China Eximbank provides $12.88 million buyer’s credit loan for Huíla Polytechnic Institute and Secondary School Construction Project (Linked to Record ID#42029 and #34822)

Project narrative

On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 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). Following the signing of the framework agreement, on March 2, 2004, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola. All borrowings under the MLFA, which is an oil prepayment facility, carried the following estimated borrowing terms: a 21.5 maturity, a 1.5 year grace period, an interest rate of 3-month LIBOR plus a 1.5% margin, a 0.3% management fee, and a 0.3% commitment fee. 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. 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. The first tranche of the facility was released in December 2004. The facility was fully drawn down as of December 31, 2017. Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank. The volume of oil to be sold to UNIPEC each month for repayment of the loan varied 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. Loan disbursements were made on a project-by-project basis. Tendering, management and payments were jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (which coordinated the various Angolan line ministries responsible for supervising the projects). The Angolan Ministry of Finance submitted the projects for tendering; China Eximbank selected Chinese candidate firms for the projects; and a joint commission made the final firm selections. The process was managed by an office in the Angolan Ministry of Finance -- known as Gabinete de Apoio Técnico (GAT) -- that was specifically created to manage the MLFA with China Eximbank. In March 2005, China Eximbank and the Government of Angola signed a $12,881,716.77 subsidiary buyer’s credit loan agreement under the MLFA for the Huíla Polytechnic Institute and Secondary School Construction Project. The proceeds of this loan were used to partially finance a $14,313,018.63 commercial (EPC) contract with Sinohydro, which was signed on May 9, 2005. The purpose of the project, which employed 150 Angolan workers and 45 Chinese workers, was to construct a polytechnic Institute and secondary school in Huíla Province. Sinohydro was the EPC contractor responsible for project implementation. The EPC contract for this project went into effect on April 17, 2006, and the originally expected project handover date was October 11, 2007. Construction started in September 2006 and the project handover ceremony was held on April 10, 2008. In July 2007, the project received additional financing from China Eximbank (as captured via Record ID#34822).