China Eximbank contributes $150 million to syndicated buyer’s credit loan for 554MW Attarat Oil Shale Fired Power Plant Project (Linked to Project ID#64457, ID#72499, ID#72500, and ID#52552)

In October 2014, Jordan’s National Electric Power Company (NEPCO) signed a 30-year power purchase agreement with a consortium led by Eesti Energia (Enefit) — an Estonian utility company that operates most of the world’s installed oil shale generation capacity — to build an oil shale-fired power plant in Attarat (Attarat um Ghudran), a town located 100 km southeast of Amman. The exact locational coordinates of the power plant are 31°16′08″N 36°26′52″E. It was envisaged that the plant would utilize Jordan’s vast reserves of oil shale and help reduce the country’s reliance upon imports of oil products for power generation. Upon completion, this plant was expected to consume around 10 million tons of oil shale per year and generate 470 megawatts of baseload power by 2021. The plant would reportedly generate enough power to meet 10-15% of Jordan's electricity needs (about 3.7 billion kWh). NEPCO would act as the plant’s sole offtaker. The total cost of this project was $2.11 billion and it was implemented as an independent power project (IPP) and financed according to a debt-to-equity ratio of 75:25. On March 16, 2017, a consortium of four Chinese state-owned banks signed a $1.582 billion syndicated loan agreement with Attarat Power Company (APCO) — a special purpose vehicle (SPV) and project company that is owned by YTL Power International Bhd of Malaysia (45% ownership stake), Guangdong Yudean Group Co. Ltd of China (45% ownership stake), and Eesti Energia AS (Enefit) of Estonia (10% ownerships stake) — for the 554MW Attarat Oil Shale Fired Power Plant Project. The syndicated buyer’s credit loan reportedly consisted of a $594 million contribution from the Industrial and Commercial Bank of China (captured in Project ID#52552), a $594 million contribution from Bank of China (captured in Project ID#72499), a $244 million contribution from China Construction Bank (captured in Project ID#72500), and a $150 million contribution from China Eximbank (captured in Project ID#72502). The borrowing terms were as follows: a 15 year maturity and an annual interest rate of 6-month LIBOR (1.426% in March 2017) plus a 3% margin. Sinosure provided buyer’s credit insurance to the the borrower. An extensive security package was also provided to the lenders that covers all of the infrastructure and materials required to operate the plant, including over the valuable land concession from the Government of Jordan. The proceeds of the loan were to be used by the borrower to finance an engineering, procurement and construction (EPC) contract that APCO signed with Guangdong Power Engineering Corporation (GPEC) — a subsidiary of China Energy Engineering Corporation — on October 31, 2014. Under the terms of this EPC contract, GPEC agreed to undertake, on a turnkey basis, the design, engineering, procurement, construction, erection, interconnection, commissioning, start-up, testing, completion, placing in operation and delivery of the oil shale fired electric generation plant. Foster Wheeler was responsible for the provision of the circulating fluidized bed boilers. Siemens was responsible for the provision of steam turbine generators. Worley Parsons was responsible or the design of the power plant. In addition to the debt financing that was used to support this project, the shareholders in APCO agreed to provide ‘base shareholder funding’ (i.e. equity investments) of up to $528 million. These equity contributions were announced on March 16, 2017 after Enefit of Estonia and Near East Investment sold a 15% equity stake in APCO to YTL Power International Bhd and a 45% equity stake in APCO to Guangdong Yudean Group Co. Ltd (see Project ID#64457). Guangdong Yudean Group Co. Ltd is a Chinese state-owned utility that is jointly owned by Guangdong Province (76% equity stake) and China Huaneng Group (24% equity stake). As of 2017, the 554MW Attarat Oil Shale Fired Power Plant Project was the largest private sector investment and example of limited recourse financing in Jordan’s history. Upon completion, it was expected to have 554MW of gross power generation capacity and 477MW of net power generation capacity. It was expected to consist of two circulating-fluidized-bed units and draw oil shale from a nearby open cast mine. It was expected to employ 5,500 individuals (including 2,000 Chinese nationals) during the construction phase and 1,000 individuals each year after the construction phase is completed. On March 16, 2017, APCO issued a ‘notice to proceed’ to the EPC contractor (GPEC). Then, on March 20, 2017, construction began. Project implementation was suspended for two months during the spring of 2020 due to the COVID-19 pandemic. However, construction resumed in May 2020. The project is ultimately expected to deliver power generation capacity in two phases: 235MW in 2020 and 235MW in 2021. APCO has entered into a 30-year agreement with NEPCO for the sale of the plant’s entire power generation capacity following its construction. The 2 x 235 MW Attarat oil shale-fired power plant project is expected to deliver capacity in two phases, 235 MW in 2H 2020 and 235 MW in 1H 2021. Unit 1 of the 2 x 235 MW Attarat oil shale-fired power plant, which also includes an open-cast mine, was synchronized with Jordan’s national grid on May 26, 2021. As of the same date, the entire project had achieved a 96% completion rate. However, the 554MW Attarat Oil Shale Fired Power Plant Project has become a source of local controversy. To facilitate repayment of the loan (and provide a financial return to its equity holder), APCO entered into a 30-year power purchase agreement (PPA) with National Electric Power Corporation (NEPCO), the Jordanian state-owned power utility. NEPCO agreed to serve as the sole offtaker (i.e., single buyer) and purchase all power generated by the oil shale-fired power plant in Attarat at a price of approximately $0.17 per kilowatt hour (kWh). However, NEPCO signed several other PPAs with private companies around the same time, which resulted in too much power generation capacity and not enough customers. As of late 2021, many of APCO’s competitors were selling electricity at $0.10 per kilowatt hour (kWh), which put NEPCO between a rock and a hard place: it is contractually obligated to purchase power from APCOM at $0.17 per kWh without enough customers to whom it can resell the power. On December 19, 2020, NEPCO and the Government of Jordan (GOJ) initiated international arbitration proceedings against APCO with respect to the PPA and the GOJ guarantee of NEPCO’s payment obligations. NEPCO and the GOJ sought declaratory judgments that (a) the $0.17 per kWh tariff is ‘grossly unfair’ and (b) NEPCO can terminate the PPA if its ‘gross unfairness’ is not addressed. APCO has insisted that its loan agreement with ICBC, China Eximbank, Bank of China, and China Construction Bank was based on an internal rate of return (IRR) calculation of 17% (which in turn is based on the $0.17 per kWh tariff) and that it won’t be able to repay its debts if the IRR and tariff rate are downwardly revised.

Additional details

1. AidData has coded this transaction as a collateralized loan for two reasons. First, Standard Chartered Bank was selected as the security agent (i.e. collateral agent) for the loan and when lenders take collateral as security for their loans, a collateral/security agent is often appointed to enforce rights against the collateral in the event of the borrower’s default under the loan. Second, an extensive security package was reportedly provided to the lenders that covers all of the infrastructure and materials required to operate the plant, including over the valuable land concession from the Government of Jordan. 2. This project is considered to be part of the Belt and Road Initiative (BRI). 3. The Chinese project title is 约旦阿塔拉特油页岩电厂项目. 4. In the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020, it identifies a $2.1 billion China Eximbank loan for this project. However, $2.1 billion is the total cost of the project. China Eximbank contributed a relatively small amount (approximately $150 million) to the $1.582 billion syndicated buyer’s credit loan that was finalized on March 16, 2017.

Number of official sources

23

Number of total sources

43