[Cancelled] CDB provides $3.656 billion loan to help Ukraine transition its power plants from gas to coal

On December 25, 2012, China Development Bank and National Joint Stock Company Naftogaz (or ‘Naftogaz’ or ‘Нафтогаз Украин’) — a state-owned oil and gas company — signed a general loan agreement worth $3.656 billion to finance projects aimed towards the substitution of natural gas for domestically produced coal. The loan had a maturity length of 19 years (2012-2031), with a four-year use period for the preparation and approval of subsidiary projects (which would be financed through the signing of individual subsidiary loan agreements and managed by individual projects companies/special purpose vehicles). It was envisaged that the duration of individual subsidiary loan agreements would 15 years. The Government of Ukraine issued a sovereign guarantee in support of the $3.656 billion general loan agreement. The proceeds of the loan were to be used by Naftogaz help the country’s power plants to replace Russian gas with Ukrainian coal as their main source of energy (and thus raise the share of coal in Ukraine’s production of electricity). Initially, the parties agreed to finance construction of coal gasification facilities and modernization of the power stations. Then, in 2015, parties backed by the Ministry of Energy of Ukraine and China’s Ministry of Commerce preliminarily agreed to extend the scope of the credit facility to include procurement of drilling rigs and energy modernization projects for households. Accordingly, in late 2015, Naftogaz submitted four projects to Government of Ukraine Ministry of Economy for review and inclusion into the state register of investment proposals. Obtaining this official status from the Ministry of Economy as well as delivery of the notice of support of the projects from the Ministry of Energy and Ministry of Finance to CDB was a pre-requisite for proceeding with further application to CDB. In August 2016, CDB and Naftogaz agreed to extend the use period of the general loan agreement until December 25, 2017. However, in November 2017, the general loan agreement was terminated, as no subsidiary loan agreements had been submitted for approval.

Additional details

The Chinese project title is 气改煤项目. The Ukrainian project title is проектов замещения газа углем. The Overseas Development Finance Dataset published by Boston University’s Global Development Policy Center in December 2020 records this CDB loan as a $3.5 billion commitment in 2012. AidData records it as a $3.656 billion loan that was officially committed in 2012 and subsequently cancelled. Thus, the status variable is set to Cancelled.

Number of official sources

14

Number of total sources

27