Narrative
Full Description
Project narrative
Around 2016, China Construction Bank (New Zealand) Limited (CCB NZ) signed a $116,633,463 USD loan agreement with Mataura Valley Milk Limited (MVM) — a special purpose vehicle (SPV) that is jointly owned by BODCO Limited (21.45% equity stake) and China Animal Husbandry Group (CAHG) (78.55% equity stake, plus 3.60% through BODCO Limited, in which CAHG is a majority shareholder) — for the Mataura Valley Milk Factory Project. MVM provided security (collateral) to CCB NZ in the form of security over all of MVM's properties (including the land at 19 Pease Street, McNab, 1RD, Gore 9771, Southland, New Zealand) for the debt. China Animal Husbandry Group served as guarantor of the loan. This loan is captured via Record ID#91891. Also, circa 2016, the Shanghai Branch of China Development Bank (CDB) signed a $52,575,889 USD loan agreement with MVM for the Mataura Valley Milk Factory Project (captured via Record ID#71600). CAHG served as guarantor of the CDB loan. The loan agreement with CDB stipulated that CAHG's shareholding must be no less than 60%. As of 2019, MVM was in breach of its loan covenants with CDB and CCB NZ. Neither bank provided a waiver of their right to call their loans as a result of the breach. MVM was experiencing significant debt and capital issues, requiring injections from CAHG and new bank facilities to remain operational. MVM reported a $47 million NZD net loss for 2019 and began searching for a strategic shareholder. MVM also received a letter of shareholder financial support from CAHG, valid for a year, on June 11, 2020, which it took. In March 2020, CDB entered into a $19,500,000 USD loan agreement with MVM for working capital purposes (captured via Record ID#91892). It repaid the loan in full in February 2021. China Animal Husbandry Group served as guarantor of the loan. In April 2021, the New Zealand Branch of CCB entered into a $30 million NZD loan agreement with MVM for working capital purposes (captured via Record ID#91893). China Animal Husbandry Group served as guarantor of the loan. The Mataura Valley Milk Factory Project had a total project cost of $179 million USD ($240 million NZD). The purpose of the project was to construct a dairy processing plant in Gore, Southland, New Zealand. The project also involved the construction of supporting infrastructure for the plant, namely roads and utilities, with the utility cables buried in 2.2-meter-wide and 1.2-meter-deep trenches. Upon completion, the factory would process fresh milk to produce milk powder, infant formula base powder, and nutritional products; its milk processing capacity was designed to be two million liters a day and its nutritional powder capacity would be 140 tons per day, with the plant expected to reach its full production capacity of 30,000 tons of infant formula annually by the fifth year of its operation. The plant's dairy products were meant to cater to emerging markets, such as China; MVM planned to export about 50% of the plant's premium nutrition powder product to China. The factory, which was designed to be energy-efficient, environmentally friendly, highly automated, and suited for product traceability, was comprised of several components: a milk reception and standardization unit, powdered and liquid ingredients handling line, a batch formulation unit, an evaporation unit, and a drying unit. The factory's liquid ingredients handling line featured pasteurizers that would remove pathogens from raw milk. The plant's standardization unit was intended to ensure that the dairy products reached the desired value of fat content. The factory included powder handling machinery, such as agency lines, flow-assisting devices, magnets, powder sifters, and powder silos. The plant's filling line was designed to include multi-wall bag/sack fillers to accurately pack powdered products into 25kg bags. The plant was expected to create 65 full-time jobs upon completion. The project was also expected to employ between 320 and 350 workers during the peak construction period. GEA, one of the food processing industry's largest suppliers, was the contractor responsible for project implementation; the contract included plant installation, commissioning, and after-sales service. The project's groundbreaking ceremony was held on December 5, 2016. The plant was expected to begin operations in August 2018; construction was expected to require approximately 450,000 work hours. Civil works on the boiler house and service buildings commenced in January 2017. The plant was officially opened on November 23, 2018.
Staff comments
1. As of December 31, 2019, the liabilities of Mataura Valley Milk Limited to China Development Bank were $52,575,889 USD ($80.3 million NZD) and $116,633,463 USD ($178.3 million NZD) to China Construction Bank (see pg.17 of "Mataura Valley Milk Limited Financial Statements for the 12 months ended 31 December 2019"). 2. According to MVM's financial statements, its debt to CDB was worth $52,575,889 USD (see pg.17 of "Mataura Valley Milk Limited Financial Statements for the 12 months ended 31 December 2019"). According to CDB, it issued $55.08 million USD for the project (see pg.52 of "China Development Bank Sustainability Report 2018"). AidData has been unable to identify the root source of this discrepancy. For now, AidData has coded the more conservative MVM value as the transaction amount. This issue merits further investigation. 3. China Animal Husbandry Group is a state-owned company and a wholly owned subsidiary of China National Agriculture Development Group, the parent company of a2 Milk’s logistics and distribution partner in China (China State Farm Holdings Shanghai Co.) (see "The a2 Milk Company gets Mataura Valley Milk green light"). CAHG's business is rooted in the agricultural and animal husbandry industry; it works in livestock and poultry raising, animal vaccines and pharmaceuticals, and animal feeds and sells dairy, honey, pet, seed, and chemical products (see "Mataura Valley Milk (MVM) Dairy Processing Plant, Southland, NZ"). 4. According to the Export-Import Bank of China (see pg.50 of "WHITE PAPER ON GREEN FINANCE AND SOCIAL RESPONSIBILITY THE EXPORT-IMPORT BANK OF CHINA"), it also issued a loan in support to Mataura Valley Milk Factory Project by 2019. However, the face value, timing, and borrowing terms of the loan are unknown. This issue warrants further investigation. 5. The commitment year of the $52.6 million CDB loan and the commitment year of the $116.6 million USD CCB NZ loan are estimated based on the first year of construction (2016). This issue warrants further investigation. 6. On December 24, 2020, a2 Milk Corporation Limited (a2MC) entered into binding agreements to acquire a 75% interest in MVM; per this deal, all pre-existing shareholders, except CAHG, sold their shares to a2MC. The transaction was completed on July 30, 2021. CAHG was left with a 25% ownership stake, while a2MC held the remaining 75% (see pg.22 of "Mataura Valley Milk Limited Financial Statements for the 12 months ended 31 December 2020").