Narrative
Full Description
Project narrative
On December 12, 2014, China Development Bank (CDB) and Sonangol Finance Limited — a wholly owned subsidiary of Sociedade Nacional de Combustiveis de Angola (Sonangol), Angola's state-owned oil company — signed a $2 billion pre-export term facility (loan) agreement for the development of oil and gas projects, such as the Lobito Refinery Construction Project The loan's estimated borrowing terms included a 10-year maturity period, 0.5316-year grace period, an an annual interest rate of 1-month LIBOR plus a 3.4% margin. It was reportedly secured by (i.e. collateralized with) oil exports from Sonangol. The loan's (principal) amount outstanding was AOA 487,097,999,902 as of December 31, 2019, AOA 519,683,199,869 of as December 31, 2020, AOA 332,988,599,845 as of December 31, 2021, AOA 201,476,400,000 as of December 31, 2022, and AOA 165,760,000,000 as of December 31, 2023. A statement about the loan, posted on Sonangol's website, announced that construction of the country's long-planned second refinery at Lobito would begin in 2015. Sonangol had been under pressure for a long time to build a new refinery as it heavily depends on imports for its fuel requirements. However, construction of the Lobito refinery was frozen in 2016 due to high costs. Then, in 2021, Joaquim de Sousa Fernandes, chairman of the executive council of Sonaref (a subsidiary of Sonangol), announced that the project was being revived and the construction of the Lobito refinery was scheduled for completion in 2025. On October 20, 2023, China National Chemical Engineering Company (CNCEC) signed on to provides construction, technical support and inspection.
Staff comments
1. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Angola was 0.5316 years in 2014. AidData estimates the grace period of the China Development Bank loan that supported the Sonangol Finance Limited by using this figure. See https://www.dropbox.com/scl/fi/qi2hvg1s05nsak3n1n83u/Private-Chinese-Loans-to-Angola-November-2023-Data-Extraction.xlsx?rlkey=0aq7jdxm29ynbw4yh1bn07c7m&dl=0 2. AidData has estimated the all-in interest rate (3.56305%) by adding 3.4% to average 1-month LIBOR in December 2014 (0.16305%). 3. The loan's maturity is drawn from a 2014 financial report from Sonangol. See https://s3.amazonaws.com/rgi-documents/914df033bd5c850ceab55c1c4f8d5db1e17bd77c.pdf 4. The amounts outstanding are drawn from Sonangol's annual financial statements (https://www.sonangol.co.ao/relatorio-contas/). 5. A pre-export finance (PXF) facility an arrangement in which a commodity (e.g. oil) producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed.