. Both loan agreements also require that the borrower maintain a minimum cash balance of in a debt service reserve (DSR) account that is equivalent to one semi-annual principal and interest payment. For the Section A loan, the borrower is responsible for making 21, semi-annual principal repayments. The first 20, semi-annual principal repayments are worth approximately RMB 68,468,835.13 (4.76% of the face value of the loan) and the last semi-annual principal repayment is worth approximately RMB 69,044,203.49 (4.8% of the face value of the loan). The borrower is also expected to use the Section A loan proceeds to cover 80% of the cost of an RMB 1,798,026,132.66 commercial contract between Nicaragua’s Ministry of Transportation and CAMCE, which was signed on October 17, 2023. For the Section B loan, the borrower is responsible for making 21, semi-annual principal repayments. The first 20, semi-annual principal repayments are worth approximately RMB 68,364,606.86 (4.76% of the face value of the loan) and the last semi-annual principal repayment is worth approximately RMB 68,939,099.36 (4.8% of the face value of the loan). The borrower is also expected to use the Section B loan proceeds to cover 80% of the cost of an RMB 1,795,289,045.86 commercial contract between Nicaragua’s Ministry of Transportation and CAMCE, which was signed on October 17, 2023. The purpose of the project is to reconstruct, expand and modernize Punta Huete International Airport (Aeropuerto Internacional Punta Huete), which is located in the municipality of San Francisco Libre. Upon completion, it is expected that the airport will become a 4E/4F level international airport with a runway and taxiway that is 3,600 meters long and 60 meters wide. Upon completion, it is also expected that the airport will be capable of receiving more than 3.5 million national and foreign passengers each year. CAMCE is the contractor responsible for implementation. The project was originally expected to commence in July 2024 and reach completion within 48 months (July 2028).
Staff comments
1. The Chinese project title is 尼加拉瓜蓬塔韦特国际机场改扩建项目 or 承建尼加拉瓜蓬塔韦特国际机场改扩建项目. The Spanish project title is El Proyecto del Aeropuerto Internacional Punta Huete or El Proyecto de Reconstrucción, Ampliación y Mejoramiento del Aeropuerto Internacional Punta Huete. 2. The loan agreement for Part A of the Punta Huete International Airport Reconstruction Project can be accessed in its entirety via https://www.dropbox.com/scl/fi/cfda2v01czeygr3ef9ikb/Nicaragua-2024-China-CAMCE-Engineering-Co.-Ltd.-Loan-for-Section-A-of-Punta-Huete-International-Airport-Reconstruction-Project.pdf?rlkey=bpgki4j3vt5mdnnqd0oxrm035&dl=0. 3. The EPC contract for Part A of the Punta Huete International Airport Reconstruction Project can be accessed in its entirety via https://www.dropbox.com/scl/fi/95c8w9hbojfk9t1mak5jx/EPC-Contract-with-China-CAMCE-Engineering-Co.-Ltd.-for-Part-A-of-Punta-Huete-International-Airport-Reconstruction-Project.pdf?rlkey=r20lo7oeoqcy2eh04mnlh1av7&dl=0. 4. The loan agreement for Part B of the Punta Huete International Airport Reconstruction Project can be accessed in its entirety via https://www.dropbox.com/scl/fi/j0ama5ub7oif8xrjf1dl8/Nicaragua-2024-China-CAMCE-Engineering-Co.-Ltd.-Loan-for-Section-B-of-Punta-Huete-International-Airport-Reconstruction-Project.pdf?rlkey=myo6bfwibcfdffkl0vd0ofgtx&dl=0. 5. The EPC contract for Part B of the Punta Huete International Airport Reconstruction Project can be accessed in its entirety via https://www.dropbox.com/scl/fi/ukzp3vgjh86woq4djnbj0/EPC-Contract-with-China-CAMCE-Engineering-Co.-Ltd.-for-Part-B-of-Punta-Huete-International-Airport-Reconstruction-Project.pdf?rlkey=hsbm8oahchj82wnqle0yx9tc0&dl=0. 6. CAMCE may have borrowed funds from one or more Chinese banks — through an accounts receivable finance agreement — and on-lent the funds to the Ministry of Finance and Public Credit of Nicaragua. Both credit facility agreements for the Punta Huete International Airport Reconstruction Project refer to an accounts receivable assignment agreement (ARAA) in Section 2.2. However, this issue warrants further investigation. In a typical accounts receivable finance 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. 7. According to Nicaragua’s Ministry of Finance and Public Credit (https://www.dropbox.com/scl/fi/64pilad83xhbw8jz25r2e/Un-d-a-de-alegr-a-Nicaragua-y-China-logran-otro-hito-importante-en-la-cooperaci-n-y-el-desarrollo-Ministerio-de-Hacienda-de-Nicaragua.pdf?rlkey=k3hoa31b0cm76sgei84a3u32w&dl=0), it first signed the credit facility agreements with CAMCE on December 21, 2023. However, the credit facility agreements that were presented to Nicaragua’s National Assembly for approval were dated January 3, 2024. This discrepancy warrants further investigation.