China Eximbank provides buyer’s credit loan for Ashdod Port Southern Terminal Construction Project

Project narrative

In June 2014, it was announced that Pan-Mediterranean Engineering Company (PMEC) -- a special purpose vehicle and wholly-owned subsidiary of China Harbour Engineering Company - won a tender to build the Ashdod Port Southern Terminal (נמל הדרום) in Israel with a 3.35 billion NIS bid. The port, one of Israel's largest, was located in Ashdod, about 40 kilometers south of Tel Aviv, adjoining the mouth of the Lachish River. An Israeli state-owned enterprise (SOE), the Israel Ports & Assets Company Ltd., was responsible for overseeing the implementation of the project and eventually assuming responsibility for the property and assets constructed by PMEC. The Export-Import Bank of China (China Eximbank) identifies this project on its website in a long list of other projects that it is financing with loans. However, it is not clear when China Eximbank issued a loan for this project. The face value, borrower, and borrowing terms of the loan are also unknown. China Export & Credit Insurance Corporation (Sinosure) did issue buyer’s credit insurance for up to $948 million to the borrower. According to the Chinese Government, the monetary value of the commercial contract for the Ashdod Port Southern Terminal Construction Project was approximately $950 million (with a total contract period is 93 months). The port was developed under a build, operate, and transfer (BOT) process as part of a 25-year concession. The port's eventual operator was to complete the terminal development and then equip, operate, and maintain the port for the duration of the contract period. The project was divided into three subprojects: the breakwater project, the dredging project, and the wharf project. More specifically, the project involved the construction of a wharf with a total shoreline length of 2,363 meters project. It also involved the building of an 800-meter long main quay with a water depth of 17.3m, an extension of the port’s existing main breakwater by 600 meters, the building of 1,500 meters of secondary breakwaters, the dredging of the port, and the construction of storage and operating spaces. Upon completion, it was expected that the southern terminal would the capacity to handle 1 to 2.16 million TEU (20-foot standard containers) annually. The facilities were built on reclaimed land, and were planned to handle Ultra Large Crude Carriers (ULCC) 18,000+ TEU vessels. The port was one of the biggest investment projects in Israel, as well as one of the largest harbor construction projects contracted to a Chinese company. The southern terminal was to be Israel's first privatized port and was expected to connect Israel with international trade routes between Asia and Europe. 90% of Israeli international trade went through its seaports, but Israel lacked the capacity to handle the largest vessels; the new port was designed to accommodate these larger ships. Moreover, the new port was expected to be more competitive and efficient than Israel's existing state-controlled ports in Ashdod and Haifa. Overall, the port was expected to improve Israel's economic development and trade, as well as herald in a new era of Sino-Israeli cooperation. In addition to PMEC, China Communications Second Navigation Engineering Bureau Co., Ltd. was subcontracted to support the project implementation. Chinese state-owned construction machinery company Xuzhou Construction Machinery Group Co., Ltd. (XCMG) provided a 800t XGC800 crawler crane, as well as other construction equipment for hosting ripraps and Antifer-blocks (concrete blocks to guard against waves) for project implementation. The cornerstone for the seaport was laid on October 28, 2014, in the presence of the Prime Minister of Israel, Benjamin Netanyahu. At the time, the port was expected to begin operations in 2021. Despite reports from Chinese sources that the project faced challenges in hydraulic engineering, the adoption of European, American, and Israeli standards, the local climate, the environmental impact, noise concerns from local residents, as well as its expansive scale. Nonetheless, CHEC-PMEC made good progress by innovating, including independently developing the world's first platform jackup rig specifically designed for offshore gravel pile construction. As of July 2019, the project was still expected to be completed in 2021. The port was still ongoing as of April 2021. However, in 2022, the main part of the reconstruction project of Pier 21 in Ashdod Port, Israel, undertaken by Pan-Mediterranean Engineering Company, was completed ahead of schedule and put into operation. Dutch firm Terminal Investment Limited, a subsidiary of the Swiss firm Mediterranean Shipping Company (MSC), won the Israeli government tender to operate the Ashdod’s Southern Terminal for 25 years following the completion of its construction.