ICBC contributes $5.15 million NZD to the $49.7 million NZD debt service reserve facility of a $1.00216 billion NZD syndicated loan for the Transmission Gully Motorway PPP Project (Linked to Record ID#91573)

Project narrative

On July 28, 2014, financial close was reached on a deal in which a syndicate of seven banks — including the Industrial and Commercial Bank of China (ICBC) — entered into a $1.00216 billion NZD ($856.23 million USD) syndicated loan agreement to Wellington Gateway Partnership (WGP) — a New Zealand-based joint venture and special purpose vehicle (SPV) owned by United Kingdom-based investment manager InfraRed Infrastructure Fund III (40% equity stake), Pacific Partnerships Pty Ltd., the project finance arm of Australia's CIMIC Group (owner of Leighton Contractors Pty Ltd.) (15% equity stake), and Accident Compensation Corporation (ACC), a New Zealand Crown entity (public sector corporation) (45% equity stake) — for the Transmission Gully Motorway Public-Private Partnership (PPP Project). This loan consisted of two tranches: a $952.47 million NZD ($813.77 million USD) term loan with a maturity period of six years and a final maturity date of July 28, 2020 and a $49.70 million NZD ($42.46 million USD) debt service reserve facility with a maturity period of six years and a final maturity date of July 28, 2020. ICBC contributed $98.70 million NZD ($84.33 million USD) to the $952.47 million NZD term loan. Record ID#91573 captures its contribution. In addition to ICBC, the following lenders contributed the respective amounts to the $952.47 million NZD term loan: Australia and New Zealand Banking Group (ANZ) ($162.86 million NZD; $139.14 million USD), Bank of New Zealand (BNZ) ($98.70 million NZD), Commonwealth Bank of Australia (CBA) ($197.40 million NZD; $168.66 million USD), National Australia Bank Limited (NAB) ($98.70 million NZD), Bank of Nova Scotia (Scotiabank) ($118.44 million NZD; $101.19 million USD), and United Overseas Bank Limited (UOB) ($177.66 million NZD; $151.79 million USD). ICBC contributed $5.15 million NZD ($4.40 million USD) to the $49.70 million NZD debt service reserve facility. Record ID#99623 captures ICBC's contribution. In addition to ICBC, the following lenders contributed to the $49.70 million NZD debt service reserve facility: ANZ ($8.49 million NZD; $7.26 million USD), BNZ ($5.15 million NZD), CBA ($10.29 million NZD; $8.80 million USD), NAB ($5.15 million NZD), Scotiabank ($6.18 million NZD; $5.28 million USD), and UOB ($9.27 million NZD; $7.92 million USD). BNZ, NAB, and CBA were all Mandated Lead Arrangers (MLAs) and Bookrunners for the syndicated facility. Additionally, ACC committed a separate $123.1 million NZD term debt facility to WGP. The Transmission Gully Motorway PPP Project had an original cost of $850 million NZD. It later increased to $1.25 billion NZD. InfraRed committed $55 million NZD ($47 million USD to the project, accounting for 40% of the total equity ($137,500,000 NZD) at the time of financial close. InfraRed contributed $43.56 million NZD ($37.22 million USD), Pacific Partnerships contributed $16.27 million NZD ($13.90 million USD), and ACC contributed $49.01 million NZD ($41.87 million USD) in equity. The project sought to construct a four-lane 27-kilometer-long highway from Mackays Crossing at Paekākāriki to Linden. The Transmission Gully Motorway was intended to connect Wellington to the growing economic hubs of Kapiti and the Manawatu and the rest of the North Island. The motorway was designed to be safer, faster, less congested, and more reliable, as it bypassed various existing bottlenecks and the more dangerous sections of State Highway 1 (SH 1). The motorway was intended to shorten peak journeys by seven to 15 minutes. The project included the construction of 29 bridges, multiple complex interchanges, and movement of over 6 million cubic meters of earth. The Transmission Gully Motorway PPP Project was part of a larger plan to improve the Wellington Northern Corridor. It was New Zealand's third PPP and procured an availability-based PPP that included a 25-year concession — the first road project in New Zealand delivered under this model. Under the PPP, the private sector was charged with constructing, maintaining, and operating the road and addressing safety concerns and travel and reliability issues fermented by existing infrastructure; the project's performance specification incentivized the road's private operator to lower accidents and included maximum permissible travel times and the private sector's payment included a component at risk based on the performance of the road. Plans for what would be the Transmission Gully Motorway existed in various forms from 1919. WGP awarded a contract to CPB HEB Joint Venture (CPB HEB JV), a joint venture of Australia's CPB Contractors — the construction company of indirect WGP stakeholder CIMIC Group — and New Zealand's HEB Construction to design and construct the motorway. WGP awarded 25-year operations and maintenance (O&M) contract to Ventia. PSM provided the project geotechnical model and designed the cuts, embankments, earthworks, liquefaction, soft ground interaction, geohazards, and selected high risk bridge foundations; it also provided geotechnical construction service support. Robert Bird Group provided structural and civil engineering services to CPB-HEB Joint Venture. Ngāti Toa Rangatira, a Māori iwi (tribe), was the Kaitiaki — a Māori term meaning ‘guardian’ — for the project that provided cultural advice and environmental and archaeological monitoring services for the project. The NZ Transport Agency (NZTA) selected WGP as the preferred bidder for the project in December 2013. Then, in July 2014, NZTA and WGP signed the PPP contract for the project. Construction began on September 8, 2014. The project was originally expected to be completed in April 2020. The project faced major issues during implementation. During physical implementation, issues with two of the road layers, the subsoil and base course, arose. In road construction, perforated pipes are placed to absorb water, which are then drained out to watersheds through non-perforated pipes, to prevent the subsoil under a road from becoming moist and the ground unstable. During implementation, there were allegations that the implementers placed non-perforated pipes where perforated pipes should have been, and that sometimes pipes did not lead to waterways — these errors would cause water to build up under the subsoil and threaten the stability of the motorway. Additionally, the base course (also known as the 'road base'), which lies on top of the subsoil and is composed of rocks mixed with a stabilizer to create a solid, thick surface for the top road layer to lay on, was allegedly made with "rocks not up to specification" and a stabilizer that was not spread evenly across the road base, due to the alleged modification of a machine that made it spread stabilizer over a wider area — a cheaper and faster way of spreading stabilizer. As a result, the stabilizer was more concentrated in the center of the road, meaning that the outer lanes more commonly frequented by heavy vehicles and tracks, would be more prone to damage. The problems with the subsoil and base course would require significant — and expensive — reworking of the asphalt on the surface of the road over the 25-year period that WGP was contracted to maintain the road. NZTA was allegedly not informed of these many issues that arose during implementation. The project faced significant cost overruns and delays. In 2019, NZTA extended the planned completion date by one month to May 2020, but by November 2019, discussions over a completion date delay to November 2020 were ongoing. In February 2019, HEB Construction filed a claim seeking $352 million NZD from NZTA over the project's delays, although NZTA was working to resolve the issue per the 2014 contract. Despite the fact that, as a PPP, WGP agreed to take on upfront financial risks in exchange for payout after project completion, the Government of New Zealand contributed substantial funds towards the project as delays and setbacks became apparent. On February 14, 2020, NZTA announced that it would provide an additional $190.6 million NZD for the motorway and that the project would be complete prior to Christmas 2020. There were concerns that CPB HEB JV, using the agreed contract provisions and the lockdowns of the COVID-19 pandemic as the reason, would pull out of the project, in hopes of avoiding litigation; at the same time, there was a belief that NZTA wanted the joint venture to exit so it could sue them. In late May 2022, a deadline associated with those provisions passed with no return to work for a substantial number of subcontractors involved on the project. In the New Zealand Parliament, Transport Minister Phil Twyford received numerous press questions about the rumored collapse of the project; Twyford blamed the New Zealand National Party government that had signed the PPP. Chris Bishop, National MP and shadow transport minister, in turn, blamed Twyford for paying $190.6 million NZD to WGP in February 2020, rather than filing a lawsuit. Then, on May 29, 2020, NZTA announced an advance payment of $14 million NZD to keep the contractors working during winter and amidst the COVID-19 lockdowns, although there was belief that those funds may also support the fixing of the issues with the base course of the road. By June 2020, the expected completion date had been pushed back into later 2021, with discussions ongoing for it to be pushed back into 2022 to allow for another season of earthworks. In total, the project went through five delayed planned completion dates without reaching completion: April 2020, May 2020, November 2020, September 27, 2021, and December 2021. The project was finally completed in March 2022. Prime Minister of New Zealand Jacinda Ardern attended the ceremonial opening ceremony on March 30, 2022. The road opened the next day, March 31, 2022.