Narrative
Full Description
Project narrative
On April 18, 2018, a syndicate of Chinese banks signed a $872,130,000 syndicated seller’s credit (deferred payment) agreement with Sinohydro Corporation Ltd. (Sinohydro) and KAR Electrical Power Production Trading FZE (KEPPT) — a special purpose vehicle registered in Dubai and wholly owned by KAR Group — for the 730MW Al-Rumaila Combined Cycle Gas Power Plant Project. The members of the loan syndicate include China Eximbank (as the leading bank), Power China Finance Company Ltd. (as the co-leading bank), Bank of China, China Construction Bank, and the Beijing Branch of China Minsheng Bank Corp Ltd. The $1,026,000,000 project is being implemented on an Independent Power Project (IPP) basis and financed according to a debt-to-equity ratio of 85:15 (with Iraqi KAR Power Company providing the equity contribution). The interest rate of the loan is unknown. However, it is known that the loan carried a 14.5 year (174-month) maturity length. The Iraqi Government issued a sovereign guarantee for deferred payment to Sinohydro Corporation Ltd. (Sinohydro) under its EPC contract with KAR Electrical Power Production Trading FZE, while Sinosure provided medium and long term export seller’s credit insurance to Sinohydro and Sinohydro provided a credit guarantee for 10% of the financing. China Eximbank also provided financing for 100% of the amount of account receivables of Sinohydro under its EPC contract without recourse. The project’s recourse structure is designed so that during the construction period Sinohydro is liable to pay the syndicate of Chinese banks in the event of default and Sinosure refuses to provide indemnity. Later, during the power plant’s operation period, KAR Electrical Power Production Trading FZE will be responsible for repayment of the syndicated loan, and if it fails to do so, the Chinese banks will be repaid by the Iraqi Government (due to the sovereign guarantee) or via indemnity from Sinosure. The purpose of the project is to convert the Al-Rumaila Power Plant, in Basra Governorate, Iraq, from a simple cycle plant to a combined cycle plant by installing up to 730MW of steam turbines and all other necessary equipment. The wider purpose of the project is to alleviate power shortages in Iraq following conflict there. The first phase of the project is to expand the power plant's existing 5 × 293MW simple cycle gas-fired unit into a combined cycle unit. The combined cycle unit consists of 2 gas turbines + 2 waste heat boilers + 1 turbo-generator set, and 3 gas turbines + 3 waste heat boilers + 1 turbo-generator set. Sinohydro Corporation Ltd. (Sinohydro), a subsidiary of Power Construction Corporation of China (POWERCHINA), is the general EPC contractor responsible for implementation. It signed a deferred payment EPC contract with KAR Electrical Power Production Trading FZE. RAZ Company for Construction & Engineering is also involved as a sub-contractor. A notice to proceed (NTP) was issued to the general EPC contractor on April 18, 2017. The first loan disbursement took place on April 18, 2018. Construction began on June 7, 2018. The first unit of the power plant was successfully connected to the grid on June 1, 2021.
Staff comments
1. This project is also known as the Al Rumailah 730MW CCPP Project and the Rumaila Combined Cycle-Power Station Project. The Chinese project title is 鲁迈拉联合循环电站融资项目 and 鲁迈拉油田电厂项目. 2. The size of each bank’s contribution to the lending syndicate is unknown. For the time being, AidData assumes equal contributions ($174,426,000) across the five members of the syndicate. China Eximbank's contribution is captured via Record ID#65743, Power China Finance Company Ltd's via ID#92405, China Construction Bank Corporation via ID#92406, and Bank of China's via ID#92407. China Minsheng Banking Corp Ltd. is a private sector bank and does not have a project entry. 3. Tian Yuan Law Firm acted as lead law firm for the project and served as Chinese legal counsel to Sinohydro Corporation Limited (Sinohydro). Mena Associates and Amereller Legal Consultants were the Iraqi legal counsels. Zhong Lun Law Firm acted as legal counsel to the banking consortium, while Al Tamimi & Co was the Iraqi legal counsel to the banking consortium. 4. KAR Group is privately owned engineering company, established in 1999 with its main headquarter in Erbil and with branch offices in most Iraqi governorates in addition to the offices abroad in Turkey, Jordan and representative in UAE and USA. 5. China Eximbank signed an accounts receivable transfer agreement with PowerChina International to provide financing for the construction period of the project. In this type of arrangement, the exporter (seller) procures insurance from Sinosure and transfers its accounts receivable under the insurance policy to a bank. The bank then grants financing to the exporter (seller) and becomes the insured under the transferred insurance policy. When an insured loss occurs, Sinosure pays indemnity to the financing bank pursuant to the insurance policy and the Accounts Receivable Transfer Agreement.