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

Project narrative

On December 16, 2011, China Development Bank and the Government of Ghana signed a $3 billion master facility agreement (see Record 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 loan tranches (Tranches A and B) under the master facility agreement are collateralized against cash proceeds from the sale of crude oil from the Jubilee field. In December 2011, the Government of Ghana and China Development Bank signed an Accounts Agreement that established a Collection Account (CA), Debt Service Reserve Account (DSRA), and Owner Contribution Account in CDB’s Hong Kong Branch for the operation and management of the loan. Under the terms of the Accounts Agreement (which was amended on June 13, 2012 and June 21, 2013), the Government of Ghana (a) granted CDB a first fixed charge over all repayment accounts, including the CA, the DSRA, and the Owner Contribution Account; (b) agreed to maintain a cover of 1.5 times each repayment in the DSRA at all times (i.e., a debt service cover ratio of 1.5). CDB’s security interest in the charged assets, pursuant to the charge over accounts, continued to be in full force and effect, after the master facility agreement was amended in 2018. In 2011, Ghana National Petroleum Corporation (GNPC) and China International United Petroleum and Chemicals Co. (UNIPEC Asia Company Limited) also signed an Offtaker Agreement for the sale and purchase of crude oil to support repayment of the loan. Under the terms of the Offtaker 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 The proceeds from these oil sales were then to be withdrawn from Ghana’s Petroleum Holding Fund by BoG (as required by Ghana’s Petroleum Revenue Management Act) and deposited into the CA and the DSRA to facilitate loan repayment and provide sources of collateral. In the event the proceeds from crude oil sales under the Offtaker Agreement were insufficient for the Government of Ghana to meet its debt service obligations, the Ghana’s Ministry of Finance and Economic Planning (MOFEP) was also granted authority to transfer funds from the Annual Budget Funding Amount (ABFA) to an offshore escrow account for the purpose of servicing outstanding debts to CDB and/or meeting the Government of Ghana’s counterpart funding commitments. A Five Party Agreement (signed in December 2011 and amended on June 13, 2012 and June 21, 2013) between the Government of Ghana, Bank of Ghana (BoG), GNPC, CDB, and UNIPEC Asia Company Limited allows for provides the Government of Ghana the opportunity to use other sources of revenue to meet its debt service obligations. The Five Party Agreement also sets out the structure of the oil-backed borrowing arrangement and the key contractual obligations of each party under the arrangement, including the Government of Ghana obligation to open and maintain the transaction accounts, BoG’s obligation to ensure timely and legal transfers of repayments to CDB accounts and to open and maintain standby letters of credit, GNPC’s obligation to supply and UNIPEC’s obligation to purchase crude oil to support repayments, and the obligation of Ghana’s MOFEP to oversee and manage the subsidiary loans and projects approved through the master facility agreement. The cash balance of the DSRA was GHS 0 ($0) in 2013, GHS 415,877 ($136,753.55) in 2014, GHS 364,979,295 ($96,783,244.94) in 2015, GHS 366,604,322 ($92,926,496.66) in 2016, GHS 370,586,909 ($84,231,954.95) in 2017, GHS 370,586,909 ($78,960,839.70) in 2018, GHS 370,586,909 ($69,152,250.23) in 2019, GHS 370,586,909 ($64,710,992) in 2020, GHS 370,586,909 ($62,547,369.40) in 2021, and GHS 370,586,909 ($41,014,089.71) in 2022. The cash balance of the Owner Contribution Account was GHS 0 ($0) in 2013, GHS 41,642,584 ($13,693,403.20) in 2014, GHS 192,069,065 ($50,931,840.84) in 2015, GHS 206,380,064 ($52,313,012.09) in 2016, GHS 206,380,064 ($46,908,824.43) in 2017, GHS 206,380,064 ($43,973,337.31) in 2018, GHS 206,380,064 ($38,510,928.15) in 2019, GHS 206,380,064 ($36,037,588.88) in 2020, GHS 206,380,064 ($34,832,666.20) in 2021, and GHS 206,380,064 ($22,840,770.28) in 2022. The cash balance of the CA was GHS 0 ($0) in 2013, GHS 0 ($0) in 2014, GHS 9,576,037 ($2,539,321.94) in 2015, GHS 9,576,037 ($2,427,324.27) in 2016, GHS 9,576,037 ($2,176,569.91) in 2017, GHS 9,576,037 ($2,040,363.28) in 2018, GHS 9,576,037 ($1,786,907.44) in 2019, GHS 9,576,037 ($1,672,144.47) in 2020, GHS 9,576,037 ($1,616,236.05) in 2021, and GHS 9,576,037 ($1,059,811.96) in 2022. 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). 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.