Narrative
Full Description
Project narrative
In December 2019, PT Obsidian Stainless Steel — a special purpose vehicle and joint venture between China’s state-owned Xiamen Xiangyu Co., Ltd. (51% equity stake) and Jiangsu Delong Nickel Industry Co., Ltd. (49% equity stake) that was legally incorporated in Indonesia — signed an RMB 6.88 billion ($1.06 billion) facility agreement with a group of Chinese state-owned banks for the Xiamen Xiangyu Integrated Stainless Steel Plant Project. Participants in the loan syndicate included China Development Bank, China Construction Bank, ICBC, Agricultural Bank of China, CITIC Bank, China Merchants Bank, Bank of China, and Tai Fung Bank. Bank of China served as the mandated lead arranger, financial adviser, onshore and offshore facility agent, and security agent. The facility had a 6.75-year (81-month) maturity. It was provided in three tranches: an RMB-denominated, Sinosure-backed tranche worth $886 million for the ‘offshore’ lenders that carried an interest rate of 5-year LPR plus an unspecified margin; a dual currency, Ping An Insurance-backed tranche for four ‘onshore’ lenders (Tai Fung Bank, Bank of China Jakarta, Bank of China Singapore and ICBC Indonesia) that carried an interest rate of 5-year LPR plus an unspecified margin; and a dual currency, Ping An Insurance-backed tranche for four ‘onshore’ lenders (Tai Fung Bank, Bank of China Jakarta, Bank of China Singapore and ICBC Indonesia) that carried an interest rate of 6-month LIBOR plus an unspecified margin. The total cost of the Xiamen Xiangyu Integrated Stainless Steel Plant Project is RMB 13.4 billion and it is being financed according to a debt-to-equity ratio of 51:49. The purpose of the project is to construct a nickel mine, a 2.5 million metric tons per year stainless steel smelter, a 1,440MW (8X135MW) coal-fired power plant, and a 40 million metric tons multi-functional port in Virtue Dragon Industrial Park in South Sulawesi (exact locational coordinates: -3.827910421, 122.4682708). Zhongtian Guoneng Power Engineering and Suzhou Thvow Technology. Co., Ltd. are the EPC contractors responsible for project implementation. In September 2017, China’s National Development and Reform Commission approved the project. A contract to build the power plant was also awarded to Zhongtian Guoneng Power Engineering in September 2017. The contract specified an implementation period from October 2017 to July 31, 2019. Construction of the smelter began on or around October 2019. In April 2020, the smelter's first production line began to operate. Unit 1 was commissioned in April 2021. Unit 8 began operating in June 2021. Unit 9 began operating in January 2022. However, this project has also become a source of local protest and controversy. Residents living near the Delong Nickel Smelter began to complain about pollution from coal dust almost immediately after the power station began operations. The coal dust reportedly blows up to 3 kilometers away from the power station and coats everything, both indoors and outdoors. Children in the area have also reportedly begun coughing and having difficulty breathing. Records ID #110688, #92497 and #110274 capture the estimated financial commitments of Bank of China's main branch, Bank of China (Jakarta Branch) and Bank of China (Singapore Branch); Record ID #100758 captures the estimated financial commitment of China Development Bank; Records ID #100759 and #110687 capture the estimated financial commitments of ICBC and ICBC Indonesia; Record ID #100760 captures the estimated financial commitment of China Construction Bank; Record ID #100761 captures the estimated financial commitment of Agricultural Bank of China; Record ID #100762 captures the estimated financial commitment of China CITIC Bank Corporation; and Record ID #100763 captures the estimated financial commitment of China Merchants Bank Co., Ltd.; and Record ID #100764 captures the estimated financial commitment of Tai Fung Bank Limited.
Staff comments
1. Pinsent Masons acted as lenders’ legal counsel. Pinsent Masons advised the Bank of China and the financing syndicate. Hermawan Juniarto & Partners and Chang An Law Firm advised the Bank of China on Indonesian and PRC law, respectively. 2. Bank of China served as the security agent for the loan. 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. As such, AidData assumes that the syndicated loan was collateralized. 3. AidData cannot estimate the interest rate: while the 5-year loan prime rate (LPR) -- a benchmark lending rate adopted by commercial banks in China -- in December 2019 is known (4.15%), the applicable margin is unclear. 4. Tai Fung Bank Limited is 50.3% owned by Bank of China. 5. This project is also known as the Delong Nickel Phase II Power Station Project. The Chinese project title is 中国银行及11家中外银行组成的银团对位于印尼东南苏拉威西（South Sulawesi）10亿美元厦门象屿不锈钢一体化冶炼项目的融资. 6. This project won the award for Project Finance Deal of the Year at the Asian Legal Business China Law Awards 2021. 7. Clearing conditions precedent on this complex transaction took more than a year. The project ultimately achieved financial close on February 3, 2021, more than a year after the debt financing package was finalized. 8. The monetary values and pricing of the three tranches are unknown. The specific participants in each tranche are also unknown. As such, AidData has created a single record to capture the entire RMB 6.88 billion syndicated loan for the time being. 9. The individual contributions of Bank of China, Bank of China (Jakarta Branch), Bank of China (Singapore Branch), China Development Bank, ICBC, ICBC Indonesia, China Construction Bank, Agricultural Bank of China, China CITIC Bank Corporation, China Merchants Bank Co., Ltd., and Tai Fung Bank Limited to the RMB 6.88 billion syndicated loan are unknown. For the time being, AidData assumes equal contributions (RMB 625,454,545.455) across all 11 known members of the syndicate.