China Eximbank provides RMB 1.26 billion loan for Phase 1 of Entebbe International Airport Upgrading and Expansion Project

On March 31, 2015, the Chinese Government and the Government of Uganda signed a preferential loan framework agreement for Phase 1 of the Entebbe International Airport Upgrading and Expansion Project. On the same day, China Eximbank and the Government of Uganda signed an RMB 1,260,000,000 government concessional loan (GCL) loan agreement [CHINA EXIMBANK GCL NO. (2015) 6 TOTAL NO. (545)] for Phase 1 of the Entebbe International Airport Upgrading and Expansion Project. Uganda’s Parliament then ratified the loan agreement on July 29, 2015. Several months later, on November 17, 2015, the Government of Uganda entered into a subsidiary, on-lending agreement with Uganda Civil Aviation Authority (UCAA). The borrowing terms of the GCL are as follows: a 20 year maturity, a 7 year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.25% (RMB 3,150,000) management fee, and a 0.25% commitment fee. The first scheduled loan repayment date is April 1, 2022. The GCL is secured by (collateralized against) airport revenues deposited in a lender-controlled bank account with a minimum cash balance requirement. A December 3, 2015 escrow account agreement between the Government of Uganda's Ministry of Finance, Planning, and Economic Development, Stanbic Bank Uganda Limited, UCAA, and China Eximbank specifies that the borrower must maintain a minimum cash balance in the repayment reserve account of RMB 25,200,000 during the loan’s grace period (equivalent to total payable interest for one year during the loan’s grace period) and RMB 98,870,000 during the loan’s repayment period (equivalent to total payable principal and interest for one year during the loan’s repayment period). The GCL agreement also specifies that the 'all the revenues (proceeds) of Entebbe International Airport (including but not limited to revenues generated from the Project) shall be applied in priority to payment of any and all amounts due and payable [to the lender].' Under the terms of an Escrow Account Agreement, UCAA also agreed to (a) seek secure advance approval from China Eximbank for any use of the airport revenues that it deposits in the escrow account; and (b) grant China Eximbank approval authority over the airport’s annual budgets. The ultimate borrower/end-user (UCAA) is expected to use the GCL proceeds to finance a $200,000,000 commercial (EPC) contract between UCAA and China Communications Construction Company (CCCC), which was signed on October 8, 2014 and amended on January 12, 2015. According to the Government of Uganda’s Aid Management Platform (AMP), this loan achieved a 78% disbursement rate, with China Eximbank making 26 loan disbursements (worth $156,639,169.44) between 2015 and 2021: a $60,124,334.71 disbursement on December 24, 2015, a $9,822,292.39 disbursement on November 15, 2016, a $4,473,339.53 disbursement on December 14, 2016, a $5,272,753.02 disbursement on March 29, 2017, a $2,363,019.84 disbursement on April 20, 2017, a $1,336,370.91 disbursement on May 25, 2017, a $1,237,900.78 disbursement on August 10, 2017, a $5,492,164.36 disbursement on November 21, 2017, a $3,445,536.22 disbursement on December 27, 2017, a $21,668,252.97 disbursement on April 19, 2019, a $3,032,693.76 disbursement on May 30, 2019, a $3,743,156.53 disbursement on August 22, 2019, a $3,074,851.76 disbursement on October 31, 2019, a $2,911,749.34 disbursement on November 25, 2019, a $2,683,403.29 disbursement on March 31, 2020, a $1,275,590.33 disbursement on April 27, 2020, a $3,197,241.55 disbursement on May 27, 2020, a $1,758,890.15 disbursement on July 24, 2020, a $1,831,735.75 disbursement on August 7, 2020, a $1,944,401.91 disbursement on September 28, 2020, a $3,835,965.97 disbursement on December 18, 2020, a $4,414,162.60 disbursement on November 24, 2021, a $3,128,465.91 disbursement on March 30, 2022, a $2,110,577.92 disbursement on August 17, 2022, a $1,314,054.62 disbursement on November 17, 2022, and a $1,146,263.31 disbursement on December 13, 2022. According to the Uganda Ministry of Finance, Planning, and Economic Development's Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2021/2022, as of December 31, 2021, total loan disbursements amounted to $155,982,698.23 and the loan’s amount outstanding (including arrears) was $155,982,698.23. The purpose of the project’s first phase is to upgrade and expand Entebbe International Airport. The airport is located at 5 minutes from the main campus of Kampala International University, near the town of Entebbe, on the shores of Lake Victoria, and approximately 40.5 kilometers (25 mi) by road south-west of the central business district of Kampala, the capital and largest city of Uganda. Its exact locational coordinates are 00°02′41″N 032°26′35″E”. Phase 1 activities include constructing a new cargo terminal, resurfacing the main runway with new lighting, constructing a new terminal building (that is adjacent and connected to the existing terminal and with aerobridges), repairing, strengthening and expanding the main apron serving the existing terminal and the new terminal, repairing the second runway and associated taxiways, repairing Apron 2 (which serves VVIPs or Very Very Important Persons), strengthening Apron 4 (which serves general aviation and cargo aircraft), replacing aging navigation aids, and constructing a multi-story car park. The total cost of Phase 1 is $200 million and the total cost of Phase 2 is $125 million. These two phases were originally expected to take 5 years to implement. It is expected that, upon completion, the expanded and upgraded airport will increase annual passenger output at the airport from 1.5 million to 3.5 million and freight volume of the completed freight center from 55,000 tons to 100,000 tons CCCC is the contractor responsible for project implementation. Dar Al-Handasah (Shair & Partners) is responsible for project supervision. A formal groundbreaking ceremony took place on August 29, 2015. Construction began on May 10, 2016. As of June 2019, the project had achieved a 52% completion rate. As of October 26, 2021, the Government of Uganda’s Aid Management Platform summarized the status of the project in the following manner: ‘Physical Progress: The overall performance of the civil works currently stands at 50%. One runway is complete; works on the runway apron are halfway and 80% of the works on the cargo building have been achieved. Challenges: Overdue IPC Payments which have led to accrual of interest charges e.g accrued interest for [Interim Payment Certificate]# 1 up to [Interim Payment Certificate] #23 as of July 11th 2019 stood at USD 951,368.49. This increases by the month. Progress of the Cargo Terminal and Airfield Works continues but require intense supervision to ensure acceptable workmanship and approved materials are employed. Some [overdue] approved materials for the Cargo Complex are not yet delivered to [the project site], meaning that delays encountered so far will not be recovered. The project still reports approximately Eleven Months delay and the Contractor [CCCC] is still reluctant to [reprogram its] work in accordance with Clause 8.3 of the General Conditions of Contract, to include measures intended to recover lost time. It is also evident that project completion cannot be achieved by May 2021. In addition, challenges for construction include coordination difficulties with the extensive fuel network (by Tristar) and with Airport Operations, Safety and Security, due to the naturally intrusive nature of construction within an operational environment. Runway 17/35 and Apron 1 Works are particularly noted in this respect. By November 2021, the project had achieved an overall completion rate or 75.1%. Then, in March 2022, construction of the cargo terminal was completed. Li Qinpu, a project manager of the CCCC, said at the peak of the construction of the cargo terminal, the project employed 80 Chinese workers and more than 900 local workers at different skills levels. Phase 1 was originally expected to reach completion by May 9, 2021. However, this date was subsequently pushed out to December 5, 2022. The expected completion date of the project’s second phase (which had not yet secured financing as of March 2022) is March 2024. The Entebbe International Airport Upgrading and Expansion Project has become a source of local and international controversy. One set of concerns relate to the potentially inflated cost of the underlying commercial contract. CCCC (the EPC contractor) pre-financed the feasibility study for the design and implementation of project. The feasibility study report submitted to CAA in December 2013 costed Phase 1 of the project at $200,000,000, which paved the way for the signing of a $200,000,000 commercial contract between CAA and CCCC on October 2014. There was, however, no independent review of the feasibility estimates by UCAA during the procurement stage which would have informed the Government of Uganda on the reasonableness and accuracy of the cost estimates prior to agreeing to CCCC securing the funds from China Eximbank. Additionally, the UCAA contracts committee approved the project cost in the feasibility study on September 23, 2014 without undertaking an independent evaluation of these costs. Another set of concerns relate to the collateralization arrangement that underpins the China Eximbank loan agreement and an Escrow Account Agreement in which UCAA reportedly granted China Eximbank approval authority over the Entebbe International Airport’s annual budgets and UCAA’s use of revenues from the airport in the escrow account. The loan agreement states that repayment of the China Eximbank loan is the responsibility of the “end user” (CAA) and the escrow account (established as a requirement of the loan agreement to facilitate repayment) should be funded using airport revenues. However, in January 2019, Uganda’s Auditor General revealed that the Government of Uganda’s Ministry of Finance, Planning, and Economic Development had made interest payments on the loan and but not deposited airport revenues in the escrow account. The Auditor General also noted that “inconsistencies in the operationalization of the agreements and the involved parties’ deemed actions represent non-compliance/ breach of contract that could result in penalties and even cancellation of the [loan] facility.” By March 2019, China Eximbank responded to the borrower’s non-compliance with escrow account conditions by halting loan disbursements, which in turn led to the Government of Uganda falling behind on payments to CCCC (the EPC contractor). This resulted in major construction delays. CCCC’s payment certificates 11-23 (worth $24.5 million) for work performed between December 2017 and February 2019 were not paid, which led to a project implementation standstill that lasted for 361 days. UCAA later told a parliamentary oversight body that “[t]hese [escrow account] conditions were not palatable for an international airport of a sovereign state whose operations are dynamic and sometimes unpredictable.” The Government of Uganda responded on March 6, 2019 by dispatching an 11-member delegation (consisting of CAA officials, Ministry of Finance, Planning and Economic Development officials, the Deputy Solicitor General, and Uganda’s Ambassador to China, H.E. Dr. Crispus C.W. Kiyonga) to Beijing to renegotiate so-called ‘toxic clauses’ in the loan agreement with China Eximbank. According to an internal Government of Uganda record (a September 5, 2019 memo/letter from Finance Minister Matia Kasaija to Public Works Minister Monica Azuba Ntege), “[w]hile the initial agenda was to cause a re-negotiation of specific clauses in the original financing agreement that seemed very unsuitable to [the Government of Uganda] and therefore to the end user (UCAA), the [China Eximbank] officials made it clear from the onset that re-negotiation and amendment of the loan agreement were not agreeable to them. The Bank proposed, which the [Government of Uganda delegation] found plausible, that rather than having a re-negotiation, we could have a ‘clarification’ of the contentious clauses with a view of having a workable interpretation. It was the understanding of all parties that to achieve a win-win situation, the contentious clauses would be interpreted with a view of having a balanced effect that would enable resumption of disbursement without necessarily amending the agreement. The Bank’s view was that such an amendment if allowed would set a bad precedent and more so, they saw no cause to warrant the amendment. In that regard, it was agreed that: i) The Bank resumes financing through disbursements and makes flexible the conditions set around the Escrow Account Agreement clauses especially the provision requiring UCAA to deposit all airport revenues [in] this account. The Bank clarified that the objective of the sales collection account was to see [UCAA’s] inflows and outflows for this account and that since the minimum reserve amount was already available on the debt reserve payment account, the funds would henceforth be available for [UCAA’s] operations. It was agreed that the Borrower [the Ministry of Finance, Planning and Economic Development] shares proof of the banking on the sales collection account as a trigger for the Bank to unlock disbursements. This has since been implemented. ii) Another contentious matter that the delegation wanted to be varied was the provision requiring UCAA to submit for approval all their operational budgets to [China Eximbank]. The Bank clarified that they were interested in the project budget but since this budget was subsumed in other UCAA operational activities, UCAA was henceforth required to share approved budgets with the Bank for review only and not for approval.” China Eximbank and the Government of Uganda delegation also reportedly agreed to keep the details of their meeting (‘minutes of the meeting’) confidential. Then, on December 20, 2019, Uganda’s Office of the Auditor General publish a report that criticized Uganda’s Ministry of Finance for the borrowing terms in the Entebbe airport loan agreement and several other loan agreements with China Eximbank: “A review of the various facility agreements for issued [China Eximbank] loans revealed that the [Government of Uganda] was obliged to open escrow accounts where the government was expected to make advance deposit of funds over the tenure of the loan required for the repayment of the loan. It was observed that some of the escrow bank accounts are held with local commercial banks while others are held in the Lenders countries. […] The funds are deposited on commercial bank accounts upfront and the creditors have access to them before even the loans are disbursed. Government of Uganda has no control over these accounts. The practice causes financial strain to the cash flows of the country and maybe as a result of weaknesses in negotiations that are undertaken by the government of Uganda and the lenders. These funds could have been used as advance to start the implementation of the projects for which the financing is required. The practice distorts the Government [of Uganda]s] cash flows and monetary control policy. The [Government of Uganda’s] Accounting Officer promised to improve on the way [the Government] negotiate[s] loans with escrow conditionalities. [Uganda’s Auditor General] advised the Accounting [Officer] to in future avoid loans with such unfavourable terms or negotiate to have such terms softened.” Then, in October 2021, a parliamentary panel led by opposition politicians revealed that the Government of Uganda’s arrangement with China Eximbank requires that all of UCAA’s revenues and expenditures pass through accounts controlled by China Eximbank at a Kampala branch of South Africa’s Standard Bank Group Ltd. (Stanbic Bank), which is itself partly owned by Beijing’s biggest state-owned bank, the Industrial and Commercial Bank of China (ICBC). Members of Parliament’s Committee on Commissions, Statutory Authorities and State Enterprise (Cosase) raised questions and concerns about the wisdom of granting financial oversight power (and influence over which creditors get paid first) — normally reserved for the country’s treasury and parliament — to a Chinese state-owned bank. They also questioned the wisdom of the Ugandan Government limiting its own ability to tap into revenue from rapidly expanding tourism and exports. [Note: Entebbe International Airport is a regional hub airport. Traffic has soared over the past decade and is expected to grow more amid a $15 billion crude-oil development project along Uganda’s border with the Democratic Republic of Congo.] Joel Ssenyonyi, a member of parliament who led the panel, said “It’s appalling. […] that [China Eximbank] now has to approve any budget spending [of UCAA].” On October 28, 2021, Uganda's Finance Minister Matia Kasaija was called before the parliamentary panel and questioned over the terms of the loan. He apologized to the lawmakers, noting that “we shouldn’t have accepted some of the clauses. [...] But they told you . . . either you take it or leave it.” He also said the loan would be repaid and there was no chance that the airport would be seized by the lender. Then, on November 25, 2021, a local newspaper in Uganda (The Daily Monitor) published a report, which suggested that the China Eximbank loan agreement “if not amended, [could] expose Uganda's sovereign assets to attachments and take-over upon arbitration awards in Beijing.” Two days later, on November 27, 2021, UCAA Spokesperson Vianney M Luggya tweeted that “It is true that @UgandaCAA opened up a Sales Collection Account in @stanbicug where all the [UCAA’s] revenues are deposited in line with the Escrow Account Agreement terms, but it does not mean that anyone is to control our finances.” Luggya also tweeted that “The [UCAA] enjoys the freedom & liberty of spending what is collected (as per the budget). The lender’s monitoring of the account is only similar to what happens when one gets a salary loan or any other loan, & the bank requests that the salary is channeled through their bank. It does not mean that lending bank takes over your salary.” In late 2021, internal disagreements within the executive branch of the Ugandan Government also spilled into public view. Uganda's Finance Minister Matia Kasaija reportedly advocated for adherence to the agreement that the Government of Uganda struck with China Eximbank in March 2019 (as codified in the ‘minutes of the meeting’). However, UCAA and the Ministry of Public Works reportedly treated Kasaija’s position ‘with disdain for allegedly blind-spotting a deal that presents real risks to Uganda's sovereign assets.’ UCAA officials reportedly flagged up to 13 clauses in the China Eximbank agreement as "unfair” or a threat to “the sovereignty of Uganda.” A confidential source told the a local newspaper in Uganda that “it’s clear that [U]CAA will lose its rights of use and control over its revenues […] as a self-financing institution with limited funding. Such provisions would expose the [organization] to risk of failure in service delivery and bankruptcy.” In June 2020, David Kakuba, who was the Director General of UCAA at that time, warned that granting China Eximbank approval authority over UCAA’s budgeting and planning decisions “exposes UCAA to risk of failure to deliver its mandate, and infringes on State's effective control over UCAA.” After Kakuba’s retirement, the Acting UCAA Director General Fred Bamwesigye wrote to Works Minister Gen Edward Katumba Wamala on September 8, 2021 and reminded him of the importance of renegotiating the loan agreement with China Eximbank. He also asked him to remind Minister of Finance Matia Kasaija to notify China Eximbank of the need to amend the agreement to make it consistent with Ugandan law and international law. He wrote that “whereas some of the provisions referred to were alluded to in the Minutes of the Negotiations, the unfair clauses remain embedded in the agreements, while in some cases, they were not dealt with at all. […] There is, therefore, an urgent need to start the review and renegotiation of the Government Concession Loan Agreement... in order to reduce the intentions of the parties into a legally-binding agreement.” Then, on December 11, 2019, David Kakuba warned Minister of Finance Matia Kasaija that “any seeming delay or any form of understanding that is not reduced into an amended agreement of the signed ones, would maintain the enforceability by [China Eximbank] of the disputed agreement.” He also noted that Section 10.3 of the Repayment Mechanism Agreement provides for a waiver of immunity and states that ‘each obligor hereby irrevocably waives any immunity on grounds of sovereign or other immunity for itself or any of its property in connection with any arbitration proceeding or with enforcement of any arbitral awards any court judgement.' Such a provision, if not amended, David Kakuba argues "exposes government assets to attachments and take-over upon arbitration awards in China.” Around the same time, Uganda’s Ministry of Public Works reportedly asked the Ministry of Finance to seek a speedy revision and resolution of the ‘problematic clauses’ in the China Eximbank loan agreement. However, in December 2021, Bloomberg reported that “Uganda’s chief legal officer urged the Finance Ministry to refrain from renegotiating the terms of [the China Eximbank loan agreement] as it is able to meet its debt obligations.”

Additional details

1. The China Eximbank loan (GCL) agreement can be accessed in its entirety via https://www.dropbox.com/s/lw0gzj417uznyyd/Upgrading%20and%20Expansion%20of%20Entebbe%20International%20Airport%20Phase%20I%20Project.pdf?dl=0. 2. The collateralization arrangement that governs the PBC is described in detail in Article 6.12 of the PBC agreement. The PBC agreement defines the ‘security document’ as ‘each of the agreements and legal documents signed by the relevant parties for the purposes of creating security interests in favor of the Lender and enhancing the credit of the Borrower as stipulated in Article 6.12, including without limitation the On-lending Agreement(s), the Repayment Mechanism Agreement and the Escrow Account Agreement.’ Article 6.12 reads as follows: ‘The borrower undertakes that a Repayment Mechanism will be established for the Project and the repayment of principal and payment of interest and fees under this Agreement shall be credit enhanced and secured by the Repayment Mechanism Agreement, Escrow Account Agreement and the following arrangements: (1) After this Agreement has been signed by the Borrower and the Lender, the On-Lending Agreement shall be duly signed by the Borrower and End-User [UCAA], in form and substance acceptable to the Lender. (2) The Repayment Reserve Account and the Sales Collection Account shall be opened and maintained with the Escrow Account Bank and be subject to the escrow arrangement under the the Escrow Account Agreement. The Repayment Reserve Account shall be used to maintain the minimum amount of balance as a debt service reserve as required by the Lender and the Lender shall be entitled to utilized the funds in the Repayment Reserve Account. The Sales Collection Account shall be used to collect the revenues of Entebbe International Airport (including but not limited to revenues generated from the Project) and the required amount of funds in the Sales Collection Account shall be transferred to the Repayment Reserve Account as required by the Lender. (3) All the revenues (proceeds) of Entebbe International Airport (including but not limited to revenues generated from the Project) shall be applied in priority to payment of any and all amounts due and payable under this Agreement. (4) The Borrower undertakes to ensure that the successors or permitted assignees and transferee of the parties of the Security Documents shall abide by the provisions of the relevant Security Documents. (5) Notwithstanding the existence of the Security Document, the Borrower shall be fully liable for the payment and repayment obligations under this Agreement. The Borrower’s obligations under this Agreement shall not be affected or undermined by the execution, delivery and performance by the relevant parties of such Security Documents.’ The PBC defines the ‘End-User’ as ‘the Civil Aviation Authority of the Republic of Uganda.’ The PBC defines ‘Escrow Accounts’ as ‘each or both (as the context may require) of the Repayment Reserve Account and the Sales Collection Account.’ The PBC defines the ‘Escrow Account Agreement’ as the ‘escrow account agreement entered into to or to be entered into among the Lender, the Borrower, the End-User and the Escrow Account Bank, and other relevant parties, as agreed by the Borrower and the Lender, in respect of opening, maintenance and control of the Escrow Accounts and in form and substance acceptable to the Lender. The PBC defines the ‘Escrow Account Bank’ as the ‘Export-Import Bank of China and/or such other reputable international bank registered in Uganda and acceptable to the lender.’ The PBC defines the ‘On-Lending Agreement(s)’ as the ‘loan agreement entered into between the Borrower and the End-User, whereby the Facility is on-lent by the Borrower to the End-User to implement the Project.’ The PBC defines the ‘Repayment Reserve Account’ as ‘the account in the name of the Borrower with the Escrow Account Bank and for the purpose of maintaining the minimum amount of the funds as debt service reserve pursuant to the Escrow Account Agreement.’ The PBC defines the ‘Repayment Mechanism Agreement’ as ‘the repayment mechanism agreement entered into or to be entered into among the Lender, the Borrower, the End-User n form and substance acceptable to the Lender, under which the parties agree to, among others, enter into (or procure the relevant parties to enter into) the Escrow Account Agreement and ensure all revenues of Entebbe International Airport (including but not limited to the revenues generated from the Project) shall be paid into the Sales Collection Account.’ The PBC defines the ‘Sales Collection Account’ as ‘the account in the name of End-User with the Escrow Account Bank and for the purpose of collecting revenues of Entebbe International Airport (including but not limited to revenues generated from the Project) pursuant to the Escrow Account Agreement.’ 3. The revenues generated by this project flow through a ‘cashflow waterfall’ arrangement (usefully described via https://pivotal180.com/project-finance-cash-flow-waterfall/ and https://www.lexology.com/library/detail.aspx?g=26f2629e-2040-4dda-a6d8-6600e478cf7f). 4. This project is also known Phase I of the Entebbe International Airport Rehabilitation Project and On Uganda Upgrading and Expansion of the Entebbe International Airport Phase I Project. The Chinese project title is 乌干达恩德培国际机场改扩建项目. 5. The November 17, 2015 on-lending agreement can be accessed in its entirety via https://www.dropbox.com/s/8fko4q7phz9vniq/On-lending%20Agreement%20between%20CAA%20and%20GoU%20for%20the%20Upgrading%20and%20Expansion%20of%20Entebbe%20International%20Airport%20phase%20I.pdf?dl=0 6. On November 17, 2015, an MOU was signed by UCAA and Government of Uganda's Ministry of Finance, Planning, and Economic Development to 'operationalize the Escrow Account Agreement, the Repayment Mechanism Agreement and the On-lending Agreement.' The MOU can be accessed in its entirety via https://www.dropbox.com/s/j6oprhtele0jeby/MOU%20between%20CAA%20and%20MOFPED%20for%20Entebbe%20%20International%20Airport%20Expansion%20and%20Upgrade%20project%20I.pdf?dl=0 7. The December 3, 2015 escrow account agreement between the Government of Uganda's Ministry of Finance, Planning, and Economic Development, Stanbic Bank Uganda Limited, UCAA, and China Eximbank can be accessed in its entirety via https://www.dropbox.com/s/53iri169qfsx2xy/ESCROW%20Account%20Agreement%20between%20CAA%20and%20GoU%20regarding%20the%20Upgrading%20and%20Expansion%20of%20Entebbe%20International%20Airport%20Project%20Phase%20I.pdf?dl=0. This agreement has several important terms, definitions, clauses, and conditions that merit attention: (i) ‘Airport Revenues’ are defined as ‘all the revenues, proceeds, incomes and any other amounts of whatever nature (whether directly or indirectly) generated from or relating to operation of the Entebbe International Airport by the End-Users from the date of a written notice issued by the Lender under Clause 16 herein, including but not limited to all revenues generated from the Project.’ (ii) The agreement identifies two different escrow accounts: the Sales Collection Account and the Repayment Reserve Account. The Sales Collection Account is defined as ‘a Uganda Shillings denominated account of End-user [UCAA] for the purpose of collecting Airport Revenues’. The Repayment Reserve Account is defined as ‘a Dollar denominated account of the Borrower on which the Minimum Reserve Amount must be maintained’. (iii) The agreement specifies that ‘(a) The End-user shall prepare, and provide to the Borrower and the Lender, budget of operation, maintenance and other expenditures prior to last week of December every year for the next calendar year. Such budget shall be subject to the Borrower and the Lender’s review and approval. Such budget shall be prepared in a form that has been previously approved by the Borrower and the Lender. It shall record the project operating amount for each calendar month (Monthly Figure) and the aggregate amount of the budget for the whole calendar year (Aggregate Yearly Figure). The End-user shall provide the first such budget within sixty (60) days after the date of the first Disbursement under the Loan Agreement, (b) The Lender (acting reasonably) has the right to approve or reject some or all of such pro forma budget provided that if the Lender rejects part or all of such budget, it shall within thirty (30) days given reasons for such rejection. If the Lender does not object within thirty (3) days after receipt of the aforesaid budget,, such budget shall be deemed to have been approved. (c) The End-user shall promptly notify the Escrow Account Bank of the Monthly Figure and Aggregate Yearly Figure approved by the Lender. The Lender shall also have the right to notify the Escrow Account Bank of the Monthly Figure and the Aggregate Yearly Figure. If there is a conflict between the notice provided by the End-user and the notice provided by the Lender, the Lender’s notice shall prevail. […] The End-user shall prepare, and provide to the Borrower and the Escrow Account Bank, a monthly operating budget prior to the 28th day of each month for the next calendar month. The monthly operating budget shall be prepared in accordance with a form previously approved by the Borrower and the Lender. The End-user shall provide the first such monthly operating budget within sixty (60) days after the date of the first Disbursement under the Loan Agreement.’ (iv) The agreement specifies that ’[t]he Borrower and the End-user shall procure the payment of Airport Revenues directly into the Sales Collection Account. The Borrower and the End-User shall ensure that the first payment of Airport Revenues shall be paid into the Sales Collection Account within sixty (60) days after the date of the first Disbursement under the Loan Agreement and no later than the date of the second Disbursement under the Loan Agreement. If so required by the Lender or the Borrower, the End-user shall give instruction in writing to any other person from whom a payment is due to pay amounts owing by it to the End-user or others in connection with the Project or the operation of Entebbe International Airport to the Sales Collection Account. […] Save as otherwise agreed in writing by the Lender, the End-user may withdraw amounts from the Sales Collection Account for the following purposes and in the following order of priority: (a) first, at any time, to transfer to the Repayment Reserve Account, such amount as may be required at that time to ensure that the required Minimum Reserve Amount is standing to the credit of the Repayment Reserve Account; (b) secondly, every month, to transfer an amount to the End-user that is consistent with the budgeted costs as described in the annual operating budget referred to in clause 3.1 (provided that the amount so transferred each month shall be an amount not exceeding 110% of the Monthly Figure and that the aggregate amount so transferred in any given budget year is in an amount not exceeding 105% of the Aggregate Yearly Figure); the End-user shall be responsible for ensuring that the amount transferred is within the threshold herein stated and shall be held liable for any transfer in excess of this agreed threshold. (c) finally, to the order of the End-user, provided that the credit balance remaining standing on the Sales Collection Account after the transfer of (a) and (b) above is in an amount that exceeds the projected operating cost for the next three calendar months as specified in the annual operating budget prepared in accordance with clause 3.1. No withdrawals other than those described above may be made from the Sales Collection Account without the prior written approval of the Lender to the Bank.' (v) Clause 5.1(a) of the agreement specifies that ‘[t]he Borrower shall at any time during the Maturity Period and before any of […] its obligations under the Loan Agreement has been duly performed in full, maintain the applicable Minimum Reserve Amount in the Repayment Reserve Account. (b) Without prejudice to clause 5.1(a), if the balance standing to the credit of the Repayment Reserve Account is at any time less than the Minimum Reserve Amount required at that time, the Escrow Account Bank shall, and is hereby authorized by the Borrower and the End-user to, on written notification from the Lender, transfer such amount as is necessary to ensure that balance standing to the credit of the Repayment Reserve Amount is restored to no less than the required Minimum Reserve Amount from the Sales Collection Account into the Repayment Reserve Account. If the balance standing to the credit of the Sales Collection Account is not sufficient for the aforementioned purpose, the Escrow Account Bank shall promptly notify the Borrower and the Lender in writing. The Borrower shall pay or procure the payment, into the Repayment Reserve Account of such amount within five (5) Banking Days of it receiving such written notice from the Escrow Account Bank.’ It also specifies that ‘[w]here the amount standing at the credit of the Sales Collection Account is not sufficient for the above deduction and transfer, the Borrower will arrange other funds to be paid into the Repayment Reserve Account in order to ensure the amount standing at the credit of the Repayment Reserve Account is no lower than the Minimum Reserve Amount.’ (vi) The agreement includes a negative pledge clause, which specifies that ‘[n]either the End-user no the Borrower shall create or permit to subsist any Security including any right of set-off or consolidation over any of the Escrow Accounts or the amounts standing to the credit thereof.’ (vii) The agreement specifies that ‘[e]ach of the End-user and the Borrower hereby irrevocably authorizes the Lender to monitor and control the Escrow Accounts. No withdrawal shall be made from the Escrow Accounts without prior written approval of the Lender, in case the amount in the Repayment Reserve Account is less than the Minimum Reserve Amount.’ (viii) The agreement specifies that ‘[a]ny breach by any of the Borrower, the End-user or the Escrow Account Bank of this Deed shall be an Event of Default under the Loan Agreement. […] The Lender is entitled to issue a written instruction to the Escrow Account Bank notifying the Escrow Account Bank of the Event of Default and requiring that (a) no amount should be permitted to be withdrawn from the Escrow Accounts without the prior consent of the Lender (other than then fees payable to the Escrow Account Bank under Clause 2.2); and/or(b) if required by the Lender, the Escrow Account Bank shall withdraw funds from the Escrow Accounts and transfer the proceeds of the Escrow Accounts as so instructed by the Lender in an amount and to such bank account to be specified by the Lender to the Escrow Account Bank in writing; and/or (c) the Escrow Account Bank shall act solely on the instruction of the Lender in respect of the Escrow Account. The Borrower, the End-User and the Escrow Account Bank each acknowledge and accept that the Lender shall not required any further authority or consent from the Borrower or the End-user (as the case may be) to any such request transfer or restriction and the Escrow Account Bank shall disregard any instructions from the Borrower or the End-user that delays or otherwise interferes with the making of any such transfer or impose such restriction.’ (ix) The confidentiality clause of the agreement specifies that ‘[a]ll data reports, records, technical information any any other information of any kind whatsoever developed or acquired by any party in connection with this Deed shall be treated by the parties as confidential unless such information is available in the pubic domain. […] The parties shall keep the terms and conditions of this Deed confidential and no party shall reveal or otherwise disclose the information in this Deed to any third party without the prior written consent of the other party save where the information is in the public domain or is necessarily disclosed in the ordinary course of business or by operation of law. […] The obligation of confidentiality shall endure in perpetuity. […] The Parties shall not at any time during term of this Deed release any statement to the press or make any other public statement of any nature which could reasonably be expected to be published in any media regarding the relationship or the subject matter of this Deed without the prior written consent of the other Party which consent shall not be unreasonably withheld.’

Number of official sources

27

Number of total sources

52