China Eximbank reschedules $208 million preferential buyer’s credit for the Southern Power Grid Reconstruction Project (Linked to Record ID#40431)

Project narrative

On June 2, 2011, China Eximbank and the Ministry of Finance of the Kyrgyz Republic signed a $208 million preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC No. (2011)18 TOTAL NO. (169)] for the Southern Power Grid Reconstruction Project. The Kyrgyz Parliament ratified the loan (PBC) agreement on June 13, 2011. The loan carried the following borrowing terms: a 20 year maturity, a 7 year grace period, a 2% interest rate, a 0.25% commitment fee, and a 0.25% management fee ($520,000). The final maturity date of the loan is September 21, 2031. On August 3, 2011, the State Agency for Budget Credit Management under the Ministry of Finance of the Government of the Kyrgyz Republic entered into a subsidiary loan agreement (on-lending arrangement) with National Electric Grid of Kyrgyzstan, OJSC (or Joint Stock Company “National Grid of Kyrgyzstan” or OJSC Natsionalnaya Elektricheskaya set Kyrgyzstana or OJSC NES of Kyrgyzstan or NEGK). The proceeds of the loan were to be used by the end-user (ultimate borrower) — National Electric Grid of Kyrgyzstan, OJSC — to finance 100% of the cost of its $208 million commercial contract (ID#166-69/0093) with Tebian Electric Apparatus Stock Co., Ltd. (TBEA), which was signed on October 15, 2009. According to the Government of the Kyrgyz Republic’s Aid Management Platform (AMP), the first loan disbursement (of $41,200,000) took place on December 21, 2011; the second loan disbursement (of $130,881,100) took place on December 31, 2012; the third loan disbursement (of $25,276,200) took place on December 31, 2013; and the fourth loan disbursement (of $183,030.90) took place on June 1, 2015. The same source notes that, as of 2015, the loan disbursement rate was 94.9% (with total loan disbursements amounting to $197,540,330.90). According to internal data that the Kyrgyz Ministry of Finance shared with AidData in July 2022, this loan achieved a disbursement rate of 100% as of December 31, 2021 and its amount outstanding was $161,617,074.71 as of December 31, 2021. The Southern Power Grid Reconstruction Project involved the construction of a 500 kV Datka power station in Jalal-Abad (captured via Record ID#39619) and the construction of 220 kV power transmission lines in Batken, Jalal-Abad, and Osh stretching for 256.5 km. TBEA was the contractor responsible for project implementation. On August 30, 2011, construction commenced. The project was completed on June 20, 2013. However, the Southern Power Grid Reconstruction Project has underperformed from a revenue generation and debt repayment perspective. On December 9, 2019, a Settlement Agreement was signed by Joint Stock Company “National Grid of Kyrgyzstan” and the State Agency for Budget Credit Management under the Ministry of Finance of the Kyrgyz Republic. Under the terms of the Settlement Agreement, overdue repayments (arrears) were included in an updated repayment schedule (amortization table) without any change to the loan’s final maturity date. According to the audited financial statement of Joint Stock Company “National Grid of Kyrgyzstan” for the year that ended on December 31, 2019, ‘[t]his restructuring […] led to significant changes in the amortized cost of loans from the Export-Import Bank of China.’ The original loan (PBC) that was issued on June 2, 2011 is captured via Record ID#40431. The December 9, 2019 rescheduling is captured via Record ID#96098.