China Eximbank provides $337.1 million preferential buyer's credit for National Broadband Network Phase II Project (Linked to Record ID#31253, 88213)

Project narrative

On October 30, 2015, the Government of Cameroon released a presidential decree authorizing the Ministry of the Economy, Planning, and Regional Development to sign a preferential loan agreement with China Eximbank for the National Broadband Network Phase 2 Project. The date of the signing agreement was also the first date of disbursement, which was $47,728,395. Then, on December 8, 2015, China Eximbank and Cameroon’s Ministry of Economy, Planning, and Regional Development (MINEPAT) signed a $337,121,984.15 (CFA 199 billion) preferential buyer credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2015) 1 TOTAL NO. (343)] for the National Broadband Network Phase 2 Project. The borrowing terms of the PBC (loan) were as follows: a 20 year maturity, a 5 year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.25% commitment fee, and a 0.25% management fee. The loan was collateralized against the project (broadband) revenues of CAMTEL. Under the terms of a Repayment Mechanism Agreement, the borrower was expected to deposit these revenues in an escrow account (compte séquestre) and maintain a minimum cash balance in the escrow account equivalent to two, semi-annual debt service (principal, interest, and fee) payments. The proceeds of the PBC were on-lent to Cameroon Telecommunications (CAMTEL) to finance its $396,614,099 commercial contract with Huawei Technologies Co., Ltd, which was signed on June 17, 2013 and amended on October 24, 2014. As of December 31, 2020, the loan had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 180.3 billion. Its outstanding amount was equivalent to CFA 31 billion as of December 31, 2016, CFA 110 billion as of December 31, 2017, CFA 135 billion as of December 31, 2018, and CFA 193 billion as of December 31, 2019. The purpose of the project was to add an additional 3,000 km to an existing fiber optic network in 13 cities. Huawei Technologies Co., Ltd was the contractor responsible for project implementation. The project had achieved a 90.27% completion rate as of 2019. The originally expected project completion date of the project was June 8, 2020. There are some indications that the China Eximbank loan for the National Broadband Network Phase II Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’ Then, in its 2023 annual report, La Caisse Autonome d'Amortissement du Cameroun (CAA) disclosed that the borrower had not complied with the minimum account balance requirement under its Repayment Mechanism Agreement with China Eximbank for the National Broadband Network Phase II Project. However, after February 2023. CAMTEL fulfilled its obligation by depositing a bimonthly contribution of CFA 200 million into the escrow account.