China Eximbank provides $219.4 million buyer’s credit loan for Chelyabinsk Metallurgical Plant Project

Project narrative

In 2010, the Export-Import Bank of China and Gazprombank — a private-owned Russian bank — signed a buyer’s credit loan agreement worth $219.4 million USD for the Chelyabinsk Metallurgical Plant Project. The loan carries the following borrowing terms: an 8.5 year maturity, a 2.5 year grace period, and an annual interest rate of LIBOR plus a margin of 6.75% per year during the period until the construction completion date (and LIBOR plus a margin of 6.25% per year after that date). Sinosure provided buyer’s credit insurance. Gazprombank used the proceeds of this loan to on-lend to a special purpose vehicle called Chelyabinsk Metallurgical Plant OJSC (or ChMK OAO or Chelyabinskiy Metallurgicheskiy Kombinat PAO), which is a subsidiary of Mechel (one of Russia's leading mining and metals companies). The on-lending agreement between Gazprombank and Chelyabinsk Metallurgical Plant OJSC was signed on September 15, 2010. The proceeds of this loan — and two additional loans from BNP Paribas S.A. and UniCredit — were to be used by Chelyabinsk Metallurgical Plant OJSC to finance payments under two contracts: an equipment and technology supply contract (worth €220.0 million EUR) executed with an Italian company called Danieli & C. Officine Meccaniche S.p.A. (‘Danieli’) on June 30, 2008, and a general construction contract (worth $261.0 million USD) executed with a Chinese state-owned company called Minmetals Engineering Co. Ltd. (‘Minmetals’) on October 29, 2008. The purpose of the the Chelyabinsk Metallurgical Plant Project was to construct a universal rolling mill complex (or ‘universal rail and structural rolling mill’) at a metallurgical plant in the city of Chelyabinsk within the Chelyabinsk region. The project aimed to produce new types of large section structural shapes (including beams, angles, rails, channels and special sections) with a total output of 1.1 million tons per year. It was initiated in September 2010 and completed on July 16, 2013. Upon completion of the project, the new rolling mill complex was capable of producing steel rails with a length of 100 meters.