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Overview

[China-Venezuela Joint Fund] Cerro Azul Cement Plant in Venezuela (Linked to Record ID#58677)

Commitment Year•2010Country of Activity•VenezuelaDirect Recipient Country of Incorporation•VenezuelaSector•Industry, Mining, ConstructionFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Jan 1, 2010

Geospatial footprint

Map overview

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The China-Venezuela Joint Fund funded the Cerro Azul cement plant. More detailed locational information can be found at https://www.openstreetmap.org/way/474415865

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownershipAt least 25% Chinese ownership

Funding agencies

State-owned Policy Banks

  • China Development Bank (CDB)

Receiving agencies

State-owned Banks

  • Banco de Desarrollo Económico y Social de Venezuela (BANDES)

State-owned Funds

  • China-Venezuela Joint Fund

Implementing agencies

State-owned Funds

  • China-Venezuela Joint Fund

Collateral providers

State-owned companies

  • Pétroleos de Venezuela S.A. (PDVSA)

Loan desecription

[China-Venezuela Joint Fund] Cerro Azul Cement Plant in Venezuela

Interest type•Unknown

Collateral

The borrowing was collateralized with PDVSA income from daily oil sales to China National United Oil Corporation (ChinaOil), which was deposited in a collection (escrow) account at China Development Bank (CDB). Banco de Desarrollo Económico y Social de Venezuela (BANDES) opened and maintained a USD-denominated collection (escrow) account with CDB into which all proceeds from oil export sales -- under an offtake agreement (petroleum sales and purchase contract) between PDVSA and ChinaOil -- were deposited for the purposes of (a) making regular debt service payments to CDB, and (b) maintaining a minimum cash collateral balance. The borrower was required to maintain a minimum cash balance in the collection (escrow) account equivalent to no less than 1.3 times the aggregate amount of principal, interest, and any other amount due during the next repayment period. If the minimum cash balance was not maintained, then PDVSA would be responsible for increasing the amount of fuel and/or crude oil to be delivered under the petroleum sales and purchase contract to ensure that (a) the actual debt service coverage ratio was maintained at the required level at the required times; and (b) the amount in the New Collection Account was sufficient to meet the required balance requirements set out in the facility agreement. If PDVSA did not do so, then BANDES was responsible for transferring funds to the CDB-controlled bank account to 'remedy any shortfall.' The lender also had the ability to block the debtor from withdrawing the funds.

Narrative

Full Description

Project narrative

The China-Venezuela Joint Fund funded the Cerro Azul cement plant. Construction began on the plant in 2014, however the financial commitment date is unclear. The Medium source says that construction for the Cerro Azul cement plant began in 2010. The PDVSA source says that this plant has a production capacity of approximately 1 million metric tons of cement a year. The plant will cover over 3000 hectacres. Pilot cement production of high quality clinker began in September 2014 and it has an estimated annual production of 1 million tons of cement. The project is being built by Iran. Ehdasse Sanat, a subsidiary of Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) is the Iranian contractor for the project. In November 2018, it was revealed that as a result of corruption about 75% of Cemento Cerro Azul’s employees are administrative staff The China-Venezuela Joint Fund receives contributions from China Development Bank and FONDEN, and it is administered by Bandes. See Record ID#58677 for more information on the fund. The first commitment to this fund was made in 2007.

Staff comments

The flow type is unclear, however, the Chinese part of the fund is financed by a loan, so the same is assumed here. The status of the project is unclear, but the PDVSA source from 2014 makes it seem as though construction is pretty far along at the time. The transaction amounts for all sub-projects are accounted for in the projects for the three tranches and their renewals. Because it is unclear how much funding for each project is from the Chinese side and it is unclear which tranche is funding each sub-project, the transaction amounts should not be recorded until this information is known. This project is not suspected to be a duplicate of #58479, a cement plant, as it is funded by the Exim Bank.