Active Development AidData Chinese Aid

[Cancelled] CDB provides $3.656 billion loan to help Ukraine transition its power plants from gas to coal

$3.66M USD

Funder	China Development Bank (CDB)
Recipient Organization	Naftogaz of Ukraine
Country	Ukraine
Start Date	Dec 25, 2012
End Date	Oct 26, 2030
Duration	6,514 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`67216`

Grant Description

[Cancelled] CDB provides $3.656 billion loan to help Ukraine transition its power plants from gas to coal On December 25, 2012, China Development Bank and National Joint Stock Company Naftogaz (or ‘Naftogaz’ or ‘Нафтогаз Украин’) — a state-owned oil and gas company — signed a master facility agreement (general loan agreement) worth $3.656 billion to finance projects aimed towards the substitution of natural gas for domestically produced coal.

The loan had a maturity of 19-years (2012-2031), with a four-year use period for the preparation and approval of subsidiary projects (which would be financed through the signing of individual subsidiary loan agreements and managed by individual projects companies/special purpose vehicles). It was envisaged that the duration of individual subsidiary loan agreements would be 15-years.

The Government of Ukraine issued a sovereign guarantee in support of the $3.656 billion general loan agreement.

The proceeds of the loan were to be used by Naftogaz help the country’s power plants to replace Russian gas with Ukrainian coal as their main source of energy (and thus raise the share of coal in Ukraine’s production of electricity).

Initially, the parties agreed to finance construction of coal gasification facilities and modernization of the power stations.

Then, in 2015, parties backed by the Ministry of Energy of Ukraine and China’s Ministry of Commerce preliminarily agreed to extend the scope of the credit facility to include procurement of drilling rigs and energy modernization projects for households.

Accordingly, in late 2015, Naftogaz submitted four projects to Government of Ukraine Ministry of Economy for review and inclusion into the state register of investment proposals.

Obtaining this official status from the Ministry of Economy as well as delivery of the notice of support of the projects from the Ministry of Energy and Ministry of Finance to CDB was a pre-requisite for proceeding with further application to CDB. In August 2016, CDB and Naftogaz agreed to extend the use period of the general loan agreement until December 25, 2017.

However, in November 2017, the general loan agreement was terminated, as no subsidiary loan agreements had been submitted for approval.

📋 Staff Comments

The Chinese project title is 气改煤项目. The Ukrainian project title is проектов замещения газа углем. The Overseas Development Finance Dataset published by Boston University’s Global Development Policy Center in December 2020 records this CDB loan as a $3.5 billion commitment in 2012. AidData records it as a $3.656 billion loan that was officially committed in 2012 and subsequently cancelled. Thus, the status variable is set to Cancelled.

📚 Sources & References

'Нафтогаз' привлекает у банка КНР $3,656 млрд для проектов замещения газа углем, Николай Азаров предложил госбанку Китая открыть представительство в Украине
China extends project submission deadline for Naftogaz under 2012 energy projects credit facility
ANNUAL REPORT 2015, Позиция Минэнергоугля делает невозможной дальнейшую работу Нафтогаза в рамках кредитного проекта с Государственным банком развития КНР
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