China Development Bank provides $185.57 million loan for Ghana Coastal Fishing Landing Sites Project (Linked to Project ID#2034)

On December 16, 2011, China Development Bank and the Government of Ghana signed a $3 billion master facility agreement (captured via Project ID#2034). This agreement established two lending facilities: Tranche A and Tranche B. Tranche A is a $1.5 billion facility and any borrowings through this facility are undertaken with a 15 year maturity, 5 year grace period, an interest rate of 6-month LIBOR plus a 2.95% margin, a 0.25% upfront fee, and a 1% commitment fee. Tranche B is a $1.5 billion facility and any borrowings through this facility are undertaken with a 10 year maturity, 3 year grace period, an interest rate of 6-month LIBOR plus a 2.85% margin, and a 1% commitment fee. Both tranches are collateralized against cash proceeds from the sale of crude oil from the Jubilee field, which the borrower was required to deposit in a debt service reserve account (DSRA). The cash balance of the DSRA was GHS 370,586,909 ($71,266,713) in 2019. [Note: A requirement of the master facility agreement was that the Ghana National Petroleum Corporation (GNPC) and the China International United Petroleum and Chemicals Co. (UNIPEC Asia) sign an offtaker for the sale and purchase of crude oil. Under the terms of this agreement, GNPC agreed to supply and sell 13,000 barrels of crude oil from Jubilee Field each day to UNIPEC Asia over a 15.5 year period. The proceeds from these oil sales were then deposited into a special account to facilitate loan repayment and provide a source of collateral.] Under the terms of the master facility agreement, subsidiary loan agreements must be negotiated to secure financial support for any given project. On April 17, 2019, China Development Bank and the Government of Ghana signed a subsidiary loan agreement worth $185,570,000 — using the Tranche B lending facility — for the Coastal Fishing Landing Sites Project. This project was originally identified as eligible for lending through the Tranche A facility; however, the Government of Ghana and CDB agreed to fund it through the Tranche B facility and shorten the maturity of the loan to ensure that the off-taker agreement did not extend beyond its current term. As such, the terms of lending for this project (9 year maturity, 3 year grace period, 6-month LIBOR plus a 2.85% margin, and a 1% commitment fee) were slightly different than the terms specified for lending through the Tranche B facility in the master facility agreement signed on December 16, 2011. The borrower was also responsible for paying a 5.56% (approximately $8.77 million) lump sum Sinosure premium and maintaining a minimum cash balance of 1.3 times the repayment amount for each six month cycle in a designated DSRA at all times. The proceeds of the loan were to be used by the borrower to partially finance a $195,507,564.00 commercial contract [ID#GPHA-CHEC-11-FLS] between China Harbour Engineering Company Limited (CHEC) and Ghana Ports and Harbours Authority (GPHA), which was signed in August 2012 (and then amended on July, 6 2018). The Coastal Fishing Landing Sites Project involves the development of 12 coastal fishing ports and fish landing sites with related on-land facilities. The (principal) amount outstanding under the Tranche B lending facility was GHS 1,505,360,000 ($268,814,285) as of December 31, 2020 and GHS 1,107,600,000 ($213,000,000) as of December 31, 2021. These fishing ports, landing sites and related facilities are located in Axim and Dixcove in the Western Region, Otuam, Moree, Mumford, Winneba, Senya Beraku, Gomoa Fete and Elmina in the Central Region, Teshie and James Town in the Greater Accra Region, and Keta in the Volta Region. The facilities will include breakwater for a sheltered berthing and anchorage bay; quay walls for the berthing, loading/unloading of canoes and trawlers; navigational aids for the safe arrival and departure of canoes and trawlers; fish handling sheds for the transfer and sale of fresh fish under all weather conditions, ice blocks/crush making plant for the manufacture and sale of ice blocks of crushed blocks to fisherman; net mending and drying yards for fishermen to spread and mend or dry their nets; pre-mixed fuel supply yard for the installation of pre-mixed fuel tanks for sale of pre-mixed fuel to fishermen; canoe/trawler repair yard for the maintenance and repair of damaged vessels; maintenance and repair of outboard motors and marine engines yards; services to the fishing ports (e.g. roads, driveways, water and power supply, telephone lines); and port administration building to accommodate the port management and the staff of the Department of Fisheries. CHEC is the general EPC contractor responsible for implementation. Its EPC contract specifies that construction was to commence within 56 days of the signing of the subsidiary loan agreement (April 17, 2019). A formal groundbreaking ceremony for this project took place at the Axim fishing port in the Western Region on July 24, 2019. However, project implementation did not begin until August 22, 2019. As of August 2020, construction of the revetment and breakwater at the Axim fishing port was ongoing and entering its final stage, with a target completion date of September 2020. As of August 2020, construction of an underwater quay wall at the Axim fishing port was also set to be completed in January 2021. Other planned activities at the Axim fishing port include the construction of 9 buildings, including an administration building, fish market, net mending hall, ice making plant, workshop large, fuel depot, day care, toilet, and a power station. All of these activities were expected to reach completion by September 2021. As of August 2020, the various fishing port and landing sites had achieved the following completion rates: Axim 42.01%, Dixcove is 38.23%, Moree 37.52%, Mumford 38.57%, Winneba 8.88%, Senya 90.69%, Gomoa Fete 69.82%, Teshie 38.32% and Keta 5.25%. There are some indications that the CDB loan for the Ghana Coastal Fishing Landing Sites Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans.

Additional details

1. This project is also known as the Construction of Eleven Coastal Fishing Landing Sites Project. The Chinese project title is 系沿海岸线十个渔港项目 or 渔港项目. 2. The all-in interest rate that applies to this loan (5.739%) was calculated by taking the average 6-month LIBOR rate during the month (April 2019) when the subsidiary loan agreement was finalized (2.633%) and adding a 2.85% margin. 3. This CDB loan is not included in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 4. Excerpts from the August 2012 commercial contract [ID#GPHA-CHEC-11-FLS] between China Harbour Engineering Company Limited and Ghana Ports and Harbours Authority (GPHA) can be accessed via https://www.dropbox.com/s/2m7cqk5vo4l9b9o/2020_02_14_10_49_42.pdf?dl=0. Some sources suggest that this contract may have been subsequently amended and rescoped/revalued at $208 million on July, 6 2018. This issue merits further investigation. 5. AidData has coded the planned implementation start date as 56 days after the signing of the April 17, 2019 subsidiary loan agreement. 6. Evidence of the subsidiary loan agreement signing can be found at https://www.dropbox.com/s/kyuwhymh10b5wj7/Subsidiary%20Loan%20Agreement%20Coastal%20Fishing%20Sites.pdf?dl=0. 7. Debt Service Reserve Account (DSRA) are ring-fenced funds that are reserved for funding shortfalls in payments of loan principal and interest. As such, DSRAs ‘protect’ lenders from short-term failures by borrowers to meet their repayment obligations. AidData treats them as a source of de facto collateral. 8. The original project scope involved the development of 10 coastal fishing ports and fish landing sites. It was subsequently expanded to the development of 12 coastal fishing ports and fish landing sites. 9. The Sinosure premium is charged on principal and interest amounts and it is payable upfront in one lump sum. CDB agreed to finance 85% of the Sinosure premium under the loan, while the Government of Ghana agreed to pay the remaining 15%. 10. The $195,507,564.00 commercial contract [ID#GPHA-CHEC-11-FLS] between China Harbour Engineering Company Limited (CHEC) and Ghana Ports and Harbours Authority (GPHA) can be accessed in its entirety via https://www.dropbox.com/s/mleoe5c69b15f9n/2019_06_04_15_23_02.pdf?dl=0 11. The (principal) amounts outstanding are drawn from the Ghanaian Ministry of Finance’s Annual Public Debt Reports. These amounts are reported in GHS by the Ministry of Finance. AidData has estimated the USD amounts by applying the average GHS-to-USD exchange rate in 2020 (5.6-to-1) and the average GHS-to-USD exchange rate in 2021 (5.2-to-1). 12. The DSRA cash balance in 2019 is drawn from https://www.ifac.org/_flysystem/azure-private/Ghana-financial-statements.pdf. The USD value of the cash balance is calculated by apply the average GHS-to-USD (5.9-to-1) exchange rate in calendar year 2019.

Number of official sources

18

Number of total sources

24