CDB contributes $2.35 billion to $4.7 syndicated loan for Kazakh Section of Line C of the Central Asia-China Gas Pipeline Project (Linked to Project ID#91926, #39955, #54489, #54528, #70616, #91898, #91901, #91917, #91923)

In August 2007, the Government of Kazakhstan and the Chinese Government signed a 33-year intergovernmental agreement to develop two gas pipeline projects—the Central Asia-China Gas Pipeline and the Beineu-Shymkent Gas Pipeline—as 50:50 joint ventures. Then, in February 2008, JSC KazTransGas and Trans-Asia Gas Pipeline Company Limited — a wholly owned subsidiary of China National Petroleum Corporation (CNPC) — created a special purpose vehicle called Asia Gas Pipeline LLP (AGP) to construct, finance, and operate the Kazakh Section of the Central Asia-China Gas Pipeline Project. KazTransGas and CNPC each hold a 50% equity stake in AGP. On October 22, 2008, AGP entered into a $7.5 billion syndicated facility (loan) agreement with China Development Bank (CDB) and Bank of China (BOC) for the Kazakh Section of Lines A and B of the Central Asia-China Gas Pipeline Project (captured via Projects ID#54489, #91923). The loan facility bore interest at a rate of 3-month LIBOR plus a 2.15% margin per annum during the CNPC loan repayment guarantee period and 3-month LIBOR plus a 2.9% margin per annum thereafter. The loan is to be repaid in several installments beginning in March 2013 until December 23, 2023. Therefore, the loan’s implied grace period is 4.5 years and its implied maturity length is 15 years. CNPC issued a loan repayment guarantee that was effective until March 28, 2020 on the condition that borrower would subsequently sign 'ship & pay' agreements with the CNPC group of companies by September 28, 2019. After the expiry of the CNPC repayment guarantee, the loan's margin increased from 2.15% to 2.9%. The amounts due under this loan were secured by (collateralized against) account charges, a pledge over deposit certificate agreement, an insurance assignment, and the repayment guarantee from CNPC. As of December 31, 2017, the loan’s amount outstanding was $4,029,784,000. As of December 31, 2018, the loan’s amount outstanding was $2,700,836,000. The proceeds of the loan were used by the borrower to finance EPC contracts (for pipelines and compressors) with China Petroleum Pipeline Bureau, China Petroleum Engineering and Construction Corporation (CPECC), and KazStroyService (KSS). The purpose of the project was to construct the Kazakh sections of Line A and Line B of the 1873 km Central Asia-China Gas Pipeline. These sections both measure 1300 km in length and they run parallel to each other in Southern Kazakhstan from Shymkent to the Alataw Pass. The pipeline then crosses the Kazakhstan-China border at Horgos (Xinjiang Province), where it connects to the West-East Gas Pipeline 2. The project also involved the construction of compressor stations along the Kazakh Section of Lines A and B. China Petroleum Pipeline Bureau, China Petroleum Engineering and Construction Corporation (CPECC), and KazStroyService (KSS) were the EPC contractors responsible for project implementation. A formal commencement ceremony took place on July 9, 2008. However, construction of the Kazakh section of the pipeline did not commence until August 1, 2008. Line A achieved 'state acceptance' on December 4, 2009. Then, on December 12, 2009, the Kazakh section of Line A was officially inaugurated. Line B achieved 'state acceptance' on October 18, 2010. On February 3, 2011, AGP obtained a general license for the operation of Line A and Line B. By October 20, 2012, all compressor stations along Line A and Line B of the Central Asia–China Gas Pipeline were operational, enabling the pipeline to transmit 30 billion cubic meters of natural gas annually. All of the compressor stations along Line A and Line B achieved ‘state acceptance’ between June 2012 and December 2012. Then, on December 27, 2012, AGP entered into a $4.7 billion syndicated facility (loan) agreement with China Development Bank (CDB) and Bank of China (BOC) for the Kazakh Section of Line C of the Central Asia-China Gas Pipeline Project (captured via Projects ID#39997 and #91926). The loan bears interest at a rate of 3-month LIBOR plus a 2.35% margin per annum during the CNPC loan repayment guarantee period and 3-month LIBOR + a 3.45% per annum thereafter. The loan is to be repaid in several installments beginning in June 2017 until December 27, 2027. Therefore, the loan’s implied grace period is 4.5 years and its implied maturity length is 15 years. CNPC issued a loan repayment guarantee that was effective until March 28, 2020 on the condition that borrower would subsequently sign 'ship & pay' agreements with the CNPC group of companies by September 28, 2019. After the expiry of the CNPC repayment guarantee, the loan's margin increased from 2.35% to 3.45%. The loan was secured by (collateralized against) a ‘ship or pay’ transportation agreement pledge, account charges, insurance and reinsurance policies assignments, and the repayment guarantee from CNPC. As of December 31, 2017, the loan’s amount outstanding was $2,923,178,000. As of December 31, 2018, the loan’s amount outstanding was $2,511,324,000. The purpose of the project was to construct the Kazakh section of Line C of the 1873 km Central Asia-China Gas Pipeline. This section measures 1300 km in length and runs parallel to Lines A and B in Southern Kazakhstan from Shymkent to the Alataw Pass. The pipeline then crosses the Kazakhstan-China border at Horgos (Xinjiang Province), where it connects to the West-East Gas Pipeline 2. The project also involved the construction of compressor stations along the Kazakh Section of Line C. Line C has a designed capacity of 25 billion cubic meters per annum, and its pipe diameter is 1,219 mm, 152 mm larger than Line A/B. Upon completion of all supporting facilities of Line C, the overall delivery capacity of the Central Asia-China Gas Pipeline was expected to reach 55 billion cubic meters per annum, equaling approximately 20% of China’s annual natural gas consumption while annually substituting 73 million tons of coal and cutting carbon dioxide and sulfur dioxide emissions by 78 million tons and 1.21 million tons, respectively. China Petroleum Pipeline Bureau, China Petroleum Engineering and Construction Corporation (CPECC), and KazStroyService (KSS) were the EPC contractors responsible for project implementation. It was originally envisaged that the construction of Line C would take place between January 2012 and January 2014. However, the construction of Line C did not begin until January 16, 2013. The overall welding work of the pipeline was completed at the end of 2013. Line C went into operation on May 31, 2014. Line C was officially commissioned on June 9, 2015. Its compressor stations achieved ‘state acceptance’ between July 2015 and October 2018. Line C successfully transmitted gas to Khorgas on June 15, 2017. Line C’s Supervisory Supervisory Control and Data Acquisition (SCADA) — a software communication system that allows for various gas production sites to communicate with each other — achieved ‘state acceptance’ in November 2018.” In December 2012, AGP entered into a $4.7 billion USD syndicated loan facility with China Development Bank (CDB) and Bank of China (BOC) to finance the construction of Line C of the Turkmenistan-China Gas Pipeline. The loan bears interest at a rate of 3-month LIBOR + a 2.35% margin per annum during the guarantee period and 3-month LIBOR + a 3.45% per annum thereafter. The loan was to be repaid in several installments beginning in June 2017 until December 27, 2027. The loan was secured by a "ship or pay" transportation agreement pledge, account charges, insurance and reinsurance policies assignments, and a guarantee from CNPC. As of December 31, 2017, the outstanding principal amount from this loan was $2.9 billion USD. Based on this information, the interest rate was recorded as 3-Month LIBOR in December 2012 (0.309%) + 2.35%, or 2.659%, while the grace period was 4.5 years, the repayment period was 10.5 years, and the maturity period was 15 years.

Additional details

1. For more information about 'ship & pay' agreements, see https://documents1.worldbank.org/curated/pt/224601468741297994/pdf/multi-page.pdf. 2. AidData calculated the transaction amount ($2.35 billion) assuming that all participants (2) in the $4.7 billion syndicated loan contributed equal amounts. See #91926 for BOC portion. 3. AidData has estimated the all-in interest rate by adding 2.35% to average 3-month LIBOR in December 2012 (0.309%). 4. Turkmenistan and Uzbekistan reportedly each contribute 10 bcm of gas to Line C, while Kazakhstan supplies 5 bcm of gas. 5. The Central Asia-China Gas Pipeline—also known as the Turkmenistan-China Gas Pipeline or the Asia Gas Pipeline—is a 1,873-kilometer long gas pipeline connecting Turkmenistan to China via Uzbekistan and Kazakhstan, which delivers gas equal to approximately 20% of China’s annual natural gas consumption. It consists of 4 lines (A, B, C, and D). Lines A, B, and C run parallel to each other. These three pipelines begin at Gedaim on the Turkmen-Uzbek border, run through central Uzbekistan and southern Kazakhstan, and end at Khorgas in China's Xinjiang Uyghur Autonomous Region. Roughly 188 kilometers of Lines A-C are in Turkmenistan, roughly 529 (or 530) kilometers of Lines A-C are in Kazakhstan, and roughly 1115 (or 1300) kilometers of of Lines A-C run from Kazakhstan to China. Line D, which is still under construction, will be 966 kilometers in length and connect Galkynysh to western China via Kyrgyzstan and Tajikistan. It will originate at the Galkynysh gas field in Turkmenistan. Then, in Tajikistan, Line D will run through Tursunzoda, Shahrinav, Hisor, Roudaki, Vahdat, Fayzobod, Nourobod, Rasht and Lakhsh (formerly Jirgatol) to Kyrgyzstan’s border. It will then go through Kyrgyzstan, crossing into China near the village of Irkeshtam on the Kyrgyzstan-China border. The Central Asia-China Gas Pipeline is supplied from the Galkynysh and Dauletabad gas fields, as well as from the Bagtyyarlyk gas field in Turkmenistan, where it originates. The pipeline is also supplied with gas from the Beineu-Bozoy-Shymkent Gas Pipeline to which it is linked in Shymkent, Kazakhstan. The Beineu-Bozoy-Shymkent Gas Pipeline delivers gas originating in gas fields of Kazakhstan. Line A and Line B connect to the Second West-East Gas Pipeline, while Line C connects to the Third West-East Gas Pipeline. Line D, which is under construction, will connect to the Fifth West-East Gas Pipeline. Line A, B, and C provide 55 billion cubic meters (bcm) of gas to China per annum. Line D is planned to have capacity of 30 bcm/year. 6. The construction of the China-Central Asia Gas Pipeline was financed through a series of Chinese loans and equity investments: $7.5 billion syndicated CDB/BoC loan for Kazakh Section of Lines A and B (captured via Projects ID#54489, #91923); $4.7 billion syndicated CDB/BoC loan for the Kazakh Section of Line C (captured via Projects ID#39997, #91926); $3.5 billion syndicated CDB/BoC loan for the Uzbek Sections of Lines A and B (captured via Projects ID#91901, #91917); $1.4 billion syndicated CDB/BoC loan for the Uzbek Section of Line C (captured via Projects ID#54528 #91898); $300 million CNPC Finance loan for Tajik Section of Line D (captured via Project ID#39955); and $300 million equity investment from Trans-Asia Gas Pipeline Company Limited for Line D of the Central Asia-China Gas Pipeline Project (captured via Project ID#70616).

Number of official sources

16

Number of total sources

22