China Eximbank provides $208.4 million buyer’s credit loan for New Capital of Oyala (Djibloho) Construction Project (Linked to Record ID#62125, #484)

Project narrative

In late 2006, China Eximbank and the Government of Equatorial Guinea signed a $2 billion buyer’s credit facility agreement (互惠贷款) for various infrastructure projects (as captured via Record ID#484). All subsidiary loans approved under this facility agreement carry the following terms: a 5.5% interest rate, a 5 year maturity, a 2 year grace period, a 0.375% commitment fee, and a 0.5% risk guarantee (garantia del riesgo) cost. The subsidiary buyer's credit loans under the $2 billion facility were secured with (i.e. collateralized against) minimum cash balances in an escrow account opened by Government of Equatorial Guinea in China Eximbank. Under the original terms of an Account Settlement and Financing Agreement (Convenio de Liquidacion de cuentas y Financiamiento) that the parties signed on February 17, 2006, the minimum cash balance requirement was reportedly equivalent to 30 percent of the Government of Equatorial Guinea's outstanding stock of debt to China Eximbank. After the Account Settlement and Financing Agreement was amended on March 26, 2010, the borrower was expected -- at any given point in time -- to maintain a minimum cash balance in the escrow account (also known as 赤道几内亚共和国财务预算部) equivalent to the value of its next set of semi-annual principal, interest, and fee payment obligations to the lender. The borrower was also expected to deposit the cash proceeds from its oil export sales (crude oil sales revenue) to China into a payment reserve account (also known as 还款准备金 or 赤道几内亚共和国财务预算部还款准备金). More specifically, the borrower was expected to deposit the cash proceeds from six oil cargoes into the payment reserve account. Then, on April 28, 2015, China Eximbank expanded the buyer’s credit facility agreement (i.e. credit line) by another $500 million (as captured via Record ID#62125). In 2017, China Eximbank and the Government of Equatorial Guinea signed a $208,423,208.75 subsidiary buyer’s credit loan agreement for New Capital of Oyala (Djibloho) Construction Project. The loan's first scheduled principal payment was on October 27, 2017. The proceeds of the loan were to be used by the borrower to finance 85% of the cost of a $246 million commercial (EPC) contract between the Government of Equatorial Guinea and China Construction First Building (Group) Corporation Limited (中建一局签), which was signed on April 6, 2017. According to Caja Autónoma de Amortización de la Deuda Pública within Equatorial Guinea’s Ministry of Finance and Budget, the China Eximbank loan for the project had disbursed $36,780,566.25 as of December 31, 2019 and the borrower had made principal ($14,712,224.00) and interest ($3,617,572.94) payments worth $18,329,796.94 as of December 31, 2019. The loan's principal amount outstanding was $22,068,342.25 as of December 31, 2019. According to China Eximbank, the same loan had disbursed $52,793,702.25 as of January 21, 2020 and the borrower had made principal payments worth $19,991,593 as of January 21, 2020. The same source identifies the loan's principal amount outstanding as $32,802,109.25 as of January 21, 2020 and the value of the next scheduled principal payment (on July 21, 2020) as $5,279,369. Djibloho (or Oyala) is a city in Equatorial Guinea that is being built to replace the national capital of Malabo. The President of Equatorial Guinea has said that Malabo (the official capital on the island of Bioko) is vulnerable to coup attempts because those who seek to overthrow the government can arrive by sea, necessitating the construction of a new inland capital, Oyala, which is not far from the President’s home village. The New Capital of Oyala (Djibloho) Construction Project involves the construction of six government ministry and commission buildings (including buildings for the Presidency, Ministry of Defense, Ministry of Security, Ministry of Internal Affairs, Ministry of Treasury and Budget, Ministry of Foreign Affairs and Cooperation with a total construction area of 29431.00 square meters and a total floor area of 52667.9 square meters); a presidential office complex (presidential palace) with 1200 offices (with a total construction area of 79045.14 square meters and a total floor area of 160641.4 square meters); and 504 'social' housing units for government officials (with a total construction area of 47869.07 square meters and a total floor area of 163110.87 square meters). Djibloho (or Oyala) will also have a new university and international airport. China Construction First Building (Group) Corporation Limited (中建一局签) — a wholly-owned subsidiary of China State Construction Engineering Corporation Ltd. — is the contractor responsible for project implementation. On July 16, 2017, a groundbreaking ceremony took place. Then, in October 2017, China’s Ambassador to Equatorial Guinea, Chen Guoyou, visited the project site. The foundation of the new Ministry of Finance office building was poured on March 9, 2019. Construction was still ongoing as of August 2020 and at that time the city was reportedly uninhabited. The project was originally expected to reach completion in August 2018. However, it has faced major implementation challenges and delays. The COVID-19 pandemic halted progress. Then, in May 2023, Equatorial Guinea's Vice President Teodoro Nguema Obiang Mangué said that China Construction First Building (Group) Corporation Limited was at risk of breaching its contractual obligations to the Government of Equatorial Guinea and it had 30 days to explain in writing why it had stopped working on the New Capital of Oyala (Djibloho) Construction Project. In October 2023, China Construction First Building (Group) Corporation Limited reportedly agreed to resume construction by March 2024. There are also indications that the China Eximbank loan for the New Capital of Oyala (Djibloho) Construction Project has financially underperformed vis-a-vis the original expectations of the lender. On January 21, 2020, YANG Bin, a Division Chief in China Eximbank's Concessional Loan Department sent a letter to Equatorial Guinea's Ministry of Finance. The letter notified Equatorial Guinea's Ministry of Finance that its aggregate (principal) amount outstanding under the oil-backed buyer’s credit facility agreement was $226,505,172.49. It also informed Equatorial Guinea's Ministry of Finance of its estimated semi-annual principal, interest, and fee payment obligations as of July 21, 2020: $58,416,671.63 [$49,131,680.76 in principal payments, $6,298,102.17 in interest payments, $2,414,333.94 in commitment fee payments, and $572,554.76 risk guarantee (garantia del riesgo) costs]. Then, on March 5, 2020, RAN Longfei, the Deputy Regional Director for Africa in China Eximbank's Sovereign Business Department, sent a letter to Equatorial Guinea's Minister of Finance Cesar Augusto MBA ABOGO. The letter reads as follows: “[r]eference is made to our letter dated January 7, 2020. According to the Account Agreement for the Escrow Account and the Oil Sales Agreement, 6 cargoes of oil sales revenue shall be deposited to the Escrow Account each year. However, we only received 5 cargoes of oil sales revenue for the year 2019. Your Ministry has not fulfilled your obligations under the Account Agreement, which will have negative effect on your Ministry's credit and other ongoing projects. Besides, since the Escrow Account balance does not meet the minimum amount requirements, we could not proceed any payment for other parties. Your Ministry is kindly requested to deposit one cargo of oil sales revenue to the Escrow Account immediately to meet the requirements for the year 2019, and provide us a schedule of crude oil delivery plan for the year 2020. Your personal attention and cooperation will be highly appreciated.” As of January 2020, Equatorial Guinea's Ministry of Finance was expected to maintain a minimum cash balance of $58,416,671.63 in its escrow account with China Eximbank (an amount equivalent to the next semi-annual installment of principal, interest, and fees due to China Eximbank in July 2020). However, the actual cash balance of the escrow account was $39,223,380.18 as of February 13, 2020.