China Development Bank provides $2 billion loan for Atyrau Petrochemical Complex Construction Project (Linked to Record ID#40266)

Project narrative

In 2008, a special purpose vehicle called Kazakhstan Petrochemical Industries Inc. Limited Liability Partnership (KPI Inc.) was legally incorporated. It is a joint venture of KazMunayGas (49.5% equity stake), SIBUR Holding (40% equity stake), Samruk-Kazyna Ondeu (9.5% equity stake) and "Firm Almex Plus” LLP (1% equity stake). Then, in 2009, Kazakhstan Petrochemical Industries (KPI) LLP signed an Engineering, Procurement, and Construction (EPC) contract with Sinopec Engineering Co., Ltd. (through Sinopec Group subsidiary China Petroleum & Chemical Corporation) for the first stage of construction of Atyrau petrochemical project. On February 22, 2011, the Development Bank of Kazakhstan JSC (DBK) entered into a $1.4 billion credit agreement with the Export-Import Bank of China to finance the construction of an integrated petrochemical project in the Atyrau Region of Kazakstan. However, as of 2017, no amounts had been drawn down under this credit agreement. This was due to the mutual termination of the EPC contract between KPI and Sinopec in 2014. Therefore, AidData assumes that the China Eximbank loan was canceled (since the proceeds of this loan were to be used to fund the EPC contract with Sinopec). The loan cancellation is captured via Record ID#40266. Then, in December 2015, China National Chemical Engineering Corporation (CNCEC) signed an EPC contract with KPI to construct an integrated gas-chemical complex in the Atyrau Region on a turnkey basis. On September 3, 2016, the Xinjiang Branch of China Development Bank (CDB) signed a $2 billion loan agreement with KPI for the construction of the complex. The loan carried the following borrowing terms: a 20.879-year (final maturity date: July 15, 2037), a 6-year grace period, a fixed interest rate of 5.8%, a 0.75% upfront (management) fee, and a 0.25% commitment fee. The borrower is responsible for making semi-annual principal and interest payments beginning in 2022. National Welfare Fund Samruk-Kazyna JSC provided a guarantee for this loan on February 13, 2017. The loan was also secured by (i.e. collateralized with) all current and future assets of KPI. On November 24, 2017, CDB sent an advance payment of $409 million to CNCEC. The CDB bank loan was originally expected to cover the entire cost of the $1.795 billion EPC contract with CNCEC; the remainder of the financing for the $2.6 billion project was originally expected to be provided by KPI's shareholders. However, in 2022, CDB issued a supplementary loan to KPI worth $287,620,379 (KZT 133,460,935,000). The borrowing terms of the 2022 loan are unknown. Then, in June 2023, the Eurasian Development Bank provide anther $150 million credit facility to KPI in order to 'finance current operations of the company.' The purpose of the project was to construct the 'first stage' of the Atyrau Petrochemical Complex. The project site is located in a special economic zone (SEZ) called the National Industrial Petrochemical Technopark, which is 33 km to the northeast of the city of Atyrau, and 8-9 km north to north of Karabatan. 42 construction and installation companies were involved in the construction and installation work; 39 of which were Kazakhstani and 3 of which were foreign. The Kazakhstani companies included AtyrauNefteMash LLP, which produced the propane and propylene splitter, "Petropavlovsk Plant of Heavy Machine Building" JSC and Sewon-Vertex Heavy Industries received orders for the production of 35 units and heat exchangers with a total weight. Imstalcon JSC participated in the manufacture of equipment for the project, while the Kazakh Institute of Oil and Gas JSC participated in the design of the complex. Chicago Bridge & Iron Company (CB&I) received the PMC contract for project management. The project was transferred from Samruk-Kazyna to the trust management of JSC NC KazMunayGas (KMG) in June 2018. Upon completion, the petrochemical complex was expected to produce 500,000 tons of polypropylene per year and be the first integrated gas-chemical complex in Kazakhstan. The plant was originally expected to go online in 2020. On November 27, 2017, KPI sent a notice of the start of construction work to the general contractor. The message was received and work began on December 11, 2017. As of October 2020, the project had achieved a 77% completion rate and it was expected to be fully complete in 2021. By June 2021, the project had achieved a completion rate of nearly 90%. Then, in November 2022, polypropylene production was officially launched. As of December 2023, all construction and installation had been completed; the off-site facilities, propane loading rack and propane storage park had been put into operation; and commissioning works were underway. However, work was still underway to bring the entire petrochemical complex to a stable operating mode. On October 22, 2023, a full power outage occurred with no power supplied from KUS’ steam and gas turbine power plant resulting in a technological failure at the petrochemical complex and emergency shutdown of the propane dehydrogenation and polypropylene production operations. The incident impacted the timing of warranty testing and commissioning of the complex facilities.