ICBC participates in $500 million syndicated loan for Campana Refinery Upgrading Project (Linked to Project ID#54685 and #98854)

On June 25, 2019, the International Finance Corporation (IFC) made an investment in the Argentine branch of Pan American Energy (PAE) LLC, composed of an ‘A loan’ worth $135 million; a $50 million ‘B loan’ via the IFC’s Managed Co-Lending Portfolio Program (MCPP), a platform where institutional investors can passively participate in IFC’s future loan portfolio; and a syndicated ‘B Loan’ loan worth $315 million, for a total of $500 million. Participants in the $315 million syndicated loan included Bancaribe, BBVA, Santander, Citi, Industrial and Commercial Bank of China (ICBC), Crédit Agricole and JP Morgan. The loan's IFC ID number is 42169. The loan is guaranteed by Pan American Energy headquarters. The IFC and IFC MCPP tranches had an 8 year maturity (final maturity date June 2027), while the $315 million syndicated B loan was divided into two tranches with separate terms. Tranche "B1-A" was worth $160 million and had a five year maturity (final maturity date June 2024), while tranche "B1-B" was worth $155 million and had a six year maturity (final maturity date June 2025). It is unknown which of these two B tranches ICBC participated in. All tranches had a variable interest rate and were payable in semi-annual installments. All tranches also had a grace period of at least 24 months from the date of signing of the loan contract, though the tranche(s) which carried grace periods longer than 24 months are unknown. As of July 6, 2020, the entire loan had been disbursed. The loan proceeds were to be used by PAE to complete its ongoing multi-year refinery upgrade program of the Campana refinery, specifically to continue increasing the production of refined products, producing additional higher value and cleaner-burning fuels, and reducing refinery air emissions. The Campana refinery delivers 15% of the country’s refined fuel, in Campana, province of Buenos Aires. The refinery, about 80 km from Buenos Aires, produces around 4.5Mm3/y of oil derivatives and the expansion is expected to increase its capacity by 60%. This syndicated loan follows another from 2015, in which the International Finance Corporation (IFC) made an investment of $120 million from its own account and mobilized up to $400 million in B Loan and parallel loan to partially fund PAE's 2015/2016 capital expenditure program (IFC ID number 36146). The investment was made to further develop PAE’s oil and gas assets in the Cerro Dragón block in the Golfo San Jorge Basin, in the Lindero Atravesado block, and in the Neuquén Basin. The engagement encompassed activities related to drilling, secondary recovery, facility expansions, improvements, and parts of the 2015/2016 investment program to support increased oil and gas production. The ICBC contribution to this loan is captured in Project ID#54685. In September 2020, the Office of the Compliance Advisor/Ombudsman (CAO) received a complaint regarding the both the IFC's 2015 loan (IFC ID number 36146) and 2019 loan (IFC ID number 42169) to PAE. The complaint was from a former worker of one of PAE´s former contractors in Cerro Dragón, on behalf of himself and approximately ten other former workers of the same and other contractors. The Complainants allege that PAE has deprived them of their right to work by unfairly accusing them in court of actively participating in a violent seizure of the Cerro Dragón oil filed in 2012. As a result, they believe they are entitled to economic compensation and allege that the Company has failed to honor an out-of-court settlement agreement stating that the Complainants are entitled to compensation. The Complainants did not request confidentiality. The Complainants stated they were unfairly cited (and in some cases, indicted) in criminal court proceedings initiated by PAE for a violent seizure of the Cerro Dragón oil field in 2012, operated by PAE. The Complainants claimed that they were not involved in the violent incidents that took place in 2012, but that PAE’s contractors nevertheless laid them off at the request of PAE. The Complainants additionally claimed that because of the criminal court proceedings and the violent incidents from 2012, PAE labelled them as ‘terrorists’ and thereafter, no other company in the oil and gas sector in Argentina would hire them. They alleged that, as a result, PAE has deprived them of their right to work for the past eight years, and they believe they are entitled to economic compensation for the years during which they have not been able to access jobs. The Complainants also alleged that they signed out-of-court settlement agreements with PAE in 2019 (amended in 2020), whereby PAE agreed to pay each Complainant the sum of ARS $12 million (USD $120,000 approx.) in compensation for affecting their right to work as a consequence of the criminal court proceedings they were involved with, related to the 2012 seizure of the Cerro Dragón oil field. The Complainants informed CAO that they were approached and allegedly represented by a lawyer called María Duffey Laxague in the process of the signing the out-of-court settlements, but believe she later turned on them and partnered with PAE in bad faith to deceive them. The Complainants stated that that payments stipulated in the agreement were not met by PAE. The Complainants have also expressed distrust regarding PAE’s allegations that no such dealings with the lawyer exist and that legal action for fraud has been filed against her by the Company. The Complainants informed CAO that they had sent PAE a letter (cartadocumento) as a formal notification of their intention to pursue legal action if PAE does not pay the economic compensation that they believe they are entitled to. Nonetheless, they have expressed their willingness to address the issue of the complaint through dialogue under the auspices of the Dispute Resolution function of the CAO. PAE stated that the violent incidents in the Cerro Dragón oil field in 2012 were an unprecedented attack on private property. Following the violent incidents, several individuals, including the individual who filed the complaint, were prosecuted by the State in criminal courts (not by PAE). PAE also shared that it is not their policy or practice to label or retaliate against former workers of its contractors, or anyone. They stated that the violent seizure of the oil field Cerro Dragón in 2012 is public knowledge for everyone in the industry and there is an ongoing criminal judicial proceeding before the Federal Courts in Comodoro Rivadavia, in the Province of Chubut in relation to the seizure. They also stated that PAE did not have any influence on the Complainants’ alleged inability to access jobs. PAE additionally rejected the Complainants’ claim that economic compensation was due to them. PAE stated that they had not entered into an out-of-court settlement agreement with any of the Complainants. The Company claimed that the alleged out-of-court settlement agreements were fraudulent and were forged by the Complainants’ lawyer María Duffey Laxague. As a result, PAE has taken legal action against the lawyer for the crimes of fraud and falsification of public 8 documents, currently before Criminal Court nbr. 54 (Juzgado Nacional en lo Criminal y Correccional Nro. 54), under court proceeding nbr. 24.082/2020 (“Imputada: Duffey Laxagüe, María Auxliadora s/ Estafa procesal, defraudación por contrato simulado, falsificación de documentos públicos, y uso de documento falso o adulterado (art. 296 Código Penal)”. The court's jurisdiction has been confirmed in the City of Buenos Aires, and PAE has appeared before the court as the plaintiff (parte querellante).

Additional details

1. The IFC project identification number is IFC-42169. 2. The size of ICBC’s contribution to the $315 million syndicated loan tranche is unknown. For the time being, AidData assumes equal contributions ($45 million) across the 7 known members of the loan syndicate. 3. Given the grace period for tranche is unknown, grace period has been set to the minimum in any of the tranches (24 months, or 2 years). 4. Pan American Energy is a leading global multi-source energy company. In 2017, the company’s shareholders —Bridas Corp. (40%) and BP (60%) — consolidated their interests in Pan American Energy and AXION Energy to form a single company called Pan American Energy Group. Bridas Corp. is now known as BC Energy Investment Corp., and is 50% held by Bridas Energy Holdings Ltd. and 50% held by China National Offshore Oil Corporation (CNOOC). Today, Pan American Energy (PAE) has positioned itself as Argentina’s largest private producer, employer and investor in the energy industry and conducts operations in Argentina, Mexico, Bolivia and Uruguay. PAE’s operations span the upstream, midstream and downstream operations and thermal and renewable electric power sectors of the energy business. In the downstream business, PAE operates the Campana Argentina refinery. As for its retail operations, the company sells fuels through the brand AXION Energy and lubricants through the brand Castrol, in its 740 gas stations in Argentina and Uruguay. Axion presently has a 15% share of the Argentine fuels market. The company currently explores and produces oil and gas in Argentina, Bolivia and Mexico in conventional and unconventional reservoirs, both onshore and offshore. 5. The Office of the Compliance Advisor/Ombudsman is a recourse mechanism for projects supported by the International Finance Corporation and Multilateral Investment Guarantee Agency of the World Bank Group. It was established in 1999 and is based in Washington, D.C. 6. This loan is considered guaranteed rather than collateralized because (1) a particular revenue stream or asset is not listed in relation to the guarantee and (2) the loan was acquired by the Argentine branch of PAE specifically, and the PAE prospectus specifies PAE headquarters ('la Casa Matriz') is the guarantor. 7. On May 6, 2016, financial close was reached on a deal in which a syndicate of six banks — including the Industrial and Commercial Bank of China (ICBC) — entered into a $378.00 million USD syndicated loan agreement with Axion Energy Argentina S.A. — a wholly owned subsidiary of Argentina-based refining and fuel distribution company Bridas Corporation, itself 50% owned by Argentina's Bridas Energy Holdings and 50% by Chinese state-owned petroleum company CNOOC Limited — for the Campana Refinery Expansion Project. This loan carried a A/B loan structure: the $78.00 million USD A loan that carried a maturity period of eight years, a maturity date of May 6, 2024, and was provided entirely by the International Finance Corporation (IFC) and a $300.00 million USD B loan that carried a maturity period of five years and six months (5.5 years), a final maturity date of November 6, 2021, and was provided by a five-commercial bank syndicate. All five commercial lenders, including ICBC, contributed $60.00 million USD to the $300 million USD B loan. The proceeds were to be used by the borrower to support a $1.5 billion USD expansion of the Campana Refinery's production lines for refined products such as ultra-low sulfur diesel, to reduce its sulfur emissions, and expand its distribution network {{see ID#187926}}. Project ID#98854 captures this loan.

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