China Eximbank extends $2 billion master loan facility agreement in September 2007

China Eximbank extends $2 billion master loan facility agreement in September 2007 On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议).

Following the signing of the framework agreement, on September 28, 2007, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola.

The MLFA, which is an oil prepayment facility, was designed to finance 100 projects via individual loan agreements (ILAs). The MLFA was split between a $1.0 billion phase I facility and a $1.0 billion phase II facility.

Availability of the phase II facility was subject to confirmation by the lender on or prior to the date falling five years after satisfaction of the conditions precedent to the MLFA and was made available by China Eximbank during that period.

The MLFA was a framework agreement under which the Government of Angola and China Eximbank could conclude individual buyer’s credit loan agreements (ILAs or subsidiary loan agreements) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts.

Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank.

The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices. Loan disbursements were made on a project-by-project basis.

Tendering, management and payments were jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (which coordinated the various Angolan line ministries responsible for supervising the projects).

The Angolan Ministry of Finance submitted the projects for tendering; China Eximbank selected Chinese candidate firms for the projects; and a joint commission made the final firm selections.

The process was managed by an office in the Angolan Ministry of Finance -- known as Gabinete de Apoio Técnico (GAT) -- that was specifically created to manage the MLFA with China Eximbank.

On June 9, 2015, the Government of Angola and China Eximbank entered into amendments of this MLFA and others in order to realign payments of drawn amounts under certain ILAs with the revised schedules of progress and/or completion of certain specified public investment projects, the timing and/or scale of which was altered when the revised 2015 national budget was adopted in March 2015.

However, it is unclear whether the borrowing terms of the MLFA were amended.

The following is a list of projects financed through the September 2007 MLFA: Record ID#34867, a $44.911 million loan for the Benguela, Huambo, and Bie Electricity Network (MT and BT) Rehabilitation and Expansion Project Record ID#34868, a $129.479 million loan for Phase 4 of Luanda Electricity Network (MT and BT) Rehabilitation and Expansion Project Record ID#34870, a $20.25 million loan for Phase 2 of Lubango Electricity Network (MT and BT) Rehabilitation and Expansion Project Record ID#34871, a $74.95 million loan for Luanda Water Supply System Improvement and Reinforcement Project Record ID#66688, a $18 million loan for the Agricultural Equipment Acquisition Project Record ID#34873, a $429.71 million loan for the Caxito-Nzeto Highway Rehabilitation Project Record ID#34874, a $144 million loan for the Nzeto-Tomboco-Mbanza Congo Highway Rehabilitation Project Record ID#34875, a $65.728 million loan for Phase 1 of the Cabinda Integrated Infrastructure Project Record ID#34877, a $75.685 million loan to complete Phase 1 of Malange Integrated Municipal Infrastructure Project Record ID#34876, a $101.836 million for Phase I of Zaire Province Integrated Infrastructure Project Record ID#34878, a $44.3 million loan for the 1,500 Vehicles Acquisition Project Record ID#34879, a $55.773 million loan for the Railway Transport Equipment Acquisition Project Record ID#34880, a $396 million loan for the Luanda, Benguela, Huambo, Uige, and Malanje Urban Transport Vehicle Acquisition Project There are some indications that the Government of Angola's borrowings under the September 2007 MLFA have financially underperformed vis-a-vis the original expectations of the lender.

As a result of the Government of Angola’s decision to avail itself of the G20's Debt Service Sustainability Initiative (DSSI), the MLFA and ILAs entered into by China Eximbank and the Government of Angola (described above) were under DSSI treatment and payments due by the Government of Angola under these finance agreements were suspended from May 1, 2020 until December 31, 2021.