China Eximbank provides $429.71 million buyer’s credit loan for Caxito-Nzeto Highway Rehabilitation Project (Linked to Project ID#31742)

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 September 28, 2007, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola. The MLFA, which is an oil prepayment facility, was designed to finance 100 projects via individual loan agreements (ILAs). The MLFA 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 was a framework agreement under which the Government of Angola and China Eximbank could 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. ILAs approved through the MLFA carried the following estimated borrowing terms: an interest rate of 3-month LIBOR 3 plus a 1.5% margin, a 13.75 maturity, a 1.25 year grace period, a management fee of 0.3%, and a 0.3% commitment fee. 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. On September 28, 2007, China Eximbank and the Government of Angola signed a $429,710,921.10 buyer’s credit loan agreement under the 2007 MLFA for the Caxito-Nzeto Highway Rehabilitation Project. The proceeds of the subsidiary loan were used to partially finance $477,456,579 commercial contract with China Road and Bridge Corporation (CRBC), which was signed on May 17, 2007. The purpose of the project was to rehabilitate a 208 km two-way dual-lane expressway that runs from the coastal city of Nzeto (N'Zeto) to the city of Caxito in Bengo Province. Angola National Roads Institute (INEA) was the project owner, and Gauff Engineering was the project supervisor. CRBC was responsible for project implementation. The project commenced in December 2011 and concluded in June 2014. The road was officially inaugurated on February 5, 2016.

Additional details

1. This project is also known as the Phase 2 of the Caxito-N’zeto Road Project. The Chinese project title is 的口行二期Caxito-N’Zeto道路项目. The Portuguese project title is Reabilitação e Duplicação da Estrada Caxito/Nzeto. 2. In the database of Chinese loan commitments that SAIS-CARI released in July 2020, it identifies this loan as having a face value of $477 million (equivalent to the value of the commercial contract). AidData relies on the face value of the loan ($429,710,921.10) that is reported in Dr. Lucy Corkin’s book (See: UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA). 3. 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. 4. 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 would be signing relevant agreements with the Government of Angola. Therefore, AidData has coded Sinosure as an accountable agency and as providing insurance for the loan. 5. 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

7

Number of total sources

16