China Eximbank provides $48.3 million preferential buyer’s credit for 330/110/10 kV Minsk-Severnaya Substation Renovation Project (Linked to Record ID#96027, 96029, 96030)

Project narrative

On August 18, 2015, China Eximbank and the Government of Belarus signed a $48,339,072.53 preferential buyer’s credit (PBC] agreement [CHINA EXIMBANK No. PBC (2015) 11 (353)] for the 330/110/10 kV Minsk-Severnaya Substation Renovation Project. The PBC carries a 2% interest rate, a 4.5-year grace period, and a 10-year maturity (estimated final maturity date: August 18, 2025). The purpose of the project was to renovate a 110 kV high-voltage overhead transmission line located in Minsk District, Minsk Oblast (phase 1) and a 330kV Minsk-Severnaya substation. The project was also designed to support another China Eximbank-financed project: a $323 million PBC for the Power Distribution System for the Belarusian Nuclear Power Plant (BNPP) Project (as captured via Record ID#42422). China Energy Engineering Group Planning & Engineering Co., Ltd. — a subsidiary of China Power Engineering Consulting Group Co Ltd. — was the contractor responsible for implementation. Phase 1 commenced in April 2017 and ended in December 2017. Phase 2 was ultimately completed on July 31, 2019. There are some indications that the China Eximbank loan (PBC) for the 330/110/10 kV Minsk-Severnaya Substation Renovation Project financially underperformed vis-a-vis the original expectations of the lender. On or around September 16, 2019, the lender and borrower agreed to reschedule the PBC through a 5-year maturity extension (revised final maturity date: 2030). The Government of Belarus showed signs of financial distress before and after the grace period extension was offered. In 2019, the International Monetary Fund (IMF) reported that international reserves had fallen 'well below adequacy metrics', covering a mere 2 months of imports. On December 16, 2019, China Development Bank stepped into the breach and issued an RMB 3.5 billion ($500 million) emergency loan to Ministry of Finance of Belarus. It explicitly authorized the borrower to use the proceeds of the loan to repay existing debts and shore up the country's foreign exchange reserves. Then, on or around November 6, 2020, China Eximbank and the Government agreed to reschedule the loan (PBC) for the 330/110/10 kV Minsk-Severnaya Substation Renovation Project through an additional 1-year maturity extension (revised final maturity date: 2031). On or around February 21, 2022, China Eximbank agreed to reschedule the loan (PBC) through yet another 1-year maturity extension (revised final maturity date: 2032). Then, on July 14, 2022, the Government of Belarus defaulted on a USD-denominated Eurobond payment. As of April 2023, it was attempting to meet its Eurobond payment obligations in local currency, in contravention of bond documentation that does not allow for settlement in alternative currencies. This local currency payment strategy was taken as Western sanctions against the Government of Belarus tightened due to its support for Russia’s invasion of Ukraine.