Narrative
Full Description
Project narrative
On June 23, 2020 a ceremony was held for the signing of a $243,600,000 supplier’s credit (loan) agreement between the Government of Ghana and Dongfang Electric International Corporation for the procurement of standard gauge rolling stock (trains). Then, in October 2020, Ghana’s Parliament approved the supplier's credit loan. The loan carries the following borrowing terms: a 12-year maturity, a 2-year grace period, an interest rate of 6-month LIBOR plus a 2.5% margin. The borrower also bought a credit insurance policy from Sinosure worth up to 7% of the face value of the loan ($17,052,000). The borrower is expected to use the proceeds of the loan to facilitate the acquisition of standard gauge rolling stock in order to enable the testing, commissioning and immediate operation of the new standard gauge railway lines (currently under construction in the country). The Government of Ghana’s June 2020 commercial contract with Dongfang Electric International Corporation includes the supply of nine 4500HP mainline diesel locomotives with maximum speed of 160km/hr for passengers, supply of 48 passenger coaches, 15 mainline diesel locomotives for freight, 330 freight wagons and 11 Shunting diesel locomotives. As part of the commercial contract, Dongfang Electric International Corporation is to supply spare parts and tools along with the locomotives and rolling stocks within a 24-months warranty period. The contract also calls for the establishment of one maintenance workshop with maintenance equipment at a location to be determined by the purchaser, and the provision of After Sales Services to guarantee regular and proper maintenance of the trains during the operational period. Additionally, Dongfang Electric International Corporation is expected to provide training for skilled personnel or railway engineers and managers in all aspects of the rolling stock systems including locomotive design, operation and maintenance. Some of the acquired rolling stock is expected to be used to support a newly-constructed 97 km railway line from the Port of Tema to Mpakadan. The contract was to be implemented in two phases: the first to be completed in two batches 12 and 18 months, respectively from the date when the agreement was signed, totaling 100 locomotives; the second, 230 trains, to be delivered in one batch, within 18 months from a mutually agreed upon commencement date.
Staff comments
1. At one point, Dongfang Electric International Corporation reported that it would likely source the funds for the supplier’s credit from ICBC or China Construction Bank (most likely through an export seller’s credit). This issue warrants further investigation. 2. The all-in interest rate was estimated by adding 2.5% to the average 6-month LIBOR rate in June 2020 (0.426%).