China Eximbank lends $195 million for No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory (Kangyidaunt) Construction Project (Linked to Project ID#96221, 98029)

On August 6, 2004, China Eximbank and the Ministry of Finance & Revenue of the Union of Myanmar signed an agreement on the Financing Plan for the No. 4 Urea Fertilizer Factory Construction Project in Taikkyi (တိုက်ကြီး) township. China Eximbank agreed to provide a concessional loan and a buyer’s credit loan at a 3% annual interest rate. The proceeds of the loans were to be used by the borrower to finance a commercial contract between Huanqiu Contracting & Engineering Corporation (寰球工程公司 or HQCEC) — a subsidiary of CNPC — and the Government of Myanmar's Ministry of Energy, which was signed on March 24, 2004. Then, in 2005, the Government of Myanmar decided to instead construct 2 separate factories, which led to financing delays. In February 2006 and July 2007, China Eximbank and the Government of Myanmar signed two loan agreements — a concessional loan agreement and a buyer’s credit loan agreement — for the No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory (Kangyidaunt) Construction Project. The precise face values of the concessional loan and buyer’s credit loan are unknown. However, it is known that they were collectively worth approximately $195 million and Myanmar’s Ministry of National Planning and Economic Development reports that one of the loans was worth $74.08 million. The proceeds of these loans were to be used to finance a revised EPC contract with HQCEC. Construction began on March 24, 2004. However, the project was not officially launched until March 2007. The construction of the No. 4 Fertilizer Factory [ဓာတ်မြေသြဇာစက်ရုံ (မြောင်းတကာ) or အမှတ်(၄)ဓာတ်မြေသြဇာစက်ရုံနှင့်], which is located in Hmawbi Township, was ultimately completed on December 5, 2010. The construction of the No. 5 Fertilizer Factory (ပုသိမ် အမှတ် ၅ ဓာတ်မြေဩဇာ စက်ရုံ) was ultimately completed on January 12, 2011. The No. 5 Fertilizer Factory occupies an area of 200 acres near Ohbo Village within Kangyidaunt (ကန်ကြီးထောင့်) Township, Pathein District, Ayeyawady Region. Upon completion, it was expected produce 500 tons of urea and 325 tons of ammonia a day. There are some indications that the China Eximbank loan for the No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory (Kangyidaunt) Construction Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2020, China Eximbank and the Government of Myanmar signed a debt suspension agreement as part of the G-20 Debt Service Suspension Initiative (DSSI). Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between May 1, 2020 and December 31, 2020 under 3 buyer’s credit loan (BCL) agreements, 6 government concessional loan (GCL) agreements, and 27 preferential buyer’s credit (PBC) agreements (as captured via Project ID#98029). Debt service payments under many of these loan agreements were again deferred in 2021 (as captured via Project ID#96221).

Additional details

1. This project is also known as the Myanmar Fertilizer Project and Myanmar 4A and 4B Fertilizer Plant Project. The No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory are referred to as 4A Factory and 4B Factory by Huanqiu Contracting & Engineering Corporation. No. 5 Fertilizer Factory is also referred to as No. 5 Fertilizer Plant (Pathein). The Chinese project title is 缅甸第四化肥厂 or 缅甸化肥项目. The Burmese project title is ယူရီးယား ဓာတ္ေျမၾသဇာစက္႐ုံ. 2. It is unclear what the breakdown of financing is between the concessional loan and export buyer's credit. As such, for now AidData codes both flows as a single project record. 3. Neither the China Eximbank concessional loan nor the China Eximbank buyer’s credit that supported this project are included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020. 4. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 15.0531 years in 2006 and 14.5376 years in 2007. AidData estimates the maturities of the two China Eximbank loans that supported the No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory (Kangyidaunt) Construction Project by taking the average of these two figures. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 5.7195 years in 2006 and 5.56 years in 2007. AidData estimates the grace periods of the two China Eximbank loans that supported the No. 4 Urea Fertilizer Factory (Myaungtagar) and No. 5 Urea Fertilizer Factory (Kangyidaunt) Construction Project by taking the average of these two figures. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0

Number of official sources

10

Number of total sources

21