ICBC (Asia) contributes $99.18 million AUD to a $3.64086 billion AUD term loan of a $3.9384 billion AUD syndicated loan for the Victorian Desalination Project (Linked to Record ID#96655)

Project narrative

On September 2, 2009, financial close was reached on a deal in which a syndicate of 12 lenders — including Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)) — signed a $3.9384 billion AUD ($3.33743 billion USD) syndicated loan agreement with AquaSure Finance Pty Ltd — a special purpose vehicle (SPV) — for the Victorian Desalination Project. The syndicated loan was divided into two tranches: a $3.64086 billion AUD ($3.08529 billion USD) term loan tranche and a $297.54 million AUD ($252.14 million USD) export credit facility. The $3.64086 billion AUD term loan carried a maturity period of seven years, a maturity date of September 3, 2016, and a variable interest rate that shifted through the life of the loan, with an interest rate of BBSY plus a margin of 350 basis points (bps) from year one to year five, an interest rate of BBSY plus a margin of 375 bps in year six, and an interest rate of BBSY plus a margin of 400 bps in year seven. This loan was secured by (i.e. collateralized) against a fixed and floating charge over the assets of AquaSure Pty Ltd — a SPV and 100% owned subsidiary of AquaSure holdings of which equity is owned by Macquarie Group, Degrémont SA (Suez Environnement SAS), Thiess Pty Ltd, UniSuper, and foreign investors Itochu Corporation, HSBC Environmental Infrastructure Fund, Samsung C&T Corporation — as managed by a Security Trustee. ICBC (Asia) contributed $99.18 million AUD ($84.05 million USD) to the $3.64086 billion AUD term loan tranche, as captured by Record ID#96654. In addition to ICBC (Asia), the following lenders contributed the respective amounts to the $3.64 billion AUD tranche: United Overseas Bank Limited (UOB) ($69.43 million AUD; $58.83 million USD), Intesa Sanpaolo S.p.A. ($247.95 million AUD; $210.11 million USD), WestLB AG ($54.55 million AUD; $46.22 million USD), Banco Santander, S.A. ($198.36 million AUD; $168.09 million USD), Crédit Industriel et Commercial (CIC) ($51.57 million AUD; $43.70 million USD), Sumitomo Mitsui Banking Corporation (SMBC) ($123.97 million AUD; $105.06 million USD), Mega International Commercial Bank ($34.71 million AUD; $29.42 million USD), the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) ($99.17 million AUD; $84.04 million USD), Taiwan Business Bank (TBB) ($13.89 million AUD; $11.77 million USD), Commonwealth Bank of Australia (CBA) ($108.11 million AUD; $91.61 million USD), ING Bank N.V. ($69.43 million AUD), KEB Hana Bank ($9.91 million AUD; $8.40 million USD), Macquarie Bank ($99.18 million AUD), Natixis ($74.38 million AUD ($63.03 million USD), Mizuho Corporate Bank, Ltd. (MHCB) ($99.18 million AUD), IFM Alternative Fixed Income Fund ($20.83 million AUD; $17.65 million USD), Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) ($262.83 million AUD; $222.72 million USD), Landesbank Hessen-Thüringen (Helaba) ($34.71 million AUD; $29.42 million USD), National Australia Bank Limited (NAB) ($247.94 million AUD; $210.11 million USD), DBS Bank ($54.55 million AUD), Westpac Banking Corporation ($247.94 million AUD), Banco Espírito Santo (BES) ($138.85 million AUD; $117.66 million USD), HSBC Bank ($257.87 million AUD; $218.52 million USD), GE Capital ($69.43 million AUD), BNP Paribas S.A. ($108.11 million AUD; $91.61 million USD), Crédit Agricole Group ($108.11 million AUD), Dexia Group ($99.17 million AUD), Australia and New Zealand Banking Group (ANZ) ($167.61 million AUD; $142.04 million USD), the Bank of Nova Scotia (Scotiabank) ($69.43 million AUD), AustralianSuper Pty Ltd ($45.62 million AUD; $38.66 million USD), BayernLB ($54.55 million AUD), Bank of Ireland ($54.55 million AUD), and Société Générale S.A (SocGen) ($145.79 million AUD; $123.55 million USD). There were 12 mandated lead arrangers for this loan: ICBC (Asia), Mizuho, Macquarie, Dexia, BTMU, SMBC, Intesa Sanpaolo, Santander, Westpac, NAB, HSBC, and BBVA. NAB and Westpac served as lead arrangers among the mandated lead arrangers. The remaining banks were participants. The deal was initially split into a $1.93 billion seven-year facility AUD and a $1.75 billion three-year term loan AUD; however, the latter portion was then syndicated and rolled into the $1.93 billion AUD seven-year tranche. The Government of Victoria issued a treasurer's guarantee of syndication, in which it committed to becoming the lender of last resort, at commercial rates, if syndication failed to meet the financing needs of the project. Furthermore, the guarantee meant that the Government of Victoria would repay debt if the banks could not roll over (refinance) their debt at the maturity date. Syndication of the debt was launched on September 21, 2009, with the banks supporting a losing consortium for the Victoria Desalination PPP, BassWater, joining the loan. The syndication was completed on November 6, 2009. The syndication was 53% ($400 million USD) oversubscribed, bringing the total number of lenders to 34. The state's syndication guarantee ended on November 16, 2009, after the additional of the 22 new lenders, making the Victoria Desalination PPP entirely privately financed for the long term. The contribution breakdown of the $297.54 million AUD export credit facility was as follows: BBVA ($64.17 million AUD; $54.63 million USD), ANZ ($59.51 million AUD; $50.43 million USD), HSBC ($109.10 million AUD; $92.45 million USD), and SocGen ($64.47 million AUD; $54.63 million USD). The project's debt-to-equity ratio was 84:16; there was $762.69 million AUD ($646.31 million USD) in equity provided. The following entities issued the respective amount of equity for this project: HSBC Environmental Infrastructure Fund ($45.00 million AUD; $38.13 million USD), Itochu Corporation ($99.15 million AUD; $84.02 million USD), Samsung C&T Corporation ($158.57 million AUD; $134.37 million USD), UniSuper ($198.30 million AUD; $168.04 million USD), Macquarie ($63.30 million AUD; $53.64 million USD), Degrémont ($158.64 million AUD; $134.43 million USD), and Thiess ($39.66 million AUD; $33.61 million USD). On March 4, 2016, financial close was reached on a deal in which a syndicate of 12 banks — including the Industrial and Commercial Bank of China (ICBC) — entered into a $900.00 million AUD ($663.22 million USD) syndicated term loan agreement with AquaSure Finance Pty Ltd — a special purpose vehicle (SPV) jointly owned by Suez Environnement SAS and Degrémont SA (20.8%); UniSuper (26.0%); Samsung C&T Corp (20.8%); Itochu Corp (13.0%); Macquarie Capital Group (8.3%); InfraRed (5.9)%; and Pacific Partnerships (5.2%) — for the Victorian Desalination 2016 Refinancing Project. This loan carried a maturity period of seven years, a maturity date of March 4, 2023, and a reported interest rate of BBSY plus a margin of 145 bps. The proceeds of this loan were to be used by the borrower to refinance the Victorian Desalination Project; specifically, refinancing a portion of commercial bank debt raised in late 2013 to refinance the original 2009 loan. ICBC contributed $45.00 million AUD ($33.16 million USD) to the loan syndicate. Record ID#96655 captures ICBC's contribution. The proceeds of this loan were to be used to construct a seawater desalination plant and associated marine intake and outlet tunnels, transfer pipelines, and power supply on a 263-hectacre project site on the Bass Coast in Wongthaggii, Victoria. The plant had a designed capacity of 150 gigalitres (GL) of water per year, which it could supply to Melbourne, Geelong, South Gippsland, and Western Port, with capacity for an upgrade to 200 GL. The plant's capacity would account for about a third of Melbourne's annual water usage if employed. The plant used reverse osmosis technology and was constructed in three 50 GL modules. There were two 0.8-kilometer to 2-kilometer long tunnels that connected the plant to the offshore sites, one tunnel to supply seawater and the other to discharge saline concentrate from the plant. The 1.9-meter diameter 86-kilometer long transfer pipeline from Wonthaggi to Berwick was to supply water from the plant into the Melbourne Water network near Soldiers Road in Berwick, and water will then flow to consumers or to the Cardinia Reservoir, with off-take pipes allowing water from the Cardinia Reservoir and Melbourne Water network to supply the Wonthaggi area and other towns when the plant was not operating or from the plant itself, when operational. The power supply for the plant was an underground high voltage alternative current transmission line largely co-located with the transfer pipeline, excepting its divergence towards the Cranbourne terminal station along an existing high voltage line at Pound Road, Clyde Road, with power load compensator equipment co-located with the booster pump station in Cardinia. The plant featured a 'living green roof', Australia's largest, made of biodegradable materials meant to minimize the plant and help reduce maintenance. Additionally, only 38 hectares of the project site were developed for the plant, the remaining hectares were turned into an ecological space with paths for pedestrians and cyclists. With the plant entirely independent of rainfall, the Wongthaggii plant was expected to improve Melbourne's water security. The State Government of Victoria would order water annually from the plant, but AquaSure would supply to the state only when requested and it had no right to sell water to third parties. In the early 2000s, Melbourne had experienced two major droughts, causing its freshwater reserves to fall to under a third in 2009. Studies about the impact of climate change, population growth, and droughts found that Melbourne could, by the late 2010s, be facing a shortage of drinking water by as much as 100 billion liters annually. Then, on June 19, 2007, the Government of Victoria announced its plans to construct a desalination plant as part of its Water Plan. It launched a tender process for the Public-Private Partnership (PPP) Project and called in expressions of interest in June 2008. On July 30, 2009, the Government of Victoria awarded the $3.5 billion AUD (€2.05 billion EUR; $2.9 billion USD) contract to AquaSure to finance, construct, maintain, and operate the project for a 27-year concession period. The total maximum net present cost of financing, building and operating the plant over 30 years was $5.7 billion AUD, assuming water orders of 150 billion liters per year over the 27.75 years. A joint venture between Thiess Pty Ltd and Degrémont Pty Ltd was the design and construction (D&C) contractor responsible for project implementation. Once operational, a joint venture between Thiess Services Pty Ltd and Degrémont Pty Ltd was the operations and maintenance (O&M) contractor. Olex won a $43 million USD contract in November 2009 for the provision of high-voltage alternating current power cabling. Theiss contracted Ortech Industries for $7 million USD for the manufacture and supply of 44,000 square meters of its 'Durra Panel' acoustic ceiling system and 38,000 square meters. It also contracted Ausform $6 million USD to construct water retraining structures. In October 2010, the Thiess Degremont Joint Venture awarded a contract to Siemens Automation to supply process automation and switchgear equipment for the plant. Thiess Degrémont contracted SRS Group to supply SIEMENS motor control centers (MCCs) and control and protection panels for four control sites at the project site. In September 2010, Thiess Degrémont awarded a $4.3 million AUD contract to Fytogreen to install about 98,000 indigenous ground covers, shrubs, and tussocks over the roof. Gippsland Building Approvals won a contract to undertake property surveys. Atco was responsible for the supply of site amenity buildings. Pro-rent was responsible for the construction of a truck wheel wash and additional site amenity buildings. Safeman Australia was responsible for the provision of personal protective equipment. Douglas Partners was responsible for geotechnical investigations. Alfasi Design and Drafting was responsible for 3D modelling services. DHL Global Forwarding was the logistics partner responsible for delivery of 60,000 tons of material and equipment during the construction. General Electric’s (GE) Power Conversion business unit participated in the design and supply of a set medium-voltage motors and low and medium-voltage variable frequency drives for the plant and associated filters and transformers for use in the plant and pipeline network. The project had a contracted commercial acceptance (water delivery) date of December 19, 2011, with reliability testing to be held from January to June 2012. The entire PPP contract would expire on September 30, 2029. Construction began on September 30, 2009. It was completed in December 2012. This project was the subject of protests and controversy. A Wonthaggi protest group 'Your Water Your Say' attempted to obtain an injunction on preliminary works on the project. However, in May 2008 Australian Federal Court ruled that work should proceed. 3,000 people signed a petition opposing the project that was submitted to the Victorian Parliament in 2009. The Australian Greens, the country's third largest political party, also opposed the plant. Criticisms levied included accusations that the government was privatizing water resources because of the PPP contract and that Victorian residents would have to pay $900 million AUD annually for the plant and its produced water.