China Eximbank provides $29.75 million buyer’s credit loan for JSC Svetlogorsk Cellulose and Cardboard Factory Equipment Acquisition Project

Project narrative

On September 26, 2014, China's Eximbank and the Government of Belarus signed a $29,750,000 buyer’s credit loan agreement [№ BLA201404] for the JSC Svetlogorsk Cellulose and Cardboard Factory Equipment Acquisition Project. The loan carried an annual interest rate of 6-month LIBOR plus a 3.6% margin. The interest rate that applies to this loan (3.93%) was calculated by taking the average 6-month LIBOR rate during the month (September 2014) when the loan agreement was finalized (0.330%) and adding a 3.6% margin. The maturity length and grace period of the loan are unknown. The Government of Belarus on-lent the proceeds of the loan to a state-owned company called JSC "Svetlogorsk Pulp and Cardboard Mill" (or ОАО «Светлогорский целлюлозно-картонный комбинат» or ОАО "СветлогорскХимволокно”). JSC "Svetlogorsk Pulp and Cardboard Mill" then used the loan proceeds to partially finance a commercial contract that it signed with China CAMC Engineering Co., Ltd. (CAMCE) — a subsidiary of Sinomach — on November 30, 2012. The purpose of the project was to facilitate the acquisition of equipment for a bleached sulfate production facility at the cellulose and cardboard plant in the city of Svetlogorsk. Upon completion, it was envisaged that the facility would have the capacity to produce 400,000 tons per year of bleached sulfate cellulose (used in paper and cardboard production). CAMCE was the general (EPC) contractor responsible for implementation. On October 11th, 2010, the company signed a loan contract with a Belarus company (Светлогорский целлюлозно-картонный комбинат). The construction began in May 2013. This project was completed on December 10, 2017. However, it encountered a number of problems during and after implementation. CAMCE allegedly violated building codes and supplied defective equipment. A strong and unpleasant odor was also reported within the vicinity of the newly constructed facility. As of 2019, the facility was not fully operational. Consequently, JSC "Svetlogorsk Pulp and Cardboard Mill" could not fully service its debts to China Eximbank and the Ministry of Finance of Belarus had to step in and provide partial loan repayment. JSC "Svetlogorsk Pulp and Cardboard Mill" is a loss-making enterprise that has not shown a net profit since 2012. At the beginning of 2019, the company's total debt (about $900 million) was significantly higher than the value of its fixed assets. China Eximbank also provided a $654.1 million buyer’s credit loan to JSC "Svetlogorsk Pulp and Cardboard Mill” in 2011, which is captured in Record ID#42318.