Sinohydro provides $53.5 million — via deferred payment agreement — for Upgrading of Selected Feeder Roads in Ashanti and Western Region (Phase 1, Lot 8) Project (Linked to Project ID#60154)

On May 16, 2018, the Government of Ghana signed a master project support agreement (MPSA) with Sinohydro Corporation Limited (‘Sinohydro’) for an amount of up to $2 billion for the construction of priority infrastructure projects. The MPSA was then approved by Ghana’s Parliament on July 28, 2018. All borrowings that take place under the MPSA carry a maturity of 15 years, a grace period of 3 years, an interest rate of 6-month LIBOR plus a 2.80% margin, a 2% default (penalty) interest rate, a 0.70% management fee, a 0.50% commitment fee, and a lump sum Sinosure insurance premium of 7%. Loan repayments will be made with the proceeds from the sale of refined bauxite (after the Government of Ghana establishes a bauxite processing plant), with repayments starting approximately three years after the effective date of the agreement. The proceeds from the sale of refined bauxite will be placed in an offshore escrow account by the offtaker for the benefit of Ghana Integrated Aluminium Development Corporation (GIADC) and Sinohydro. If the value of bauxite decreases, or if bauxite reserves are lower than expected, the Government of Ghana may have to deliver higher volumes of bauxite than anticipated or find alternative means of repayment. While the Government of Ghana does not currently treat borrowings (via deferred payment agreements or DPAs) under the Sinohydro MPSA as external debt, depending on various factors and events and as a result of the deferred payment structure, they could in the future become repayment obligations of the Government of Ghana. The agreement structure seeks to ensure that the obligations of GIADC (the obligor) will not add to the Government of Ghana’s debt stock. If GIADC fails to comply with its collateral or repayment obligations, Sinohydro is entitled to prepayment of outstanding loan balances and may seize the full balance of the escrow account. Sinohydro, which is itself borrowing from China Construction Bank to finance infrastructure projects under the MPSA, decided to approve funding for infrastructure projects under the MPSA in phases. The first phase consists of 10 road projects (underpinned by 10 EPC contracts) that are collectively worth $646,637,879.74: Accra Inner City Roads Project (or Phase 1, Lot 1 Project), Kumasi Inner City Roads Project (or Phase 1, Lot 2 Project), Tamale Interchange Project (or Phase 1, Lot 3 Project), PTC Interchange Takoradi Project (or Phase 1, Lot 4 Project and the PTC Roundabout Interchange Project, Takoradi), Adenta-Dodowa Dual Carriageway Project (or Phase 1, Lot 5 Project and the Construction of 14 km Adenta-Dodowa Dual Carriageway Project), Sunyani Inner City Roads Project (or Phase 1, Lot 6 Project), Western Region and Cape Coast Inner City Roads Project (or Phase 1, Lot 7 Project), Upgrading of Selected Feeder Roads in Ashanti and Western Region Project (or Phase 1, Lot 8 Project, Rehabilitation of Oda Ofoase-Abirem Road Project (or Phase 1, Lot 9 Project and 38 km Rehabilitation of New Abirem-Afoasekuma-Akim Oda Road project), and Hohoe-Jasikan-Dodi Pepesu Road Project (or Phase 1, Lot 10 Project and 56.40 km Construction of Hohoe-Jasikan-Dodo Pepesu Road Project). Each of these projects is being financed through a separate DPA. Under the terms of the MPSA, 'deferred payments' refer to payments due to Sinohydro under a given EPC contract to be made by Ghana's Ministry of Finance using the proceeds from the sale of refined bauxite that have been deferred up to the repayment dates stipulated in the repayment schedules of the DPAs. The DPA for the Upgrading of Selected Feeder Roads in Ashanti and Western Region (Phase 1, Lot 8) Project was signed by Ghana’s Ministry of Roads and Highways, Ghana’s Ministry of Finance, and Sinohydro on September 1, 2018. Under this DPA, which is captured via Project ID#89474, Sinohydro provided $53,537,267.16 of financing to cover 85% of the total cost of the EPC contract ($40,844,015.08) plus the cost of accrued interest and fees during the 30-month construction period. The scope of the Upgrading of Selected Feeder Roads in Ashanti and Western Region Project (Phase 1, Lot 8 Project) covers the upgrading of selected Feeder Roads in the Ashanti and Western Region (measuring 68 km in length): a 4 km road from Achiase Junction to Wansamere (also known as the Achiasejxn-Wansamere-Awisasujxn Feeder Road), a 4.5 km feeder road from Mpasatia to Adupri (also known as Mpasatia - Town Roads), a feeder road from Nyinahin to Adupri (also known as Nyinahin-Adupri Feeder Road), a 29.7 km feeder road from Nyinahin to Achiase Junction via Sereso Timpon (also known as Nyinahin-Sereso Timpon-Achiasejxn Feeder Road), a 1.5 km feeder toad from Nyinahin Market Junction to Pentecost Church (also known as Nyinahin Market Junction to Pentecost Church Feeder Road), a 14 km feeder road from Nyinahini to Kyekyewere (also known as Nyinahini-Kyekyewere Feeder Road), and a 3 km feeder road from Keesekrom to Adiembra (also known as Keesekrom-Adiembra Feeder Road). The roads in the Ashanti Region are mainly to areas with bauxite. The scope of works includes: earthworks, surface dressing, road line markings and signs, as well as construction of related roadside drains, storm drains and critical culverts. Sinohydro is the EPC contractor responsible for project implementation. A formal sod turning ceremony took place on November 22, 2019. However, project implementation did not commence until December 28, 2019. The project was originally expected to reach completion in 30 months (June 28, 2022). As of September 2021, the project had achieved a 75% completion rate. The project was officially completed and commissioned on March 27, 2022.

Additional details

1. The master project support agreement (MPSA) agreement can be accessed in its entirety via https://www.dropbox.com/s/6il07wi439e6632/Master%20Project%20Support%20Agreement%20Between%20Sinohydro%20and%20the%20Government%20of%20Ghana.pdf?dl=0. 2. Bauxite is the primary ore used to make aluminum. 3. AidData has estimated the all-in interest rate (5.369%) by taking average 6-month month LIBOR in September 2018 (2.569%) and adding a 2.8% margin. 4. GIADC is a special purpose vehicle and wholly-owned subsidiary of the Government of Ghana. GIADC, which was established in 2018, is the obligor under the MPSA. An obligor, also known as a debtor, is an entity that is legally or contractually obliged to provide a benefit or payment to another entity. 5. Under each DPA, the original schedule of payments for 85% of the total EPC contract price is deferred up to the respective repayment dates, with the source of funds being the proceeds of the sale of refined bauxite. 6. Each of the DPAs signed in September 2018 includes the following 'underlying collateral' clause: ‘[The Ministry of Finance or MOF] shall procure that the [Government of Ghana or GOG] shall render its sole account for receiving revenue generated from the sales of refined bauxite to be held in escrow for the exclusive benefit of Sinohydro, as the underlying collateral that secures MOF's payment obligations hereunder. MOF shall in due course sign and procure the Account Bank (as defined below) to sign with Sinohydro an Escrow Account Agreement to govern and regulate the payments into, withdrawal from and other management of the Escrow Account, whereby MOF shall undertake that: during the Term, MOF shall procure that the proceeds generate by the GOG from selling refined bauxite will be deposited into the Escrow Account, which shall be opened with and maintained by a reputable offshore bank acceptable to Sinohydro and the Financiers in [jurisdiction] (the 'Account Bank'), and shall permit and authorize the Account Bank to remit any applied amount up to the total balance in the Escrow Account to Sinohydro or any third party designated by Sinohydro upon presentation of the [Interim Payment Certificate] signed by the [Ministry of Roads and Highways, MORH) for the applied amount with prior approval by MORF or MOF; and at any time during the term, an amount not less than the aggregate amount of the upcoming two instalments to become due and payable by MOF shall be accumulated in the Escrow Account, and MOF shall procure the account bank to furnish to Sinohdro an account statement on the first Business Day of each month. Immediately upon discharge of the obligations under the EPC contract and this [Deferred Payment] Agreement in fall, Sinohydro shall release the escrow over the Escrow Account.’ 7. The DPA and EPC contract for the Upgrading of Selected Feeder Roads in Ashanti and Western Region (Phase 1, Lot 8) Project can be accessed in their entirety via https://www.dropbox.com/s/mqba1asvmuakoja/Deferred%20Payment%20Agreement%20under%20MPSA%20for%20Phase%201%20Lots%208%20Upgrading%20of%20Feeder%20Roads%20in%20Ashanti%20and%20Western%20Regions.pdf?dl=0 and https://www.dropbox.com/s/4gl32gbaz1osqkj/EPC%20Contract%20under%20MPSA%20for%20Phase%201%20Lot%208.pdf?dl=0 and https://www.dropbox.com/s/9xepszmulfr96fd/EPC%20Contract%20under%20MPSA%20for%20Phase%201%20Lot%208%20Upgrading%20of%20Feeder%20Roads%20in%20Ashanti%20and%20Western%20Regions.pdf?dl=0. 8. The Chinese Loans to Africa (CLA) Database, which was first created by SAIS-CARI and is now managed by the Global Development Policy Center at Boston University, records a single, $550 million loan in 2018 from Sinohydro for the 'Construction/Rehabilitation of Selected Road and Interchanges in Ghana-Phase 1’. AidData instead records 10 separate loan agreements (deferred payment agreements) in 2018 for 10 separate projects. These loans from Sinohydro are collectively worth $646,637,879.74. 9. Some sources identify the length of the roads supported by this project as 69.51 km rather than 68 km. 10. The Chinese project title is 中国水电-加纳政府优先基础设施项目. 11. On September 9, 2019, China Construction Bank and Sinohydro Corporation Limited signed an accounts receivable finance agreement for four lots of Phase 1 (Lot 3, Lots 7, Lot 8, and Lot 10). Then, on July 23, 2020, China Construction Bank and Sinohydro Corporation Limited signed an accounts receivable finance agreement for six lots of Phase 1. (Lot 1, Lots 2, Lot 4, Lot 5, Lot 6, and Lot 9).

Number of official sources

13

Number of total sources

23