China Eximbank extends $2 billion master loan facility agreement to Angola (2007)

On 28 September, 2007, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola (See: THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, p. 130 and China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 93 and 中国国家副主席访问安哥拉 and LINHA DE CRÉDITO COM O EXIMBANK DA CHINA RELATÓRIO DAS ACTIVIDADES DESENVOLVIDAS II TRIMESTRE DE 2008, p. 2 and Obras e Projectos do Governo and 2015 Government of Angola Bond Prospectus, p. 107). This MLFA was designed to finance 100 projects (See: Angola and China: A Pragmatic Partnership, p. 4-5).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 (See: THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, p. 129-130). 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 (See: THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, p. 130). This facility had been fully drawn down as of 31 December, 2017 (See: THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, p. 130).ILAs approved through the MLFA carry an interest rate of 3-month LIBOR 3 plus a 1.5% margin, a management commission fee of 0.3%, an installation commission fee of 1%, and an immobilization fee of 0.3% (See: UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA, p. 140). The coded interest rate for this project is: 7.008%. This was calculated by taking the average 3 month LIBOR rate in September 2007 (5.508%) and adding a 1.5% margin. According to interview evidence that Dr. Ana Cristina Alves gathered from Angola’s Ministry of Finance, this MLFA has a 22 year maturity period and 5 year grace period (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 148).Sonangol provided a source of collateral for the loan, and repayment is to be done with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which are to be deposited in the Angolan Ministry of Finances (MINFIN) account at China Eximbank (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 148). The volume of oil to be sold to UNIPEC each month for repayment of the loan, varies 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 (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 149). Loan disbursements are made on a project-by-project basis. The tendering, management and payment of projects are jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (who coordinates the Ministries undertaking the projects in Angola). MINFIN submits the projects for tendering, China Eximbank selects the Chinese candidates running for each project, and a joint commission makes the final selection (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 149). This loan was managed by an office created specifically to manage this loan in the Angolan Ministry of Finance (GAT – Gabinete de Apoio Técnico) (See: Angola Public Expenditure Review (In Two Volumes) Volume II: Sectoral Review, p. 29).On 9 June, 2015, Angola and China Eximbank entered into amendments of this MLFA and others in order to realign payments of drawn amounts under certain ILAs with the revised schedules of progress and/or completion of certain specified public investment projects, the timing and/or scale of which was altered when the revised 2015 national budget was adopted in March 2015 (See: THE REPUBLIC OF ANGOLA U.S.$500,000,000 9.375 per cent. Notes due 2048, p. 130). However, it is unclear whether the loan terms of this particular MLFA were amended.The following is a list of projects financed through this facility:Project #34867, a $44.911 million loan for the Benguela, Huambo, and Bie Electricity Network (MT and BT) Rehabilitation and Expansion ProjectProject #34868, a $129.479 million loan for Phase 4 of Luanda Electricity Network (MT and BT) Rehabilitation and Expansion Project Project #34870, a $20.25 million loan for Phase 2 of Lubango Electricity Network (MT and BT) Rehabilitation and Expansion ProjectProject #34871, a $74.95 million loan for Luanda Water Supply System Improvement and Reinforcement ProjectProject #66688, a $18 million loan for the Agricultural Equipment Acquisition ProjectProject #34873, a $429.71 million loan for the Caxito-Nzeto Highway Rehabilitation ProjectProject #34874, a $144 million loan for the Nzeto-Tomboco-Mbanza Congo Highway Rehabilitation ProjectProject #34875, a $65.728 million loan for Phase 1 of the Cabinda Integrated Infrastructure ProjectProject #34877, a $75.685 million loan to complete Phase 1 of Malange Integrated Municipal Infrastructure ProjectProject #34876, a $101.836 million for Phase I of Zaire Province Integrated Infrastructure ProjectProject #34878, a $44.3 million loan for the 1,500 Vehicles Acquisition ProjectProject #34879, a $55.773 million loan for the Railway Transport Equipment Acquisition ProjectProject #34880, a $396 million loan for the Luanda, Benguela, Huambo, Uige, and Malanje Urban Transport Vehicle Acquisition Project

Additional details

AidData considers this loan to be collateralized in a de facto sense. The cash desposited 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.Loan details need confirmation. According to ''Angola and China: A Pragmatic Partnership,'' there was a renegotiation of the loan terms to a repayment period of 15 years and an interest rate of LIBOR + 1.25%.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. Sinosure is also assumed to be involved in this loan facility as 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 will be signing relevant agreements with the Government of Angola, although the nature of the agreements is unclear. Other China Eximbank MLFAs are captured in #42029, #34030, and #34031.

Number of official sources

7

Number of unofficial sources

12