China Eximbank provides $19.385 million buyer’s credit loan for Caxito, Catete, and Uige Water Supply System Rehabilitation Project (linked to #42029, #34030)

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).Then, in March 2005, China Eximbank and the Government of Angola signed a $19,385,342.10 subsidiary buyer’s credit loan agreement for the Caxito, Catete, and Uige Water Supply System Rehabilitation Project (See: UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA, p. 282 and LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS, p. 11). The proceeds of this loan were used to partially finance a $21,539,269.00 commercial contract with China National Electronics Import & Export Corporation (CEIEC), which was signed on 9 March, 2005 (See: LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS JUNHO, 2008, p. 11). The purpose of this project was to rehabilitate water supply systems in the town of Caxito, the town of Catete, and the city of Uige.The contract for this project was scheduled to go into effect on 8 November, 2005 and the scheduled handover date was in October 2007. According to the Angolan Ministry of Finance, the project was ultimately completed in October 2007 (See: Eximbank da China projectos Concluidos and LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS, p. 11 and Eximbank da China projectos Concluidos). However, tests and surveys that were conducted in November 2007 revealed some project execution failures and a set of remedial actions were planned in response (See: LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS, p. 10).This project also received supplemental financing through a 2007 China Eximbank $500 million credit facility (see Project ID#34030).

Additional details

The Portuguese project title is Projecto de Reabilitação do sistema de abastecimento de água de Caxito, Catete e Uíge.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

6

Number of unofficial sources

2