Narrative
Full Description
Project narrative
In September 2020, Deutsche Bank announced that it had signed a $43 million accounts receivables financing facility agreement with China National Technical Import & Export Corporation (CNTIC) for the 90MW Myingyan Gas-Fired Power Station Project. CNTIC, in turn, used the proceeds from the facility to on-lend to Electric Power Generation Enterprise (EPGE) of Myanmar (likely through a deferred payment agreement) for the 90MW Myingyan Gas-Fired Power Station Project. The borrowing terms of the loan to EPGE are unknown. However, it is known that the loan is backed by a Sinosure credit insurance policy. The purpose of the project is to construct a 90MW gas-fired power station project in Myingyan township within the Mandalay region. The plant is being developed and operated by Hong Kong-based VPower under a five-year power purchase agreement with Electric Power Generation Enterprise (EPGE). CNTIC is the EPC contractor responsible for project implementation. The power plant was put into operation on February 1, 2019.
Staff comments
1. The Chinese project title is 缅甸敏建 90MW燃气电站项目 or 中技公司缅甸发电站项目. 2. More likely than not, Deutsche Bank signed an accounts receivable transfer agreement with CNTIC to provide financing for the construction period of the project. In this type of arrangement, the exporter (seller) procures insurance from an insurer and transfers its accounts receivable under the insurance policy to a bank. The bank then grants financing to the exporter (seller) and becomes the insured under the transferred insurance policy. When an insured loss occurs, the insurer pays indemnity to the financing bank pursuant to the insurance policy and the Accounts Receivable Transfer Agreement. 3. 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. 4. CNTIC, a large-scale state-owned enterprise and a wholly-owned subsidiary of China General Technology (Group) Holding Ltd. (‘Genertec’). 5. EPGE is Myanmar’s state-owned electricity company.