CDB provides $800 million via Tranche A of $1 billion oil-backed loan in August 2010 (Linked to Record ID#107517, #69319, #69320, #58839, #58842, #36002, #58827)

📋 Staff Comments

1. The transaction was governed by a Facility Agreement between CDB and the Ecuadorian Ministry of Finance and by a Four Party Agreement (between CDB, PetroChina, the Ecuador's Ministry of Finance, and PetroEcuador) that links the Facility Agreement to the Oil Sales and Purchase Contract between PetroEcuador and PetroChina. Figure 9 in the 'How China Lends' report (https://docs.aiddata.org/ad4/pdfs/How_China_Lends__A_Rare_Look_into_100_Debt_Contracts_with_Foreign_Governments.pdf) illustrates the contractual structure of the Four-Party Agreement. The $1 billion Facility Agreement, which was signed by CDB and Ecuador's Ministry of Finance on August 31, 2010, can be accessed in its entirety via https://www.dropbox.com/s/x8g19t71mup6jbj/1.2-Facility-Agreement-CDB-I.pdf?dl=0. The Four Party Agreement, which was signed by CDB, PetroChina, the Ecuador's Ministry of Finance, and PetroEcuador on August 31, 2010, can be accessed in its entirety via https://www.dropbox.com/s/p3k0kpu4bi9dmqh/1.1-Four-Party-Agreement-CDB-I_2010.pdf?dl=0. The Oil Sales and Purchase Contract (ID#2010253), which was signed PetroEcuador and PetroChina on August 31, 2010, can be accessed in its entirety via https://www.dropbox.com/s/124ldloys4mq4a9/Contrato-No-2010253.pdf?dl=0. Amended versions of the Oil Sales and Purchase Contract, dated December 20, 2012, June 27, 2014, January 28, 2016, and August 22, 2018 can be accessed in their entirety via https://www.dropbox.com/s/wuso0clv2nh8jul/27%20June%202014%20Amended%20Oil%20Prepayment%20Agreement%20Number%202010253.pdf?dl=0 and https://www.dropbox.com/s/tksa159hasomf0e/22%20August%202018%20Amended%20Oil%20Prepayment%20Agreement%20Number%202012291.pdf?dl=0. The account management agreement can be accessed in its entirety via https://www.dropbox.com/s/7nx6xnsl85diljc/2010-ec-china-account-management-agreement.pdf?dl=0.
2. From 2010 to 2016, the Government of Ecuador entered into four separate loan agreements with China Development Bank totaling $7 billion which are related to a multi-party contractual structure that involves crude oil delivery contracts entered into with PetroChina and Unipec. Deliveries under these contracts are based upon international spot prices, such as WTI plus or minus a spread, plus a premium paid due to the term of the contracts. The spread is calculated using Argus, a crude oil price assessment publication (“Argus”) and the quality of crude oil as measured by the American Petroleum Institute. Under these agreements, Ecuador is required to invest the loaned amounts in specific infrastructure projects or programs in Ecuador. The $1 billion loan agreement with CDB in 2010 is captured via Record IDs #35865 and #107517. The $2 billion loan agreement with CDB in 2011 is captured via Record ID#69319 and ID#69320. The $2 billion loan agreement with CDB in 2012 is captured via Record ID#36002 and #58827. The $2 billion loan agreement with CDB in 2016 is captured via Record ID#58839 and ID#58842.
3. The account management agreement that was signed by Petroecuador (on behalf of the Republic of Ecuador) and China Development Bank on August 31, 2010 specifies that ‘[t]he Account Holder [Petroecuador (on behalf of the Republic of Ecuador)] shall ensure that: during the Tranche A Availability Period: (i) by no later than the date falling twenty (20) Business Days prior to the date of first Utilisation of the Tranche A Facility and thereafter for each Relevant Period or part thereof in any Interest Period in the Tranche A Availability Period, the amount standing to the credit of the Proceeds Account is no less than the Initial Required Amount [US$50,000,000]; and (ii) by no later than the date falling twenty (20) Business Days prior to the date of first Utilisation of the Tranche B Facility and thereafter for each Relevant Period or part thereof in any Interest Period in the Tranche A Availability Period, the amount standing to the credit of the Proceeds Account is no less than the Long Term Required Amount [US$113,000,000].’ It also specifies that ‘after the Tranche A Availability Period, the amount standing to the credit of the Proceeds Account in each Relevant Period in an Interest Period, is not less than the Long Term Required Amount.’ The account management agreement also specifies that “[t]he Account Holder [Petroecuador (on behalf of the Republic of Ecuador)] shall procure that all amounts to be paid by PetroChina Intl. under the Sales and Purchase Contract are paid directly into the Proceeds Account. 3.2 Any deposit made into the Proceeds Account must be in Dollars. 3.3 If CDB receives any deposit for the Proceeds Account in a currency other than Dollars before 3:00 pm (Beijing time) on any day, it shall effect the conversion of those moneys into Dollars on that day, at the spot rate of exchange quoted by CDB for the conversion of that currency into Dollars on that day. If CDB receives any deposit for the Proceeds Account in a currency other than Dollars after 3:00 pm (Beijing time) on any day, it shall effect the conversion of those moneys into Dollars on the following day at the spot rate of exchange quoted by CDB for the conversion of that currency into Dollars on the following day (provided if banks in Beijing are not open for business on the following day, CDB shall effect the conversion on the next immediate day banks in Beijing are open for business).’ Additionally, the account management agreement specifies that ‘[t]he Account Holder [Petroecuador (on behalf of the Republic of Ecuador)] acknowledges CDB's statutory rights under Chinese law and regulation to deduct from amounts standing to the credit of the Proceeds Account any amounts owed to CDB under this Agreement or any other agreement between CDB and the Republic of Ecuador, with the express understanding by the Parties that this acknowledgment: does not constitute the creation of any security interest, lien, priority right, contractual right of set-off and/or contractual privilege; constitutes an admission by the Account Holder of the right of CDB to deduct or debit all or part of the balances in the Proceeds Account to pay and/or discharge all or part of the Republic of Ecuador’s (acting for itself or through a person, entity acting as representative and/or entity, acting for and or behalf of the Republic of Ecuador) liabilities due and owing to CDB under this Agreement or any other agreement between CDB and the Republic of Ecuador (acting for itself or through a person, entity acting as representative and/or entity, acting for and on behalf of the Republic of Ecuador) in exercise of its rights under Chinese law and regulation; and 14.1.1 acknowledges CDB's statutory rights under Chinese law and regulation to exercise its rights of deduction without giving notice to the Account Holder.’ Another section of the account management agreement specifies that ‘[s]ubject to Clause 18.2 (Termination of the account service), the Account Holder [Petroecuador (on behalf of the Republic of Ecuador)] shall not be permitted to make any withdrawal from the Proceeds Account on any date: if a Default or Mandatory Prepayment Event is continuing; or if, or if as a result of the withdrawal, the amount standing to the credit of the Proceeds Account on the proposed withdrawal date is, or would be, less than the Long Term Required Amount’. The Tranche A and Tranche B availability periods were identical, running from August 31, 2010 to March 3, 2011. Therefore, between August 31, 2010 to March 3, 2011, the borrower was required to maintain a minimum cash balance of somewhere between $50 million and $113 million in the Proceeds Account. Then, from March 4, 2011 to August 31, 2014 (the loan’s final maturity date), the borrower was required to maintain a minimum cash balance of $113 million in the Proceeds Account. The Account Management Agreement can be accessed in its entirety via https://www.dropbox.com/s/7nx6xnsl85diljc/2010-ec-china-account-management-agreement.pdf?dl=0.
4. The Ecuadorian Ministry of Finance loan identification number is 23160000.

📚 Sources & References

• China will provide $1 billion loan to Ecuador on energy generation, oil, and communication(中国将向厄瓜多尔提供10亿美元贷款), $1,000,000,000 Facility Agreement, 2019 Bond Prospectus Government of Ecuador
• A Line in the Equatorial Forests: Chinese Investment and the Environmental and Social Impacts of Extractive Industries in Ecuador
• Account Management Agreement
• Acuerdo Suplementario Al Contrato de Compraventa de Petróleo Crudo
• Americas crude: Ecuador offers contracts to China
• Bartering Globalization: China’s Commodity- backed Finance in Africa and Latin America
• Building Development for a New Era: China’s Infrastructure Projects in Latin America and the Caribbean
• CBD Loan Agreement with PetroEcuador
• China's loans for oil: asset or liability?
• China, the Politic and Economic Strategic Partner of Ecuador in the Era of the Socialism of the Twenty - first Century
• China-Latin America Finance Database
• Chinese 'Loan-for-Oil' Deals in Brazil
• Venezuela, and Ecuador: Local Concerns and Perceptions
• Chinese Investments in Ecuador
• Contrato-No-2010253, cuador
• China sign cooperation agreement
• Ecuador and China will sign a $1 billion oil loan agreement
• Ecuador Minister: Talks For $1.0Bln Loan From China Suspended
• Ecuador Negotiates $1 Billion Loan With China
• Ecuador receives $1 billion in financing from China for strategic projects, joint ventures
• Ecuador secures USD 1bn loan from China
• Ecuador set to receive $1 billion loan from China-report
• Ecuador signs $1 bil Chinese loan for oil projects: ministry
• Ecuador Signs Memorandum With China's CAMC For Government Projects
• Ecuador’s Energy Policy Mix: Development
• Conservation and Nationalism with Chinese Loans (ARI)
• Four Party Agreement CDB 2010
• How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments
• INFORME-EJECUCION-AÑO-2010
• INFORME-EJECUCION-PRIMER-SEMESTRE-2010
• Inside China
• Inc: China Development Bank’s Cross-Border Energy Deals
• March 2016 External and Internal Credit Contracts
• Minutes of Meetings between CDB and Ecuador's Ministry of Finance
• Petroecuador Oil Sales and Purchase Contract with PetroChina
• Propuesta de Crédito del Banco de Desarrollo de China
• The New Banks in Town: Chinese Finance in Latin America
• The New Banks in Town: Chinese Finance in Latin America
• UPDATE: Ecuador
• China Development Bank
• Sign $1Bln Loan
• 厄瓜多尔从中国获得12亿美元贷款 Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.