China Development Bank provides $210.6 million loan for Ghana Accra Intelligent Traffic Management Project (Linked to Project ID#2034)

On December 16, 2011, China Development Bank and the Government of Ghana signed a $3 billion master facility agreement (see Project ID#2034). This agreement established two lending facilities: Tranche A and Tranche B. Tranche A is a $1.5 billion facility and any borrowings through this facility are undertaken with a 15 year maturity, 5 year grace period, an interest rate of 6-month LIBOR plus a 2.95% margin, a 0.25% upfront fee, and a 1% commitment fee. Tranche B is a $1.5 billion facility and any borrowings through this facility are undertaken with a 10 year maturity, 3 year grace period, an interest rate of 6-month LIBOR plus a 2.85% margin, and a 1% commitment fee. Both tranches are collateralized against cash proceeds from the sale of crude oil from the Jubilee field, which the borrower was required to deposit in a debt service reserve account (DSRA). The cash balance of the DSRA was GHS 370,586,909 ($71,266,713) in 2019. [Note: A requirement of the master facility agreement was that the Ghana National Petroleum Corporation (GNPC) and the China International United Petroleum and Chemicals Co. (UNIPEC Asia) signed an offtaker for the sale and purchase of crude oil. Under the terms of this agreement, GNPC agreed to supply and sell 13,000 barrels of crude oil from Jubilee Field each day to UNIPEC Asia over a 15.5 year period. The proceeds from these oil sales were then deposited into a special account to facilitate loan repayment and provide a source of collateral.] Under the terms of the master facility agreement, subsidiary loan agreements must be negotiated to secure financial support for any given project. On April 17, 2019, China Development Bank and the Government of Ghana also signed a subsidiary loan agreement worth $210,660,000 — using the Tranche B lending facility — for the Accra Intelligent Traffic Management Project. This project was originally identified as eligible for lending through the Tranche A facility; however, the Government of Ghana and CDB agreed to fund it through the Tranche B facility and shorten the maturity of the loan to ensure that the off-taker agreement did not extend beyond its current term. As such, the borrowing terms for this project (9 year maturity, 3 year grace period, 6-month LIBOR plus a 2.85% margin, and a 1% commitment fee) were slightly different than the terms specified for lending through the Tranche B facility in the master facility agreement signed on December 16, 2011. The borrower was also responsible for paying a 5.56% lump sum Sinosure premium and maintaining a minimum cash balance of 1.3 times the repayment amount for each six month cycle in a designated DSRA at all times. The proceeds of the loan were to originally intended to be used by the borrower to finance approximately 85% of the cost of three commercial contracts worth $236,100,000: (1) a $85,342,469.38 commercial contract between the Government of Ghana's Ministry of Roads and Highways and China Gansu International Corporation for Economic and Technical Cooperation for the Accra Metropolitan Area Intelligent Traffic Management and Roads Completion Project - La Beach Road Completion Project Phase I (Tema Road: Independence Arch to Nungua Barrier - 16.00km); (2) a $50,757,530.632 commercial contract between the Government of Ghana's Ministry of Roads and Highways and China Railway Major Bridge Engineering Group Co. Ltd. for the Accra Metropolitan Area Intelligent Traffic Management and Roads Completion Project - La Beach Road Completion Project Phase 2 (Coastal and Meridian Roads - Nungua Barrier to Tema - 10.60 km); and (3) a $100,000,000 commercial contract between the Government of Ghana's Ministry of Roads and Highways and Beijing Everyway Traffic & Lighting Tech. Co. Ltd. for Engineering, Procurement, Installation and Commissioning of the Accra Metropolitan Area Intelligent Traffic Management System. However, the Government of Ghana eventually canceled its commercial contract with Beijing Everyway Traffic & Lighting Tech. Co. Ltd., which resulted in the Chinese company seeking $55 million in damages via international arbitration. The (principal) amount outstanding under the Tranche B lending facility was GHS 1,505,360,000 ($268,814,285) as of December 31, 2020 and GHS 1,107,600,000 ($213,000,000) as of December 31, 2021. The rescoped project involves the widening of the 16 km La Beach Road (Independent Arch to Nungua Barrier); the widening of 10.6 km of Coastal and Meridian Roads (including the vehicular interchange at Nungua Barrier and 2 no. road over rail bridges near Sakumono Junction and Sakumono Lagoon); and the widening of the 7.5 km Teshie Link from Teshie to the Accra-Tema Motorway. This project officially commenced on February 21, 2020, and a groundbreaking ceremony was officially held on August 14, 2020 for the road development activities with the Vice President of Ghana, Dr Mahamudu Bawumia, presiding over the first sod cutting ceremony. There are some indications that the CDB loan for the Ghana Accra Intelligent Traffic Management Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans.

Additional details

1. This CDB loan is not included in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 2. The all-in interest rate that applies to this loan (5.739%) was calculated by taking the average 6-month LIBOR rate during the month (April 2019) when the subsidiary loan agreement was finalized (2.633%) and adding a 2.85% margin. 3. This project is also known as the Accra Intelligent Traffic Management System Project. The Chinese project title is 阿克拉智能交通管理系统和施工项目 or 加纳阿克拉交通管理工程建设项目 or 阿克拉城市信息通讯技术交通管理系统项目 or 特马—阿克拉滨海大道项目 or 加纳公司滨海大道项目. 4. The cancelled $100 million commercial contract with Beijing Everyway Traffic & Lighting Tech. Co. Ltd. included the following project scope: to improve transport infrastructure and reduce traffic congestion in the Greater Accra area, enhance safety for pedestrian and promote urban renewal. To this end, an Accra Metropolitan Area Intelligence Traffic Management System (AITMS) was to be established to improve traffic flow, trip reliability and safety in Accra through a coordinated traffic signal system and a centralized control center for all traffic signals. 5. The Sinosure premium is charged on principal and interest amounts and it is payable upfront in one lump sum. CDB agreed to finance 85% of the Sinosure premium under the loan, while the Government of Ghana agreed to pay the remaining 15%. 6. The commercial contract between the Government of Ghana's Ministry of Roads and Highways and China Gansu International Corporation for Economic and Technical Cooperation for the Accra Metropolitan Area Intelligent Traffic Management and Roads Completion Project - La Beach Road Completion Project Phase I (Tema Road: Independence Arch to Nungua Barrier - 16.00km) can be accessed in its entirety via https://www.dropbox.com/s/m7j1cyj02pnt5wg/Tema%20Road%20Independent%20arch%20to%20Nungua%20Barrier.pdf?dl=0. The commercial contract between the Government of Ghana's Ministry of Roads and Highways and China Railway Major Bridge Engineering Group Co. Ltd. for the Accra Metropolitan Area Intelligent Traffic Management and Roads Completion Project - La Beach Road Completion Project Phase 2 (Coastal and Meridian Roads - Nungua Barrier to Tema - 10.60 km) can be accessed in its entirety via https://www.dropbox.com/s/ff3zym4bm7n0ne7/2019_06_04_12_26_28.pdf?dl=0. 7. The (principal) amounts outstanding are drawn from the Ghanaian Ministry of Finance’s Annual Public Debt Reports. These amounts are reported in GHS by the Ministry of Finance. AidData has estimated the USD amounts by applying the average GHS-to-USD exchange rate in 2020 (5.6-to-1) and the average GHS-to-USD exchange rate in 2021 (5.2-to-1). 8. The DSRA cash balance in 2019 is drawn from https://www.ifac.org/_flysystem/azure-private/Ghana-financial-statements.pdf. The USD value of the cash balance is calculated by apply the average GHS-to-USD (5.9-to-1) exchange rate in calendar year 2019.

Number of official sources

14

Number of total sources

21