CDB provides $1.8 billion loan for OKI Pulp and Paper Mill Construction Project

Project narrative

On October 3, 2013, China Development Bank (CDB) and PT OKI Pulp & Paper Mills (OKI) — a special purpose vehicle and subsidiary of Asia Pulp & Paper (APP) — signed a $1.8 billion loan agreement for the OKI Pulp and Paper Mill Construction Project. The loan carried the following terms: a 12 year maturity and an interest rate of 6-month LIBOR (0.361% in October 2013) plus a 5.05% margin. It was secured by (collateralized with) the 35.29% ownership stake of PT Pabrik Kertas Tjiwi Kimia Tbk. (TKIM) in PT OKI Pulp & Paper Mills (OKI). The total cost of the project was $2.63 billion and it was financed with 70% debt and 30% equity. The equity component ($800 million) was funded by capital raised by the shareholders. The purpose of the project was to construct a pulp and paper mill in the city of Palembang within Ogan Komering Ilir Regency and South Sumatra Province. Upon completion, it was envisaged that the mill would have an annual production capacity of 2 million tons of hardwood pulp and 500,000 tons of paper. The project was also expected to bring 10,000 new jobs to the local area. China Energy Engineering Corporation was the contractor responsible for implementation. On February 9, 2015, the construction of a power station at the pulp and paper mill began. Then, in May 2016, the two production lines at the pulp and paper mill were completed and put into production.