China Development Bank provides $200 million buyer's credit loan for 300 MW Moynak Hydropower Plant Construction Project

Project narrative

In 2005, Samuk-Energy Group, a Kazakh state-owned enterprise, established the Moynak HPP JSC as a special purpose vehicle and project company to own and operate the 300 MW Moynak Hydropower Plant. Then, on June 14, 2006 at the Shanghai Cooperation Organization summit, China Development Bank (CDB) signed a $200 million buyer's credit loan agreement with the Moynak Hydropower Plant (HPP) Station Joint Stock Company (JSC) — a special purpose vehicle — for the 300 MW Moynak Hydropower Plant Construction Plant Project (also known as the Moinak Hydro Power Plant or Мойнақ СЭС-і). In addition to the $200 million CDB loan, the Development Bank of Kazakhstan JSC (DBK) provided loans worth $118.6 million and Moynak HPP JSC itself made a $28 million equity contribution to the $346.6 million independent power plant (IPP) project. The borrowing terms of the CDB loan included a 6.69% interest rate (LIBOR plus 120 basis points) and a 20-year maturity. The borrower was also expected to maintain a minimum cash balance of 5.6 billion tenge (approximately $44,153,591) in a lender-controlled bank (cash collateral) account. The Government of Kazakhstan provided a sovereign guarantee for repayment half of the face value of the loan and Samruk-Energy Group provided a corporate guarantee for up to $50 million. Moynak HPP JSC (also known was Moinak HPP JSC) drew down $196,337,143 from the $200 million CDB loan. As such, the loan achieved a 98% disbursement rate. On June 20, 2019, the borrower (project company) fully repaid the loan’s principal amount and interest ahead of schedule with funds from the issuance of bonds purchased by its parent company, Samruk-Energy. According to an August 2019 briefing by Director of the Treasury and Corporate Finance Department of Samruk-Energo JSC Sergey Li, early repayment (prepayment) of the USD-denominated loan reduced the share of foreign currency debt in its loan portfolio from 17% to 3%, reduced the negative effect of currency fluctuations, and freed up the 5.6 billion tenge (approximately $44,153,591) cash deposit in the lender-controlled bank (cash collateral) account. The borrower was allowed to use to cash deposit in the collateral account to facilitate prepayment. Early repayment (prepayment) also resulted in the release of the corporate guarantee of Samruk-Kazyna JSC in the amount of $50 million, thereby eliminating a contingent liability. Construction of the 300 MW hydroelectric plant started in 1985 but then stopped in 1992 due to the collapse of the Soviet Union. Thanks to the CDB financing, construction of the power plant started again. The Moynak plant was designed to house two 150 MW turbines that could generate 1.27 billion kilowatt-hours of electricity per year. The project sought to end energy shortages in southern Kazakhstan with its reliable energy, enabling growth in the industrial sector of the region. China International Water and Electric Corporation (CWE), China Geo-Engineering Corporation (CGC), and Chengdu Hydropower Investigation and Design Institute (CHIDI) jointly implemented the Moynak Hydropower Plant Construction Project. The project included the design, manufacturing, supply, installation, commissioning, training, and maintenance for the plant, with a quality assurance period for major equipment of 20 years. The station was expected to be completed and put into operation in December 2009. A project commencement ceremony was held on August 8, 2008. The Moynak hydropower plant was officially completed and commissioned on December 9, 2011. In 2012, the plant generated 503,98 million kWh of electricity.