China Development Bank provides €215 million EUR loan for Piraeus Container Terminal Franchise Project (Linked to Record ID#90694 and #92226)

Project narrative

On August 31, 2009, the Ningbo Branch of China Development Bank (CDB) provided a €215 million EUR loan to Piraeus Container Terminal S.A. (PCT) — a special purpose vehicle (SPV) — for the Piraeus Container Terminal Franchise Project. This loan carried a maturity of 15 years, a grace period of 8 years, and an interest rate of 3-month Euribor plus a 1.2% margin. The loan was secured by (i.e. collateralized against) the cash reserves of PCT. The balance of the loan was to be disbursed gradually over a period of 7 years. The loan had the following repayment schedule: 5.0% of the outstanding principal amount beginning on the eighth anniversary of the first borrowing date, to be paid annually for the first eight years and 10.0% of the outstanding amount to be paid annually over the next six years. The loan was fully disbursed as of December 31, 2016. COSCO Pacific also issued a €54.8 million EUR loan to PCT for the Piraeus Container Terminal Franchise Project that was subordinate to the senior debt of the CDB loan (as captured via Record ID#92226). PCT is a project company (SPV) incorporated in Greece and a wholly owned subsidiary of COSCO Pacific Limited. PCT was established to manage Container Terminals No. 2 and No. 3 at the Port of Piraeus that COSCO Shipping took control over on October 1, 2010, per the concession agreement in 2008. Piraeus Port is the largest port in Greece and for the Balkans and Black Sea countries. COSCO Pacific is leasing and operating the Piraeus Port container terminals for 30 years under a build-operate-transfer (BOT) lease agreement with the Piraeus Port Authority S.A. (PPA), with an extendable five-year term. Under the terms of the concession agreement, COSCO committed to invest over $700 million USD in upgrading the port's facilities. The proceeds of the CDB loan to PCT were used to be used by PCT to upgrade Pier 2 and complete the construction of Pier 3 at the Piraeus Container Port and thereby bring the capacity of the terminal up to 3.7 million TEUs, financing the BOT obligation. Construction was originally expected to be completed by the end of 2015. Implementation began in 2010 and the project was ultimately completed in 2015. Then, in 2015, the Piraeus Container Terminal 3 Expansion Project, financed by a CDB €130 million EUR loan (captured via Record ID#90694) commenced. COSCO's winning of the concession led to a series of planned strikes by dockworkers at Piraeus in October 2009; the strikes were an attempt to facilitate changes to COSCO's concession agreement by delaying the start of the agreement until after Greece's October 4, 2009, general election, which the PASOK party, which had vowed to renegotiate the team, was predicted to win. Previous strikes in 2008 were aimed at protesting the privatization of the container terminals at Piraeus, which COSCO had acquired via the concession. PCT began operations at Pier 2 on October 1, 2009, as planned, although with the assistance of PPA. The strikes ended on October 19, 2009, after negotiations. Additionally, on October 19, 2009, Aronis-Drettas-Karlaftis Consultant Engineers S.A. (ADK) filed a civil claim against COSCO Pacific Limited and PCT at the Court of First Instance of Athens in Greece alleging non-payment of fees for its design services and project management services; ADK claimed €5,800,000 (~$6.3 million USD-2015) in total. COSCO Pacific and PCT defended the material claims at the November 30, 2010 trial hearing. The Court of First Instance of Athens entirely dismissed the ADK's claim against COSCO Pacific and PCT and awarded the companies legal expenses worth €30,000 EUR (~$33,000 USD-2015); ADK appealed the case to the Court of Appeals of Athens, which upheld the dismissal and awarded part of legal expenses worth €600 EUR (~$700 USD-2015). ADK did not appeal to Supreme Civil and Criminal Court of Greece. COSCO later acquired a 67% stake in PPA in 2016, with the equity transfer completed in 2021. COSCO's involvement at Piraeus Port, including this project, has been hailed as the ‘flagship project’ of the Sino-Greek Construction of the Belt and Road Initiative (BRI).