China Eximbank provides $2 billion oil-backed buyer’s credit loan facility for infrastructure projects (Linked to Record ID#62125, #62264)

China Eximbank provides $2 billion oil-backed buyer’s credit loan facility for infrastructure projects On November 16, 2006, China Eximbank and the Government of Equatorial Guinea signed a $2 billion buyer’s credit facility agreement (互惠贷款) for various infrastructure projects.

The subsidiary buyer's credit loans under the $2 billion facility were secured with (i.e. collateralized against) minimum cash balances in an escrow account opened by Government of Equatorial Guinea in China Eximbank.

Under the original terms of an Account Settlement and Financing Agreement (Convenio de Liquidacion de cuentas y Financiamiento) that the parties signed on February 17, 2006, the minimum cash balance requirement was reportedly equivalent to 30 percent of the Government of Equatorial Guinea's outstanding stock of debt to China Eximbank.

After the Account Settlement and Financing Agreement was amended on March 26, 2010, the borrower was expected -- at any given point in time -- to maintain a minimum cash balance in the escrow account (also known as 赤道几内亚共和国财务预算部) equivalent to the value of its next set of semi-annual principal, interest, and fee payment obligations to the lender.

The borrower was also expected to deposit the cash proceeds from its oil export sales (crude oil sales revenue) to China into a payment reserve account (also known as 还款准备金 or 赤道几内亚共和国财务预算部还款准备金).

More specifically, the borrower was expected to deposit the cash proceeds from six oil cargoes into the payment reserve account.

As of 2012-2013, $1 billion had been drawn from the oil-backed buyer’s credit loan facility, and the Government of Equatorial Guinea was still drawing upon the credit line as of 2018.

Subsidiary loans approved under the facility include: Record ID#1056 for the Bata Port Rehabilitation and Expansion Project Record ID#61136 for the Malabo International Airport Expansion Project Record ID#61151 for the 88.6 km Micameseng-Bongora Road Reconstruction Project Record ID#30542 for the GECOMSA Telecommunications Project Record ID#67139 for the Bata Five-Star Hotel Construction Project Record ID#61531 for the Military Camp Construction Project Record ID#61539 for the Malabo National Park Construction Project Record ID#61631 for Phases and 2 2 of the 66kV Malabo Power Grid Project Record ID#61634 for the Malabo Natural Gas Power Plant Construction Project Record ID#61637 for the SIPOPO International Convention Center Construction Project Record ID#995 for the 120MW Djibloho Hydropower Station Project Record ID#62082 for the Djibloho Power Transmission and Transformation Project Record ID#62127 for the Djibloho Regulating Reservoir Project Record ID#62131 for the New Capital of Oyala (Djibloho) Construction Project Record ID#91831 for the Oyala 500 Housing Units Construction Project Record ID#107614 for the Technical Assistance Project On April 28, 2015, China Eximbank expanded the buyer’s credit facility agreement (i.e. credit line) by another $500 million.

This expansion, which is captured via (umbrella) Record ID#62125, supported the New City of Djibloho Project (Record ID#62131).

On January 21, 2020, YANG Bin, a Division Chief in China Eximbank's Concessional Loan Department sent a letter to Equatorial Guinea's Ministry of Finance.

The letter notified Equatorial Guinea's Ministry of Finance that its aggregate (principal) amount outstanding under the oil-backed buyer’s credit facility agreement was $226,505,172.49.

It also informed Equatorial Guinea's Ministry of Finance of its estimated semi-annual principal, interest, and fee payment obligations as of July 21, 2020: $58,416,671.63 [$49,131,680.76 in principal payments, $6,298,102.17 in interest payments, $2,414,333.94 in commitment fee payments, and $572,554.76 risk guarantee (garantia del riesgo) costs].

Then, on March 5, 2020, RAN Longfei, the Deputy Regional Director for Africa in China Eximbank's Sovereign Business Department, sent a letter to Equatorial Guinea's Minister of Finance Cesar Augusto MBA ABOGO. The letter reads as follows: “[r]eference is made to our letter dated January 7, 2020.

According to the Account Agreement for the Escrow Account and the Oil Sales Agreement, 6 cargoes of oil sales revenue shall be deposited to the Escrow Account each year. However, we only received 5 cargoes of oil sales revenue for the year 2019.

Your Ministry has not fulfilled your obligations under the Account Agreement, which will have negative effect on your Ministry's credit and other ongoing projects.

Besides, since the Escrow Account balance does not meet the minimum amount requirements, we could not proceed any payment for other parties.

Your Ministry is kindly requested to deposit one cargo of oil sales revenue to the Escrow Account immediately to meet the requirements for the year 2019, and provide us a schedule of crude oil delivery plan for the year 2020.

Your personal attention and cooperation will be highly appreciated.” As of January 2020, Equatorial Guinea's Ministry of Finance was expected to maintain a minimum cash balance of $58,416,671.63 in its escrow account with China Eximbank (an amount equivalent to the next semi-annual installment of principal, interest, and fees due to China Eximbank in July 2020).

However, the actual cash balance of the escrow account was $39,223,380.18 as of February 13, 2020.

The cash balance of the escrow account was $100,698,988 as of December 31, 2017, $85.725,355.79 as of March 31, 2018, $149,825,137 as of April 30, 2018, $157,600,000 as of June 30, 2018, $75,923,212.60 as of July 31, 2018, $220,890,603.40 as of September 30, 2018, $241,848,587.20 as of December 31, 2019, and $39,223,380.18 as of February 13, 2020.

The cash balance of the payment reserve account was $478,423,556 as of December 31, 2017, $478,423,556.50 as of March 31, 2018, $478,423,556.50 as of April 30, 2018, $478,423,556.50 as of June 30, 2018, $478,423,556.50 as of July 31, 2018, $478,423,556.50 as of September 30, 2018, $475,537,571.28 as of December 21, 2019, and $483,516,774 as of December 31, 2019.