China Eximbank provides $40 million buyer’s credit loan or Phase 2 of Luanda Electricity Network Rehabilitation and Expansion Project (linked to #103, #42029, #34921, #34868)

On 28 November, 2003, China and Angola 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 2 March, 2004, China Eximbank and the Government of Angola signed a $2 billion Master Loan Facility Agreement (MLFA). All of the subsidiary buyer’s credit loans approved through this MLFA carried the following terms: an interest rate of 3-month LIBOR (1.112% at the time that the MLFA was signed) plus a 1.5% margin- totaling 2.612%, a 22 year maturity period, and 5 year grace period (see linked Project ID#42029). According to the World Bank, this MLFA has a management commission fee of 0.3%, an installation commission fee of 1%; and an immobilization fee of 0.3% (See: Angola Public Expenditure Review (In Two Volumes) Volume II: Sectoral Review, p. 19).Sonangol provided a source of collateral for loans 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 (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 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 (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 149).In July 2004, China Eximbank and the Government of Angola signed a $40,058,383.52 subsidiary buyer’s credit loan agreement for Phase 2 of Luanda Electricity Network Rehabilitation and Expansion Project. The proceeds of this loan were used to partially finance a $44,509,315.02 commercial contract with China Machine Building International Corporation (CMIC) signed on 5 July, 2004 (See: LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS). The purpose of this project was to rehabilitate and expand electricity networks in Luanda Province (See: CMIC签订安哥拉罗安达电网改造二期工程合同).This project was originally scheduled to begin implementation on 5 June, 2005 and end implementation on 30 October, 2007; however, the project didn't actually commence until 25 February, 2005 (See: 中安石油、信贷和经贸一揽子合作计划开始进入实施阶段 and LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS). It was completed, according to the Angola’s Ministry of Finance (See: Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa). The completion date was reported to be in December 2006. Phase I of the Luanda Electricity Network Rehabilitation and Expansion Project is captured in linked ProjectID#103. Phase III of the Luanda Electricity Network Rehabilitation and Expansion Project is captured in linked ProjectID#34921. Phase IV of the Luanda Electricity Network Rehabilitation Project is captured in linked ProjectID#34868. China Eximbank later provided an additional buyer's credit loan intended for complementary actions for Phase II of the Luanda Electricity Network Rehabilitation and Expansion Project (see ProjectID#34826).

Additional details

The Portuguese project title is Projecto de Reabilitação e Expansão da Rede Eléctrica de Luanda — Fase II. The Chinese project title is 罗安达输变电工程二期 or 罗安达市电网改造和扩建项目二期.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. AidData has coded Sinosure as an accountable agency and providing insurance to the loan facility.AidData considers this loan to be collateralized in a de facto sense. The cash deposited 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.

Number of official sources

10

Number of unofficial sources

5