CDB and Bank of China provide $1.8 billion syndicated loan for Phase I of Beineu-Bozoi-Shymkent Gas Pipeline Project (Linked to Project ID#40362, #73384, #91744)

On January 18, 2011, a joint venture (special purpose vehicle) called Beineu-Shymkent Gas Pipeline LLP (BSGP) was established in Kazakhstan to oversee the financing, design, and implementation of the Beineu-Bozoi-Shymkent Gas Pipeline Project. JSC KazTransGas (KTG) and China National Petroleum Corporation (CNPC) (acting through Trans-Asia Gas Pipeline Company Limited) each hold a 50% ownership stake in BSGP. The Beineu-Bozoi-Shymkent Gas Pipeline is a 1,454 km long gas pipeline that runs through the Mangistau, Aktyubinsk, Kyzylorda and South Kazakhstan regions. It has a pipe diameter of 1067 mm. The purpose of the project was to ensure stable gas demand in the southern Kazakhstan, reduce dependence on imported gas and ensure the energy security of Kazakhstan. Construction of the pipeline was split into two phases. The first phase of the Beineu-Bozoi-Shymkent Gas Pipeline Project involved the construction of 1,143.2 km of pipeline from the Bozoi gas metering station in the Shalkar region of Aktobe Region to Akbulak gas metering station in Sairam of South Kazakhstan Region (now known as the Turkistan Region). It also involved the installation of pipeline facilities, such as: compressor station CS-1 and Bozoy shift camp in Shalkar region of Aktobe Region, emergency-response centers in Saksaulsk, Aksuat and Karaozek in the Kyzylorda Region and an emergency-response center in Shornak within the South Kazakhstan Region, as well as construction of the automated process control system (SCADA) and telecommunication (fiber-optic communication line) for the gas pipeline in Mangystau, Aktobe, Kyzylorda and South Kazakhstan regions. The first phase of the Beineu-Bozoi-Shymkent Gas Pipeline Project commenced on July 17, 2012. The project was originally expected to be completed by the end of 2012. It was ultimately completed on September 7, 2013, resulting in a throughput capacity of up to 10 bcm per year. The second phase of the Beineu-Bozoi-Shymkent Gas Pipeline Project involved 306.3 km of gas pipeline construction from Beineu settlement in the Mangystau Region to Bozoi settlement in the Aktobe Region. It also involved the installation of pipeline facilities, such as: compressor station CS-4 Karaozek in the Kyzylorda Region, Beineu gas metering station in Mangystau Region, the SCADA central dispatch control in Kyzylorda, and gas pipeline construction in Mangystau, Aktobe, Kyzylorda and South Kazakhstan regions. It was completed on December 30, 2016. Between 2014 and 2017, over 9.0 bcm of gas was transported via the Beineu-Bozoi-Shymkent gas pipeline, providing the southern regions with Kazakhstani gas. Then, in November 2017, a head compressor station at Bozoi and a line compressor station at Karaozek were put into operation, increasing the capacity of the Beineu-Bozoi-Shymkent Gas Pipeline to 10 bcm per year. In October 2017, Kazakhstan began exporting gas to China pursuant to a contract concluded between JSC KazTransGas and PetroChina for the supply of bcm from October 15, 2017 until October 14, 2018. The price of the gas exported to China pursuant to this agreement was linked to the price of Brent crude oil and determined quarterly. As of December 31, 2017, negotiations were ongoing with respect to a long-term gas supply agreement between JSC KazTransGas and PetroChina. BSGP and KazMunayGas expected that the export of gas to China would increase in the future and made plans to construct three new compressor stations on the Beineu-Bozoi-Shymkent Gas Pipeline between 2018 and 2019 to handle increased throughput. In order to fund Phase I of the Beineu-Bozoi-Shymkent Gas Pipeline Project, Beineu-Shymkent Gas Pipeline LLP signed a $1.8 billion USD syndicated loan with China Development Bank (CDB) and Bank of China (BoC) on December 11, 2012 (captured via Project ID#39562). This loan bore interest at a rate of 3-month LIBOR plus a 2.7% margin per annum for the duration of the guarantee period (until December 31, 2019) and, thereafter, at a rate of 3-month LIBOR plus a 3.2% margin per annum. The loan was to be repaid in several installments beginning in December 2017 until March 11, 2028 (implying a grace period of 5 years and a maturity period of 15.25 years). The loan was secured by corporate guarantees from KazMunayGas and CNPC. In February 2016 and September 2017, amendments were signed because of BSGP's non-compliance with certain project milestones provided for in the facility (loan) agreement; the milestones were extended until September 30, 2019. These amendments required BSGP's prepayment of $400 million of the outstanding indebtedness, which KazMunayGas provided to BSGP for repayment. The loan was secured by additional security, including an offshore account charge, an onshore account pledge and security assignment of BSGP's rights under the shareholder support agreement in favor of the security agent. As of June 30, 2017, the loan’s outstanding amount was $1.462 billion USD. As of December 31, 2017, the loan’s outstanding amount was was $1.0 billion USD. Then, on September 17, 2015, Beineu-Shymkent Gas Pipeline LLP signed a $700 million USD syndicated loan agreement with CDB and BOC for Phase II of the project to supplement their $1.8 billion USD loan for Phase I. CDB and BoC each contributed $350 million USD to the loan for Phase II. Project ID#73384 captures the BoC contribution. Project ID#40362 captures the CDB contribution. The $700 million loan for Phase II carried a maturity of 15 years (final maturity date: September 17, 2030). Its interest rate is unknown. Then, on August 14, 2019, Beinenu-Shymkent Gas Pipeline LLP signed a $720 million syndicated facility (loan) agreement with Bank of China and MUFG Bank, Ltd. (captured via Project #91744). The proceeds of the syndicated loan were to be used by the borrower to refinance the $1.8 billion CDB/BoC loan that it contracted on December 11, 2012. The interest rate of the August 2019 syndicated loan (3-month LIBOR plus a 1.65% margin) was lower than the interest rate of the December 2012 loan. The maturity length of the August 2019 syndicated loan (5.33 years; final maturity date: December 20, 2024) was also shorter than the maturity length of the December 2012 loan. As as result of this debt refinancing arrangement, Beinenu-Shymkent Gas Pipeline LLP reduced its repayment obligations for Phase I by $10.5 million.

Additional details

1. AidData has estimated the all-in interest rate by adding 2.7% to average 3-month LIBOR rate in December 2012 (0.309%). 2. Evidence of a Debt Service Reserve Account (DSRA) agreement between the lender, borrower, and guarantor can be accessed via https://qazaqgaz.kz/en/novosti-kompanii/paratty-habarlama12 and https://www.dropbox.com/s/uskxkzbegec7zg3/%D0%90%D0%9E%20%C2%AB%D0%9D%D0%9A%20%C2%ABQazaqGaz%C2%BB%20-%20Press%20center.pdf?dl=0. The same source notes that the parties had to agree upon the need to replenish the DSRA in July 2017. 3. AidData has set the "Financial Distress" marker to True for two reasons: (1) non-compliance with the terms of the 2012 loan agreement resulted in the borrower needing to prepay $400 million of the outstanding indebtedness in 2016/2017; and (2) the DSRA had to be replenished in 2017.

Number of official sources

18

Number of total sources

30