China Eximbank provides $1 billion loan for Dolisie-Brazzavile Section of Pointe-Noire-Brazzaville Road (RN1) Construction Project (Linked to Record ID#59273, ID#68874, ID#60219, ID#72780, ID#72781, ID#72782)

Project narrative

In 2012, China Eximbank and the Republic of Congo signed a $1 billion loan framework agreement (captured in Record ID#59273) — also known in the Republic of Congo as the “strategic partnership 2” (“partenariat stratégique 2”) — that allowed the Republic of Congo to obtain China Eximbank loans for infrastructure projects through a securitization mechanism: Société Nationales des Pétroles Congolais (SNPC)—the country’s state-owned oil company—agreed to deposit a portion of the cash proceeds from its oil exports into an escrow account that is controlled by China Eximbank. The borrower was required to keep a minimum deposit balance of 15-20% of total outstanding loans in an escrow account. All subsidiary loans approved through this framework agreement were to carry the following terms: a 5-year grace period, a 20-year maturity and a 0.25% interest rate. According to the Congolese authorities, only one subsidiary loan was ultimately approved through this framework agreement: a $1 billion loan in 2012 for the Dolisie-Brazzavile Section of the Pointe-Noire-Brazzaville Road (RN1) Construction Project (captured in Record ID#369). The proceeds of the loan were to be used by the borrower to partially finance a $1.48 billion commercial contract with China State Construction Engineering Corporation (CSCEC). The loan’s (principal) amount outstanding was $1,000,000,000 as of December 31, 2019. This project, which is also known as Phase 2 of the Pointe-Noire-Brazzaville Road (RN1) Construction Project, involved the construction of a 376 km road segment along National Route 1 (NR1) between Dolisie and PK45 north of Brazzaville. China Eximbank also issued multiple loans for Phase 1 of the Pointe-Noire-Brazzaville Road (RN1) Construction Project (as captured via Record ID#68874, ID#72780, ID#72781, and ID#72782). China State Construction Engineering Corporation Ltd. (CSCEC) was the contractor responsible for the implementation of Phase 1 and Phase 2. The groundbreaking ceremony for Phase 2 took place on December 22, 2011. Phase 2 was completed on October 3, 2015. The four-lane, 535 km Pointe-Noire-Brazzaville Road (RN1) was officially inaugurated and opened to traffic on March 1, 2016. The project's originally scheduled commencement and completion dates were June 30, 2012 and June 30, 2016, respectively. The Pointe-Noire-Brazzaville Road (RN1) ultimately connected the country’s economic center Pointe-Noire with the capital Brazzaville. It is said to have shortened a trip that previously would take over a week down to about a day or less. As of 2014, USD 1 billion had been disbursed. The $1 billion China Eximbank loan that supported Phase 2 was rescheduled on April 29, 2019. Under the terms of the debt rescheduling agreement, the Republic of Congo agreed to repay 33% of its its outstanding obligations for the Phase 2 (375 km Dolisie-Brazzaville Section) of National Route 1 (RN1) Construction Project within 3 years (more specifically, by December 31, 2021). For the remaining 67% of its outstanding obligations, the Republic of Congo agreed to a new repayment schedule that involved extending the maturity the loan by 15 years (from 20 years to 35 years) and resetting the interest rate of the loan from 5% to to 2%. This debt rescheduling is captured in Record ID#58340. Prior to the rescheduling, the Republic of Congo was facing a balance of payment crisis and it decided to concession the RN1 through a toll-operate-transfer (TOT) privatization. The Congolese authorities first announced its intention to concession the RN1 (and RN2) on February 6, 2016. La Congolaise des Routes S.A. [LCR or (刚果（布）国家1号公路特许经营项目公司] — a special purpose vehicle and joint venture between CSCEC (70% ownership stake), Egis Projects (15% ownership stake) and the Congolese Government (15% ownership stake) — passed the pre-qualification stage in June 2016 and submitted a technical and financial proposal in February 2017. It then received a ‘priority negotiation invitation letter’ in November 2017. Negotiations between LCR and the Republic of Congo took place between December 2017 and April 2018. The parties finalized and signed a 30-year franchise (concession) agreement at the FOCAC Summit in September 2018. According to Li Jiqin, Chairman of CSCEC International, CSCEC reached out to the Republic of Congo for this deal because the RN1 was left unmaintained after its construction was completed in 2016. Under the new agreement, CSCEC is responsible for maintaining the road while the French company, Egis, is responsible for managing toll collection. Moreover, the government of Congo is responsible for administrative coordination and security. The CSCEC’s upfront equity investment in this public-private partnership (PPP) reportedly helped the Republic of Congo address its balance of payments crisis. The Republic of Congo also tried to convince the CSCEC to invest in a similar TOT privatization of RN2 (which was also constructed with financial support from China Eximbank), but the company declined as it believed the deal would not generate enough profit. Toll collection on the RN1 commenced on March 7, 2019.