Bank of China loan disbursements for 200 Prefabricated Millennium Education Units Project (Linked to Project ID#58859)

On December 22, 2016, the Government of Ecuador signed a $167,371,800 syndicated term loan facility with five banks — Bank of China Limited, Beijing Branch, Bank of China Limited Liaoning Branch, Bank of China Limited, Panama Branch, Bank of China, Hong Kong Branch and Deutsche Bank AG, Hong Kong Branch — for the 200 Prefabricated Millennium Education Units Project. The loan carried the following borrowing terms: a 12-year maturity, a 2 year grace period, and a variable annual interest rate of 6 month-LIBOR plus a 3.5% margin. The borrower was expected to use the proceeds of the loan to finance 85% of the total cost of a $196.9 million commercial contract between Ecuador’s Ministry of Education and China Railway N.9 Engineering Group Co. Ltd. (CREC9), which was signed on August 18, 2015 [contract ID#056-MINEDUC-2015] and amended on April 12, 2016 [contract ID#004-MINEDUC-2016]. The Government of Ecuador was responsible for paying the remaining 15% ($29,536,200.00) through advance payment to CREC9, which was made by Ecuador’s Ministry of Education on May 18, 2016. The purpose of the project was to procure, assemble, and install 200 prefabricated Millennium schools (educational units). Project implementation commenced on or around June 20, 2016, shortly after the advance payment was made. Then, on March 27, 2018, Ecuador’s Ministry of Education announced that it planned to take legal action against CREC9 to recover its advance payment worth 15% of the commercial contract value. On July 13, 2018, Ecuador’s Ministry of Education unilaterally terminated its commercial contract with CREC9 and attempted to assess a fine worth $29,116,785, citing technical breaches, cost overruns, and untimely installation of the units within the period stipulated in the commercial contract. At the time of contract termination, 50 prefabricated education units were installed and at least 11 loan disbursements had taken place. CREC9 reported at the time of contract termination that the monetary value of the work that it had performed was $78 million. Project ID#58859 captures the project cancellation. Project ID#92567 captures AidData’s estimate of the total amount of funding ($38,771,040) that the various branches of Bank of China had disbursed as of July 13, 2018.

Additional details

1. The Spanish project title is La adquisición de 200 unidades educativas provisionales tipo milenio (prefabricadas) incluido su ensamblaje, instalación y puesta en operación, a nivel nacional or El Proyecto «Nueva Infraestructura Educativa» or La construcción de 200 escuelas del milenio en Ecuador. The Chinese project title is 厄瓜多尔教育部 200 所“千年学校”临时学校项目 or “千年学校”建设项目. 2. The individual contributions of the banks that participated in the lending syndicate are unknown. For the time being, AidData assumes equal contributions ($33,474,360) across all members of the syndicate, which implies that the total financial commitment from various branches of Bank of China was $133,897,440. 3. AidData has estimated the all-in interest rate by adding 3.5% to the average 6-month LIBOR rate in December 2016 (1.306%). 4. Sinosure may have provided buyer’s credit insurance in support of this loan. However, this issue requires further investigation. 5. In order to estimate the value of the loan disbursements that took place prior to the cancellation of the commercial contract, AidData subtracts the value of the advance payment ($29,536,200) from the value of the work that had been performed as of July 13, 2018 ($78 million). It then multiples this value ($48,463,800) by 0.8, based on the assumption that Bank of China Limited, Beijing Branch, Bank of China Limited Liaoning Branch, Bank of China Limited, Panama Branch, Bank of China, Hong Kong Branch were responsible for 80% of the value of the loan.

Number of official sources

14

Number of total sources

19