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Overview

[China-Venezuela Joint Fund] CDB funds USD 3.8 billion José Ignacio Abreu e Lima National Steel project (linked to Record ID#58677)

Commitment Year•2006Country of Activity•VenezuelaDirect Recipient Country of Incorporation•VenezuelaSector•Industry, Mining, ConstructionFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Jan 1, 2006
Start (actual)
Sep 1, 2008
End (planned)
Dec 31, 2014

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned Policy Banks

  • China Development Bank (CDB)

Cofinancing agencies

Government Agencies

  • Fondo Nacional para el Desarrollo Nacional (FONDEN)

Private Sector

  • Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)

State-owned Banks

  • Brazilian Development Bank (BNDES)

Receiving agencies

State-owned Banks

  • Banco de Desarrollo Económico y Social de Venezuela (BANDES)

Implementing agencies

Government Agencies

  • Venezuelan Ministry of Industry

State-owned companies

  • EPS Siderúrgica Nacional SA

State-owned Funds

  • China-Venezuela Joint Fund

Collateral providers

State-owned companies

  • Pétroleos de Venezuela S.A. (PDVSA)

Loan desecription

[China-Venezuela Joint Fund] CDB funds USD 3.8 billion José Ignacio Abreu e Lima National Steel project

Interest type•Unknown

Collateral

The borrowing was collateralized with PDVSA income from daily oil sales to China National United Oil Corporation (ChinaOil), which was deposited in a collection (escrow) account at China Development Bank (CDB). Banco de Desarrollo Económico y Social de Venezuela (BANDES) opened and maintained a USD-denominated collection (escrow) account with CDB into which all proceeds from oil export sales -- under an offtake agreement (petroleum sales and purchase contract) between PDVSA and ChinaOil -- were deposited for the purposes of (a) making regular debt service payments to CDB, and (b) maintaining a minimum cash collateral balance. The borrower was required to maintain a minimum cash balance in the collection (escrow) account equivalent to no less than 1.3 times the aggregate amount of principal, interest, and any other amount due during the next repayment period. If the minimum cash balance was not maintained, then PDVSA would be responsible for increasing the amount of fuel and/or crude oil to be delivered under the petroleum sales and purchase contract to ensure that (a) the actual debt service coverage ratio was maintained at the required level at the required times; and (b) the amount in the New Collection Account was sufficient to meet the required balance requirements set out in the facility agreement. If PDVSA did not do so, then BANDES was responsible for transferring funds to the CDB-controlled bank account to 'remedy any shortfall.' The lender also had the ability to block the debtor from withdrawing the funds.

Narrative

Full Description

Project narrative

In 2006, the Venezuelan government announced the creation of the José Ignacio Abreu e Lima National Steel company (Spanish: Siderúrgica Nacional José Ignacio Abreu e Lima). The project was funded by the China-Venezuela Joint Fund (see Record ID#58677), although the Chinese investment was most likely made later than 2006. The project cost USD 3,871,471,140.34. It was also funded by FONDEN, BNDES of Brazil, and BBVA. The amount from each entity is unclear. The project consisted of the construction of a steel production company is Ciudad Piar, Barinas. In 2008, the Brazilian company Andrade Gutiérrez was contracted to build the plant. The project was also implemented by the Ministry of People's Power for Industry and EPS Siderúrgica Nacional SA. In 2012, the plant was still under construction, with the goal of producing 1.55 million tons of liquid steel per year when completed. According to official sources, the project was showed 94% progress in the external area and 86% development in the reagent building of the concentration plant in September 2013, and would be ready to open in late 2014. It is not clear if the plant was ever completed. Some student programs were run at the plant in 2016 and 2017, but it wasn't producing at full capacity.

Staff comments

1. No transaction amount is recorded for this project because it is already captured in the China-Venezuela Joint Fund (see Record ID#58677). 2. This project should not be confused with the José Ignacio Abreu e Lima agricultural project (see Record ID#94030).