China Eximbank suspends debt service payments under buyer’s credit for STELCO’s 5th Power Development Project between January 2021 and June 2021

On December 27, 2016, the Export-Import Bank of China and Bank of China (Sichuan Branch) signed a $75,395,226 buyer’s credit loan agreement with State Electric Company Limited (STELCO) — a state-owned power utility in the Maldives — for the Hulhumalé 5th Power Development Project (as captured via Record ID#54277).

The Ministry of Finance and Treasury of the Government of Maldives provided a sovereign guarantee for this loan. The borrower also purchased buyer’s credit insurance from Sinosure.

The borrower was expected to use the proceeds of the loan to partially finance a $90 million EPC turnkey contract between STELCO and Dongfang Electric International Corporation (DEC), which was signed on May 28, 2015.

Then, in response to the COVID-19 pandemic and the G20 Finance Ministers and Central Bank Governors meeting that took place on April 15, 2020 and on November 13, 2020, the Chinese Government agreed to work with other G20 members to implement the Debt Service Suspension Initiative (DSSI).

As part of DSSI, China Eximbank, Bank of China, STELCO (borrower), and the Government of the Maldives (guarantor) signed a debt suspension agreement during calendar year 2021 (most likely in January 2021).

Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between January 1, 2021 and June 30, 2021 under the $75,395,226 buyer’s credit loan agreement for the Hulhumalé 5th Power Development Project. The total estimated suspension amount is $4,319,041.

At the time that the parties signed the debt suspension agreement, they both acknowledged that the total suspension amount would ultimately be determined at the end of the suspension period (since loan disbursements could be made during the suspension period and the lender agreed to suspend the payment of interest accrued on any disbursements during the suspension period).

The lender and borrower agreed that the suspension of debt service would be undertaken on a net present value (NPV)-neutral basis.

Therefore, the borrower agreed to pay interest accrued on the amount outstanding under the total suspension amount (‘Suspension Interest’) by paying the Suspension Interest on the amount outstanding under the loan agreement’s suspension amount at the same rate of interest set forth in the original loan agreement.

Under the terms of the debt suspension agreement, the lender and the borrower also agreed that ‘[t]he suspension interest on the amount outstanding under the Suspension Amount concerning [the] Loan Agreement shall be calculated on the basis of the actual number of days elapsed and a year of 360 days, from and including the Repayment Date/Repayment Date of Principal and Interest falling within the Suspension Period to the date of payment in full of the corresponding Suspension Amount, and shall be paid in arrears on each Interest Payment Date under the […] Loan Agreement.’ The borrower also agreed that (1) ‘it shall continue to perform all its obligations […] under the Loan [Agreement] as supplemented and amended by [the debt suspension agreement]’; (2) ‘it shall use the created fiscal space to increase social, health, or economic spending in response to the COVID-19 crisis […]’ and ‘work closely with the International Financial Institutions who are expected to put in place a monitoring system’; (3) ‘it shall disclose to the Lender all Public Sector Financial Commitments (as defined in the Government Finance Statistics Manual 2014 (GFSM2014)), respecting commercially sensitive information’; and (4) ‘it shall contract no new non-concessional debt during the Suspension Period, other than agreements under the DSSI’.

The (principal) amount outstanding under the new, $4,319,041 China Eximbank/Bank of China loan instrument was $4,319,041 as of December 31, 2021, $3,887,137 as of December 31, 2022, and $3,023,329 as of December 31, 2023.

The borrower made a $431,904 principal payment during calendar year 2022 and a $863,808 repayment during calendar year 2023.