CHEC provides loan — via deferred payment arrangement — for Phase 1 of Al-Khair (Dama Dama) Oil Terminal Construction Project

In 2001, Sea Ports Corporation (SPC) — a Sudanese state-owned company — and China Harbour Engineering Co. Ltd (CHEC) signed a deferred payment ("延期付款”) agreement for Phase 1 of the Al-Khair (Dama Dama) Oil Terminal Construction Project. The borrower (SPC) was expected to make monthly repayments with the retained (ring-fenced) portion of its monthly operating income. The other borrowing terms of the loan are unknown. However, is is known that SPC used the deferred payment arrangement to finance a $13 million commercial (EPC+F) contract that it signed with China Harbour Engineering Co. Ltd. The purpose of Phase 1 was to construct the Al-Khair (Dama Dama) oil terminal berth northeast of the existing Bashayer terminal in the Port of Sudan. The Phase 1 project scope included the design of the oil terminal, the construction of a 310 meter wharf (with a depth of 14.6 meters), the construction of a 275 meter trestle bridge, the dredging of the harbor basin, and the supply and installation of fire-fighting equipment for the terminal. The Phase 1 terminal (berth) was dedicated to the handling of light petroleum products and ethanol and it had an annual throughput capacity of 2.6 million tons. CHEC was the EPC contractor responsible for implementation. Phase 1, per the terms of the EPC contract, was originally expected to commenced in October 2001 and conclude in June 2003. Phase 1 ultimately commenced in May 2001. Per the terms of the Phase 1 contract, it was expected to reach completion within 12 months (May 2002). However, Phase 1 was ultimately completed in July 2003. Upon completion, the Al-Khair petroleum terminal could receive product carriers of up to 50,000 dwt with a maximum length of 221 meters and a draught of 13.2 meters, and it became Sudan's only dedicated terminal for crude oil exports and refined oil imports. Phase 2 involved the construction of a second deep-water berth with a length of 330 meters and a depth of 19 meters. Upon completion, the second berth was expected to be able to receive tankers of 150,000 dwt.

Additional details

1. This project is also known as Phase 1 of the El Khair Petroleum Terminal Project, Phase 1 of the Alkhair Petroleum Terminal Project, Phase 1 of the Sudan Dama Oil Wharf Phase II Dredging and Reclamation Project, the Damma Oil Terminal Phase I Project, the Dama Dama Oil Terminal Phase 1 Project, and the Port Sudan 50,000-ton Dama Refined Oil Terminal Project. The Chinese project title is 達瑪達瑪成品油碼頭一期工程及綠地 or 苏丹港5万吨级达玛成品油码头工程 or 油码头程疏浚与吹填项目 or 丹港达玛油码头 or 港达玛油码头 or 达玛达玛成品油码头一期工 or 苏丹港5万吨级码头项目 or 达玛成品油码头之. 2. In a typical receivables financing agreement (or deferred payment agreement), the company that the project owner in the host country has selected as its engineering, procurement, and construction (EPC) contractor is also a lender to the project owner. The company assigns receivables under its EPC contract with the project owner to one of or more banks. Upon assignment of receivables, the bank or banks will release funds to the company so it can discharge its obligations under the receivables financing agreement as a lender. Receivables financing is also known as accounts receivable financing (finance) or A/R financing (finance) or 应收账款融资 (in Chinese). These other terms are used because the accounts receivable of a company (i.e., unpaid invoices) are being used as collateral to unlock working capital—typically in the form of a bank loan (‘receivables loan’). Sellers often face cash flow problems when their buyers do not make full payment at the due date of the invoice. A receivables financing arrangement addresses this problem by allowing them to sell their outstanding invoices to a bank at a discounted rate. This approach allows the seller to receive the remaining invoice amount before the due date of the invoice. The bank either gets its money back at invoice maturity through the seller (acting as a collecting agent) or directly from the debtor. 3. In Chinese, a deferred payment agreement is known as《延期付款协议》. 4. The face value of the deferred payment agreement is unknown. For the time being, AidData assumes that it is equivalent to 85% of the value of the EPC contract ($13 million). 5. Sea Ports Corporation (SPC) is an independent state corporation of Sudan that governs, constructs and maintains the ports, harbors and lighthouses of Sudan. The company was founded in 1974 by the government of Sudan to be the national port operator and port authority. 6. On January 15, 2014, CHEC and SPC signed a commercial contract for Phase 2 of the Al-Khair (Dama Dama) Oil Terminal Construction Project (苏丹港达玛油码头二期疏浚工程). The project scope mostly involved basin and channel dredging, land area reclamation, and leveling activities. Phase 2 was underway in 2015, but it is unclear if it was financed through a deferred payment arrangement. This issue warrants further investigation. See https://news.sina.cn/2015-12-03/detail-ifxmhqaa9836487.d.html?from=wap and https://www.chinca.org/sjtcoc/info/65534 and https://www.dredgingtoday.com/2014/01/15/chec-bags-sudan-dama-dredging-contract/. 7. This loan is omitted from the SAIS-CARI database of Chinese loan commitments that was released in July 2020.

Number of official sources

17

Number of total sources

36