ICBC contributes to $654.1 million syndicated buyer’s credit loan for JSC Svetlogorsk Cellulose and Cardboard Factory Construction Project (Linked to Record ID#42318, #42302, #66737)

Project narrative

On June 14, 2011, China's Eximbank and the Industrial and Commercial Bank of China (ICBC) and the Government of Belarus signed a $654,163,995 syndicated buyer’s credit loan agreement [№ BLA201104] for the JSC Svetlogorsk Cellulose and Cardboard Factory Construction Project. The loan carried an 11.5-year maturity, a 7.5-year grace period, annual interest rate of 6-month LIBOR plus a 3% margin. The loan was scheduled for repayment between January 2019 and January 2023. AidData estimates that China Eximbank contributed $327,081,997.5 (captured via Record ID#42318) and ICBC also contributed $327,081,997.5 (captured via Record ID#98789) to this syndicated loan. Then, on April 26, 2012, the Government of Belarus on-lent the proceeds of the loan to a state-owned company called JSC "Svetlogorsk Pulp and Cardboard Mill" (or ОАО «Светлогорский целлюлозно-картонный комбинат» or ОАО "СветлогорскХимволокно”). JSC "Svetlogorsk Pulp and Cardboard Mill" then used the loan proceeds to finance approximately 85% of the cost ($800 million) of a commercial contract that it signed with China CAMC Engineering Co., Ltd. (CAMCE) on October 11, 2010. The purpose of the project was to support the construction of a bleached sulfate production facility at the cellulose and cardboard plant in the city of Svetlogorsk. Upon completion, it was envisaged that the facility would have the capacity to produce 400,000 tons per year of bleached sulphate cellulose (used in paper and cardboard production). CAMCE was the general (EPC) contractor responsible for implementation and it appears to have hired CMEC as a subcontractor. Construction began on or around May 28, 2012. The project was completed on December 10, 2017. However, it encountered a number of problems during and after implementation. CAMCE allegedly violated building codes and supplied defective equipment. A strong and unpleasant odor was also reported within the vicinity of the newly constructed facility. As of 2019, the facility was not fully operational. The China Eximbank/ICBC loan that was issued for the JSC Svetlogorsk Cellulose and Cardboard Factory Construction Project also financially underperformed vis-a-vis the lenders' original expectations. JSC "Svetlogorsk Pulp and Cardboard Mill" could not fully service its debts to China Eximbank and ICBC and the Ministry of Finance of Belarus had to step in and provide partial loan repayment. JSC "Svetlogorsk Pulp and Cardboard Mill" is a loss-making enterprise that has not shown a net profit since 2012. At the beginning of 2019, the company's total debt (about $900 million) was significantly higher than the value of its fixed assets.