China Eximbank provides $1.903 billion buyer’s credit loan for Phase 1 of Standard Gauge Railway Project (Linked to Project ID#31777 and #47025)

On June 26, 2012, Kenya Railway Corporation (KRC) approved a feasibility study and preliminary project design from China Road and Bridge Corporation (CRBC) for Phase 1 of the Standard Gauge Railway (SGR). Then, on July 11, 2012 and October 4, 2012, KRC and CRBC signed two commercial (EPC) contracts worth $3,804,192,784.92: (1) a $2,657,401,776.17 Construction on the Civil Works of Mombasa-Nairobi Standard Gauge Railway Project EPC Turnkey Commercial Contract on July 11, 2012 and (2) a $1,146,791,008.75 Supply and Installation of the Facilities, Locomotives and Rolling Stocks for the Mombasa-Nairobi Standard Gauge Railway Project Contract on October 4, 2012. In August 2012, the Kenyan Cabinet approved the development of the railway, which was followed by the signing of a bilateral agreement by the Kenyan and Ugandan governments for the construction of the railway (that was later upgraded to a tripartite agreement with the Rwandan government). Less than a year later, in July 2013, the National Treasury of the Republic of Kenya and China Eximbank signed an MOU — that was witnessed by the President of the Republic of Kenya — based on the commercial (EPC) contracts that CRBC and KRC signed on July 11, 2012 and October 4, 2012. On May 11, 2014, China Eximbank and the Government of the Republic of Kenya (represented by the National Treasury of the Republic of Kenya) signed two loan agreements worth $3.604 billion for Phase 1 of the Standard Gauge Railway Project (also known as the Kenya Mombasa-Nairobi Standard Gauge Railway Project). The first loan was a buyer’s credit loan (BCL) [Contract No. 1410302052014210766] worth $2,003,584,028.87 and it was provided on the following terms: a 5.25 year grace period, a 5 year (60 month) disbursement period, a 15.25 year maturity, an interest rate of 6-month Libor plus 3.6% margin, a 1% default (penalty) interest rate, a 0.75% commitment fee, a 0.75% ($15,026,880.22) management fee, a 6.93% insurance premium (payable in three installments), and a 1% default interest rate. The face value of the BCL was subsequently revised to $1,903,404,827.42. The BCL is backed by a credit insurance policy from China Export & Credit Insurance Corporation (Sinosure). The total cost of the Sinosure insurance premium is $211,543,142.85. The second loan was a preferential buyer's credit (PBC) [CHINA EXIMBANK PBC NO. (2014) 13 TOTAL NO. (307) NO. (1420303052014210788)] worth $1,600,000,000 and it was provided on the following terms: a 2 percent interest rate, a 0% default (penalty) interest rate, a 7.25 year grace period, a 7 year (84 month) availability period, a 20.25 year maturity, a 0.25% commitment fee, and a 0.25% ($4,000,000) management fee. The BCL was scheduled for 20 semi-annual repayments between July 21, 2019 and July 21, 2029. The PBC was scheduled for 26 semi-annual repayments between July 21, 2021 and July 21, 2034. The Government of Kenya on-lent the proceeds of the BCL (captured via captured via Project ID#37103) and the PBC (captured via Project ID#31777) to the ‘end-user’ (KRC). The ultimate borrower (KRC) was expected to use the proceeds of the BCL and PBC to to finance 90% of the total costs of the two commercial contracts that it signed with CRBC on July 11, 2012 and October 4, 2012. More specifically, the proceeds from the PBC were to be used to finance 42.06% of the total costs of the two commercial contracts and be exclusively utilized to make payment for the ‘Line Section of the Project’ (i.e. the construction contents and items under the Construction on the Civil Works of Mombasa-Nairobi Standard Gauge Railway Project EPC Turnkey Commercial Contract). The proceeds from the BCL were to be used to finance (a) 31.95% of the total cost ($849,000,000 out of $2,657,401,776.17) of the ‘Line Section of the Project’ (i.e. the construction contents and items under the Construction on the Civil Works of Mombasa-Nairobi Standard Gauge Railway Project EPC Turnkey Commercial Contract), (b) 85% of the total cost ($974,772,357.44 out of $1,146,791,008.75) of the Supply and Installation of the Facilities, Locomotives and Rolling Stocks for the Mombasa-Nairobi Standard Gauge Railway Project Contract, and (c) 85% of the total cost ($179,811,671,43 out of $211,543,142.85) of the medium-long term buyer’s credit insurance premium from Sinosure. The remaining 10% was to be paid by Kenya Railways Corporation to China Road and Bridge Corporation as counterpart financing, of which not less than $380,420,427.8 was to be applied to the Facilities, Locomotives and Rolling Stocks for the Mombasa-Nairobi Standard Gauge Railway Project Contract. In order to facilitate repayment of its debts to China Eximbank, the Kenyan Government provided an assurance to the lender that it would guarantee a minimum amount of railway freight through the execution of a take-or-pay agreement between KRC and the Kenya Ports Authority (KPA). The KPA also agreed to levy a new, 1.5% tax on imported goods (called the ‘Railway Development Levy’). The Railway Development Levy was designed to serve as insurance in case the revenues generated through the take-or-pay arrangement fall short of the amount required to service the China Eximbank loans. The borrower also expected to use to the Railway Development Levy to finance the Kenyan government’s portion (15%) of the project (commercial contract) cost. The BCL and PBC are secured by (i.e. collateralized against) project revenues that are deposited into a revenue account (escrow account) and a minimum cash balance in a payment account (escrow account). A 2014 Escrow Account Agreement between Kenya Railways Corporation (KRC), the Government of Kenya, and China Eximbank specifies that ‘KRC shall ensure that the following minimum amounts in [U.S.] Dollars [USD] shall be held in the Payment Account, so long as an Secured Obligations under the Loan [PBC and BCL] Agreement remain outstanding: (i) when the Loans are within the applicable Grace Period, no less than US$84,000,000, which shall be deposited into the Payment Account in the following installments: 1) an amount, of US$16,800,000, shall be deposited into the Payment Account before the first disbursement, 2) an amount of US$16,800,000 shall be deposited into the Payment Account before January 15, 2015, 3) an amount of US$25,200,000 shall be deposited into the Payment Account before July 15, 2015, 4) an amount of US$25,200,000 shall be deposited into the Payment Account before July 15, 2016; (ii) when any Loan [PBC or BCL] is within its Repayment Period, no less than US$250,000,000, and (iii) when the [BCL is] fully repaid, no less than US$80,000,000.' If the borrower does not adhere to its loan repayment schedule (runs arrears), the escrow account bank is responsible for withdrawing funds the overdue payment amount (plus 1% penalty interest) from the payment account and remitting payment to China Eximbank; then, the escrow account bank reimburses/replenishes the payment account with funds from the revenue account (where project revenues are deposited). According to the audited financial statements of KRC, the cash balances in the escrow accounts were as follows: KES 0 in the USD payment account (Account No. 1162573333) and KES 1,000 (USD 11.4) in the KES revenue account (Account No. 1162574615) in June 2014, KES 0 in the USD payment account (Account No. 1162573333) and KES 1,000 (USD 11.4) in the KES revenue account (Account No. 1162574615) in June 2015, KES 5,981,587,210 (USD 59,217,713.37) in the USD payment account (Account No. 1162573333) and KES 2,708 (USD 26.80) in the KES revenue account (Account No. 1162574615) in June 2016, KES 8,713,702,264 (USD 85,394,282.18) in the USD payment account (Account No. 1162573333) and KES 72,472,503 (USD 702,983) in the KES revenue account (Account No. 1162574615) in June 2017, KES 8,912,943,504 (USD 88,238,140.68) in the USD payment account (Account No. 1162573333), KES 424,026,583 (USD 4,197,863.17) in the USD revenue account (Account No. 1162573333), and KES 1,412,855,396 (USD 13,987,268.42) in the KES revenue account (Account No. 1162574615) in June 2018, KES 9,078,451,382 (USD 88,968,823.54) in the USD payment account (Account No. 1162573333), KES 5,334,370,360 (USD 52,276,829.52) in the USD revenue account (Account No. 1162573333), and KES 1,567,057,226 (USD 15,357,160.81) in the KES revenue account (Account No. 1162574615) in June 2019, and KES 9,195,200,216 (USD 86,434,882.03) in the USD payment account (Account No. 1162573333), KES 18,447,296,513 (USD 173,404,587.22) in the USD revenue account (Account No. 1162573333), and KES 2,991,272,808 (USD 28,117,964.39) in the KES revenue account (Account No. 1162574615) in June 2020. Given that the BCL was still in its grace period until August 11, 2019 and the Preferential Buyer’s Credit (PBC) was still in its grace period until August 11, 2021, the borrower evidently complied with the lender’s requirement that it maintain a USD 84 million cash balance in the USD escrow account while the BCL and PBC were still in their grace periods and the lender’s requirement that it maintain a USD 250 million cash balance in the USD escrow account while either loan was in its repayment period (as specified in the Escrow Account Agreement). The borrower made principal repayments on the BCL worth $100,179,201.44 between July 1, 2020 and June 30, 2021 (Fiscal Year 2020-2021) and $200,358,402.88 between July 1, 2021 and June 30, 2022 (Fiscal Year 2021-2022). The BCL’s amount outstanding was $1,903,404,827.42 as of June 30, 2020, $1,703,046,424.53 as of June 30, 2021, and $1,502,688,021.64 as of June 30, 2022. The borrower made no principal repayments on the PBC between July 1, 2020 and June 30, 2021 (Fiscal Year 2020-2021) and principal repayments worth $61,538,461.54 between July 1, 2021 and June 30, 2022 (Fiscal Year 2021-2022). The PBC’s amount outstanding was $1,600,000,000 as of June 30, 2020, $1,600,000,000 as of June 30, 2021, and $1,538,461,538.46 as of June 30, 2022. The Standard Gauge Railway (SGR) is the largest infrastructure project constructed in Kenya since independence in 1963. The Kenyan Government and the Ugandan Government first promoted the idea of the SGR in 2008 as part of a Northern Corridor Initiative to link the Kenyan coastal city of Mombasa to the landlocked countries of the Great Lakes Region. In August 2009, Kenya’s Ministry of Transport (MoT) and CRBC signed a memorandum of understanding, whereby CRBC agreed to undertake a feasibility study of the SGR Project at no cost to Kenya’s MoT. In January 2011, CRBC submitted a feasibility report to Kenya’s MoT, which concluded that Phase 1 of the railway’s expected economic internal rate of return (EIRR) was of 14.66%, which was higher than the Government of Kenya’s ‘hurdle rate’ of 12%. However, the CRBC feasibility study later became a source of controversy. Its central conclusion — that the SGR was economically feasible — was inconsistent with the conclusions of previous studies undertaken by the World Bank and a Canadian consultancy firm. The CRBC feasibility study also included no cash flow projections. It asserted that the project would be highly profitable, but its estimates of the net present value (NPV) of the project’s expected economic benefits varied between $2 billion and $2.6 billion. The fact that the project’s estimated economic benefits were lower than its expected costs aroused suspicion about the credibility of the 14.66% EIRR estimate. The Government of Kenya’s decision to only allow CRBC to conduct the project’s feasibility study was also challenged by the Law Society of Kenya (LSK), which argued that Kenyan laws require competitive bidding for a feasibility study. However, a Kenyan court ruled in favor of the government, and stated that the whole procurement process was legal. After the award of tender for the whole project was issued without competitive bidding, sub-tenders did not follow competitive bidding processes. Two Kenyan parliamentary committees, learning of this lack of competitive bidding, recommended cancellation of the sub-tenders, but they were ignored by President Kenyatta. Then, in 2020, a Kenyan court of appeal ruled that the SGR contract issued to CRBC was illegal because it was issued in a manner that is inconsistent Kenya’s procurement laws. The court ruled that the contract should be made public, but a Kenyan MoT official said that making the contract public would undermine national security. The purpose of the project was to construct a 485 km railway from the Kenyan port of Mombasa to Nairobi and then onward to Uganda, Rwanda, Burundi, and South Sudan. Upon completion, the railway was expected have a total track length of 609 km. The project sought to transport passengers and cargo from Nairobi to the southeastern port city of Mombasa at 120 kilometers per hour, thus reducing travel time between Nairobi and Mombasa from more than 10 hours to more than 4 hours. The project was also expected to reduce travel times and transport costs by as much as 60 percent. If properly implemented, the Kenyan Government estimated that the railway would increase the country’s annual rate of economic growth by 1.5 percentage points. China Road & Bridge Corporation (CRBC) was the EPC contractor responsible for project implementation, and Kenya Railway Corporation (KR) supervised its work. Project implementation commenced on December 12, 2014. The project reached completion on May 31, 2017, eighteen months ahead of schedule. President Kenyatta scheduled the completion ceremony just two months before voters would go to the polls and on Madaraka Day—a national holiday that commemorates the day when colonial Britain granted Kenya the right to internal self-rule. At the project completion ceremony, President Kenyatta gave a speech and said that ‘[our] history … was first started 122 years ago when the British, who had colonised this nation, kicked off the train to nowhere ... it was then dubbed the ‘Lunatic Express’. Today... despite again a lot of criticism we now celebrate not the ‘Lunatic Express’ but the Madaraka Express that will begin to reshape the story of Kenya for the next 100 years.’ However, the project has become a source of local scrutiny and controversy. In December 2018, a letter from Kenya’s Auditor General to the Kenya Ports Authority was leaked to the media. It suggested that the Port of Mombasa’s assets were sources of collateral that could be seized in the event that the Kenyan government could not repay its loans to China Eximbank. The letter also suggested that the Kenyan government had waived its sovereign immunity rights in order to make this pledge of collateral. The possibility that Beijing would seize a strategic asset like the Port of Mombasa provokes a public outcry in Kenya. President Kenyatta dismissed the criticism that the Kenyan government had mortgaged the Port of Mombasa to Beijing as ‘pure propaganda.’ He told a group of journalists that ‘if you want a copy of the [SGR loan] contract we have with China I can get it to you tomorrow. […]’. But neither the BCL contract nor the PBC contract was made public. In 2018, the SGR project also became a target of an anti-corruption drive by Kenya's Department of Public Prosecutions (DPP). According to Reuters, the “Kenyan authorities […] arrested the head of the agency that manages public land and the boss of the state railway on suspicion of corruption over land allocation for the new $3-billion flagship Nairobi-Mombasa railway. […] Mohammed Abdalla Swazuri, the chairman of National Land Commission, was one of 18 officials, businesspeople and companies named in a statement listing arrests that was posted …on the prosecutor’s office’s Twitter feed. Also arrested was Atanas Kariuki Maina, managing director of the Kenya Railways Corporation. […] The investigation that led to the arrests centers on allegations that officials siphoned taxpayer money through [fraudulent] compensation claims for land used for the railway.’ John Githongo, a former anti-corruption czar in Kenya, told a newspaper in August 2022 that ‘[t]he standard gauge railway is the jewel in the crown of corruption in Kenya.’ The secrecy surrounding the China Eximbank loan contracts that were issued for the SGR Project has also become a source of local concern. The Kenyan government has declined to make public the loan contracts in response to a court petition by two activists (Khelef Khalifa and Wanjiru Gikonyo), saying they have non-disclosure clauses and that releasing them would amount to breaching a bilateral agreement, thereby impairing relations between the Kenyan government and the Chinese Government. According to an affidavit from Kenya’s Public Works Principal Secretary Solomon Kitungu, releasing the loan contracts would undermine Kenya’s national security ‘since [the] terms in the contract[s] touch on foreign government information with implications on national security and foreign relations.’ Two activists—Khelef Khalifa and Wanjiru Gikonyo—filed a petition in 2021 at the High Court in Mombasa seeking to obtain all contracts, agreements, and studies for the construction and operation of the SGR. Through a coalition called Okoa Mombasa, Khalifa had previously attempted and failed to get the documents through Kenya’s Access to Information Act after the Kenyan government directed that all containerized cargo at the Port of Mombasa be transported inland through the SGR. This move reportedly had negative impact on the Kenyan coast’s port-based economy because it forced logistics companies to move their operations to container depots in the country’s interior. ‘We have a right to know the details of the project: how our money is being spent, the consequences of a loan default, and the government’s decision-making processes in signing the deal. Right now, we know none of this—the Kenyan public is completely in the dark,’ said Khalifa. Gikonyo, his co-petitioner, is the national coordinator for The Institute for Social Accountability, a Nairobi-based civil society organization. Yet another concern about the project is related to its revenue performance. It was originally projected that the railway would move 22 million tons of cargo a year. However, a Government of Kenya assessment later revealed that the maximum amount of cargo that the railway could move was approximately 8.7 million tons of cargo a year. Also, one year after the SGR was put into operation, a parliamentary report showed that it cost more than double the amount to transport goods on the train than on the road. To make the railway profitable, the Kenyan authorities compelled importers to send cargo by railway instead of by road. This decision set off protests, riots, and court cases in October 2019 and November 2019. Then, on On December 4, 2019. Kenya’s senate committee on transport summoned the Kenyan cabinet secretary for transport over his directive to haul cargo from the port city of Mombasa to Nairobi exclusively by rail. The meeting — attended by activists, businessmen and leaders from Mombasa — ended with the cabinet secretary, James Macharia, promising to rescind the directive, which had reportedly hurt local businesses. Then, in September 2020 Kenyan lawmakers tabled a report in parliament recommending that the government renegotiate the terms of the China Eximbank loans for the SGR ‘due to the prevailing economic distress occasioned by the effects of Covid 19’. In the same report, the lawmakers recommend that the government renegotiate the SGR operation agreement, ‘by planning to reduce operation costs by at least 50%’. The SGR operators had to halt its passenger service for nearly three months due to concerns about the potential spread of the pandemic. CRBC operates the railway’s passenger and cargo service through its subsidiary, the Africa Star Railway Operation Company. In the three years the SGR has been in operation, Africa Star Railway Operation’s expenditure has always exceeded revenue, and the Kenyan taxpayer money has to fill the gap to sustain the company’s operations. A report by Kenya’s transport ministry tabled in parliament in 2018 says the railway made a loss of KES 9.8 billion ($90.3 million) in its first year of operation. At the time, the Kenyan Government projected a profit of $46.8 million for the following year. However, a report by the transport ministry in 2020, also tabled to parliament, said the railway recorded a loss of $200 million over the previous three years. The document also said that during this period, the railway generated revenues of $230.7 million but had operational costs of $430.5 million. The transport ministry cited reduced limited storage capacity at a Nairobi container depot, minimum use of the city’s freight terminal, and railway charges as reasons for this performance, arguably the kinds of details a thorough appraisal should have raised. The SGR operates both passenger and cargo services and while passengers embrace it for reducing travel time compared to buses, cargo owners shun it for reasons including higher fees and tariffs, additional time clearing goods and a lack of last-mile delivery, when compared to trucks. Kenya’s election in August 2022 became a vote on President Uhuru Kenyatta’s legacy of debt-financed infrastructure building, much of it built and financed by China Eximbank. This was especially true for the SGR. The opposition party candidate Raila Odinga ran on a promise to renegotiate the Kenyan government’s outstanding debts to China Eximbank. Speaking at Chatham House in London on March 16, 2022, he said he would assemble a tough team of negotiators: ‘It depends on how you negotiate with the Chinese. If you don't have negotiators they will of course impose their terms on you.’ Several months later, in June 2022, the ruling party presidential candidate, William Ruto, told Reuters that he would publish government contracts with Chinese companies and renegotiate loans with China Eximbank. Then, in September 2022, newly elected Kenyan President William Ruto reverted cargo clearing services from Nairobi inland container depot (ICD) to the Port of Mombasa. The expected immediate impact of reverting port operations to the Port of Mombasa was a shift to road haulage and a reduction in cargo business for the SGR. Ruto’s predecessor, Uhuru Kenyatta, moved cargo clearance to the Nairobi ICD to help ease congestion at the Port of Mombasa and boost its competitiveness while also boosting traffic on the SGR to increase revenue for debt repayment. The effect of Ruto’s September 2022 decision was to shift more of the responsibility for repayment of the China Eximbank loans to Kenyan taxpayers. In mid-October 2022, Kenya’s incoming Transport Secretary, Kipchumba Murkomen also said during his confirmation hearing that he planned to renegotiate the China Eximbank loans for the Standard Gauge Railway Project. He said that these loans were likely repayable over fifty years rather than fifteen to twenty years. He also said that ‘[I]f approved, I will look for the SGR agreement and make it available to the public because no one knows the contents of that agreement’. Then, in November 2022, Kipchumba Murkomen publicly disclosed all three China Eximbank loan agreements for the SGR project. There are some indications that the SGR loans have underperformed vis-a-vis the lender's original expectations. In July 2022, the Government of Kenya received 'settlement notes' (an overdue repayment notification) from China Eximbank. Then, in October 2022, local media outlets reported (based on confidential Treasury documents) that the Government of Kenya defaulted on its China Eximbank loans for Phase 1 of the Standard Gauge Railway Project. The lender reportedly imposed a fine (‘default interest’ payment) worth $10.8 million (1.312 billion Kenyan shillings).

Additional details

1. This project is also known as the Development of Mombasa to Nairobi Standard Gauge Railway Project. The Chinese project title is 蒙内铁路项目. 2. AidData has estimated the all-in interest rate that applies to the BCL by adding 3.6% to the average 6-month LIBOR rate in May 2014 (0.323%). 3. The PBC agreement and BCL agreement define ‘Long Term Service Agreement’ as ‘any long term service purchase agreement with take-or-pay terms (or similar agreement or arrangement) entered into or to be entered into between the railway operator of the Railway (being the End-User as of the date of this Agreement or any of its legal assigns or successors) and users of the Railway (including without limitation the Kenya Ports Authority), in form and substance reasonably satisfactory to the Lender.’ Under clause 1.4 of the September 30, 2014 take-or-pay agreement (also known as the ‘Delivery and Movement of Freight to the Embakasi Container Depot’ agreement), Kenya Ports Authority (KPA) and Kenya Railways Corporation (KRC) were required to enter into a Long Term Service Agreement which provides under paragraph(C) of the preamble that ‘the repayment of the principal and payment of the interest and fees of the loans are to be secured, inter alia, by a Long Term Service Agreement with an aim of guaranteeing a minimum amount of freight throughout the term of the agreement to be charged and received by the operator for the project, which shall be used to secure the repayment of principal and interest’. Further, the Long Term Service Agreement between KRC and KPA also provides under clause 7 (c) that “that KPA shall make good any short fall arising either on account of failure to consign the minimum cargo as stipulated in Schedule 1 or to remit the amount of money commensurate with the volume of cargo so consigned and shall pay to Kenya Railways Corporation such an amount as is required to make good the short fall within a period of 30 days following the completion of reconciliation exercise”. In the event of default by Kenya Railways Corporation to pay China Eximbank collected freight and service charges, Kenya Ports Authority would be compelled to deposit the amount due to Kenya Railways Corporation [in a] bank account designated by the China Eximbank.’ 4. Under the ‘Take or Pay’ Agreement, KPA undertakes to consign a defined minimum volume of freight to the Embakasi Inland Container Depot to be transported on the Standard Gauge Railway. This agreement will form part of the security package (collateral arrangement) for the loan. 5. On December 5, 2015, China Eximbank and the Government of Kenya signed a buyer’s credit loan (BCL) agreement worth $1,397,927,373.27 for Phase 2A of the Standard Gauge Railway Project. This loan is captured via Project ID#47025. 6. The 2014 China Eximbank buyer’s credit loan for the Mombasa-Nairobi Section of the SGR Project can be accessed in its entirety via https://www.dropbox.com/s/5j3alwun2tv8wk2/SGR%20BCL%202014.pdf?dl=0 and https://www.dropbox.com/s/m98rfi886dl3jjd/SGR%20BCL%202014%20Published%20by%20Government%20of%20Kenya.pdf?dl=0. The 2014 China Eximbank preferential buyer’s credit for the Mombasa-Nairobi Section of the SGR Project can be accessed in its entirety via https://www.dropbox.com/s/4r65hnvegvqwzao/SGR%20PBC%202014.pdf?dl=0 and https://www.dropbox.com/s/6ejzkjhjc8yr7cn/SGR%20PBC%202014%20Loan%20Contract%20Published%20by%20Government%20of%20Kenya.pdf?dl=0. The escrow agreement for the Mombasa-Nairobi Section of the SGR Project can be accessed in its entirety via https://www.dropbox.com/s/sseiuktq7zdoim7/SGR%20Escrow%20Agreement.pdf?dl=0. The 2015 China Eximbank buyer’s credit loan for the Nairobi-Naivasha Section of the SGR Project can be accessed in its entirety via https://www.dropbox.com/s/0vhgyylakdrfgac/SGR%20BCL%202015%20Published%20Online%20by%20Government%20of%20Kenya.pdf?dl=0 and https://www.dropbox.com/s/zy6zgzk8cufl6z7/SGR%20BCL%202015.pdf?dl=0. 7. According to Section 6.11 of the PBC agreement, ‘[t]he Borrower undertakes that the repayment of principal and payment of interest and fees under this Agreement and the Buyer Credit Loan Agreement shall be credit enhanced and secured by the following arrangements: (1) the Railway Development Fund (the “RDF”) which could be applied in priority to repay all loans drawn under this Agreement and the Buyer Credit Loan Agreement for the Project; (2) a payment account established and opened in the Account Bank of the Lender or another bank approved by the Lender prior to the establishment of such account, which shall be subject to the escrow arrangement contemplated under the relevant Escrow Account Agreement and be used to maintain the agreed minimum amount of balance as a debt service reserve arrangement in favour of the Lender; (3) a revenue (proceeds) account established and opened in an account bank in the Borrower’s Country approved by the Lender prior to the establishment of such account, which shall be subject to the relevant Escrow Account Agreement and be used to collect the revenues generated from the Project in favour of the Lender; (4) the Long Term Service Agreement with an aim to guaranteeing a minimum amount of freight throughout the term of this Agreement of the Buyer Credit Loan Agreement (whichever is longer) to be charged and received by the relevant railway operator for this Project, which shall be used to ensure the annual repayment of principal and interest under this Agreement and the Buyer Credit Loan Agreement (including without limitation the funding of the Escrow Account pursuant to the requirements of the relevant Escrow Account Agreement). The detailed arrangements of the above credit enhancement and security arrangements will be set out by the Borrower, the Lender and other relevant parties under the relevant Security Document. The Borrower shall ensure that the relevant parties will perform their obligations under the relevant Security Document. The Lender shall be entitled to examine and supervise the execution and performance of the Security Document. Notwithstanding the existence of the Security Document, the Borrower shall be fully liable for the payment and repayment obligations under this Agreement and the Buyer Credit Loan Agreement. The Borrower’s obligations under this Agreement and the Buyer Credit Loan Agreement shall not be affected or undermined by the execution, delivery and performance by the relevant parties of such Security Document and the On-Lending Agreement.’ 8. The PBC agreement defines ‘Security Document’ as ‘all the agreement(s) and legal document(s) signed by the relevant parties in connection with the security interests as stipulated in the Article 6.11, including without limitation the Escrow Account Agreement and any Long Term Service Agreement.’ The BCL agreement also defines ‘Security Document’ as ‘all the agreement(s) and legal document(s) signed by the relevant parties in connection with the security interests as stipulated in the Article 12.2, including without limitation the Escrow Account Agreements, any Long Term Service Agreement, and any other security or similar document as mutually agreed between the Borrower and the Lender from time to time […].’ The 2014 Escrow Account Agreement between Kenya Railways Corporation (KRC), the Government of Kenya, and China Eximbank can be accessed in its entirety via https://www.dropbox.com/s/sseiuktq7zdoim7/SGR%20Escrow%20Agreement.pdf?dl=0. The 2017 Long Term Service Agreement (also known as the 'Operation and Maintenance Service Agreement for the Mombasa-Nairobi Standard Gauge Railway' Agreement) can be accessed in its entirety via https://www.dropbox.com/s/8aab7pr4qhf2xaj/Operation%20and%20Maintenance%20Service%20Agreement%20for%20the%20Mombasa-Nairobi%20Standard%20Gauge%20Railway.pdf?dl=0 9. The PBC agreement and BCL agreement define ‘escrow account agreement’ as ‘the agreement(s) entered into among the Lender, the Borrower, the End-User and the relevant account bank(s) appointed by the Lender for the purpose of supervising the Escrow Account.’ The PBC agreement and BCL agreement define ‘escrow account’ as ‘the account(s) established and opened by the End-User in the account banks appointed by the Lender (including without limitation account banks located in the Borrower’s Country and the PRC) to deposit the monies and collect the revenue generated by the Project, to secure the payment and repayment under this Agreement and the Buyer Credit Loan Agreement, including without limitation a payment account and a revenue account as stipulated in Article 6.11. The specific name of such accounts should be subject to the relevant Escrow Account Agreement.’ The PBC agreement and BCL agreement define the ‘Account Bank of the Lender’ as ‘The Export-Import Bank of China.’ 10. According to Section 6.12 of the PBC agreement, ‘[t]he Borrower undertakes to procure that the Government of Kenya or the relevant authorities of Kenya shall stipulate and issue preferential policies, regulations, or approvals in relation to the RDF which could be applied in priority to make the repayment of loans in relation to the Project as owing to the Lender, the Long Term Service Agreement and its due performance, the revenues generated from the Project which will be applied in priority to make the repayment of loans in relation to the project as owing to the Lender (except for the expenditures of operation and management of the Project), the Inland Container Depot (inland port) established in Nairobi and its mandatory customs clearance, and all other necessary policies or approvals, with an aim to ensuring the due operation of the Project and the repayment of such loan in relation to the Project as owing to the Lender.’ 11. The PBC agreement and BCL agreement define ‘On-Lending Agreement’ as the ‘loan agreement entered into between the Borrower and the End-User, whereby the Facility is on-lent by the Borrower to the End-User to implement the Project.’ 12. A secret Government of Kenya ‘project information memorandum’ on Phase 1 of the SGR Project can be accessed in its entirety via https://www.dropbox.com/s/wh5on1xatrdje65/Secret%20Project%20Information%20Memorandum%20on%20Phase%201%20of%20SGR.pdf?dl=0. 13. The Government of Kenya loan identification number for the PBC is 2014006_1. The Government of Kenya loan identification number for the BCL is 2014008_1. 14. The amounts outstanding and repayments data are drawn from the Kenyan Treasury’s External Public Debt Register. See https://www.dropbox.com/s/549ixt2gj1jbjvi/External-Public-Debt-Register-as-at-End-June-2022.pdf?dl=0 and https://www.dropbox.com/s/0et4jg1qfg1bo7r/External-Public-Debt-Register-as-at-End-June-2021.pdf?dl=0 and https://www.dropbox.com/s/233j706743q7f1g/External-Public-Debt-Register-as-at-End-June-2020.pdf?dl=0 and https://www.dropbox.com/s/qkoybr9ja0ohemy/External-Public-Debt-Register-as-at-End-June-2009.pdf?dl=0 and https://www.dropbox.com/s/thy3s6ggjcjd97z/External-Public-Debt-Register-as-at-End-June-2012.pdf?dl=0 and https://www.dropbox.com/s/fzbfq01vas6m0i9/External-Public-Debt-Register-as-at-End-June-2019.pdf?dl=0 and https://www.dropbox.com/s/ennrl6d4zd2nizs/External-Public-Debt-Register-as-at-End-June-2018.pdf?dl=0 and https://www.dropbox.com/s/8ibazrj1a8oho2d/External-Public-Debt-Register-as-at-End-June-2017.pdf?dl=0 and https://www.dropbox.com/s/wdbjl0wq49i09x1/External-Public-Debt-Register-as-at-End-June-2015.pdf?dl=0

Number of official sources

31

Number of total sources

69