Narrative
Full Description
Project narrative
In June 2018, Silk Road Fund Co., Ltd. and JSC “Uzbekneftegaz” — a state-owned oil and gas company in Uzbekistan — signed a cooperation agreement to increase hydrocarbon (oil and gas) production. Then, on July 9, 2019, JSC “Uzbekneftegaz” (Uzbekneftegaz) signed a facility (loan) agreement with two Chinese state-owned lenders — Blue Amber Investment Limited (a wholly owned subsidiary of Silk Road Fund Co., Ltd.) and Industrial and Commercial Bank of China (Asia) Limited (ICBC) — for construction and development of oil and gas fields. The loan has two tranches: a $360 million tranche (with Record ID#91787 capturing Blue Amber Investment Limited's estimated contribution and Record ID#105379 capturing ICBC's estimated contribution) and an RMB 1.6 billion tranche (with Record ID#91788 capturing Blue Amber Investment Limited's estimated contribution and Record ID#105380 capturing ICBC's estimated contribution). The USD-denominated loan tranche carries a 10-year maturity (final maturity date: July 9, 2029) and an annual interest rate of 6-month LIBOR plus a 1.15% margin. The RMB-denominated loan tranche carried an 11.5 year maturity (final maturity date: January 9, 2031) and an annual interest rate of 6-month SHIBOR plus a 0.50% margin. Both loans included a number of financial covenants relating to gearing, interest cover, liquidity, and financial statements. Both loans also obligate the borrower (UzbekNefteGaz) to maintain certain debt service reserve amounts. The Government of Uzbekistan issued a sovereign guarantee in support of the USD-denominated loan tranche and the RMB-denominated loan tranche. The borrower was expected to use the loan proceeds to finance costs incurred for the construction, development and initial working capital requirements of the projects specified in Attachment No. 1 to the Decree of the President of Uzbekistan No.PP-2822 dated March 9, 2017 relating to the construction and development of oil and gas fields (including the development of 16 gas wells, of which 7 were existing and 9 are newly drilled wells). The first loan disbursement took place in October 2019. By November 12, 2021, UzbekNefteGaz had utilized UZS 3,635 billion under the USD loan facility and UZS 2,550 billion under the RMB loan facility. In 2021, UzbekNefteGaz also disclosed that it had breached certain covenants as of December 31, 2019 under its loan agreement with Blue Amber Investment Limited and Industrial and Commercial Bank of China (Asia) Limited to provide IFRS financial statements and other supporting documents as of a certain deadline and comply with certain financial ratios. These breaches were subsequently waived by the lenders but they triggered cross-default provisions in some of UzbekNefteGaz's other financing agreements.
Staff comments
1. The all-in interest rate for the RMB-denominated loan was estimated by adding 0.50% to the average 6-month SHIBOR rate in July 2019 (2.457%). The all-in interest rate for the USD-denominated loan was calculated by adding 1.15% to the average 6-month LIBOR rate (2.206%) in July 2019. 2. Blue Amber Investment Limited served as the original lender and lead arranger. Industrial and Commercial Bank of China (Asia) Limited served as facility agent and security agent. 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. 3. There are some context clues that suggest the proceeds of these loans may have been used by Uzbekneftegaz to finance the second and/or third phases of the Karakul Gas Field Project. This issue merits further investigation. Bank of China loan issued a $177.7 million loan in 2017 for Phase 1 of the Karakul Gas Field Project (as captured via Record ID#53865). 4. This project is also known as Uzbekneftegaz’s Natural Gas Project. 5. Given that the individual contributions of the banks are unknown, AidData assumes equal contributions (RMB 800 million) across the two members of the loan syndicate. AidData Record ID#91788 records Blue Amber Investment Limited's estimated contribution and Record ID#105380 records the estimated contribution from ICBC.