Basra Gas Company and CPECC secure deferred payment agreement for BGC Portfolio Rehabilitation Project

📋 Staff Comments

1. In Chinese, a deferred payment agreement is known as 延期付款协议.
2. In a typical receivables financing agreement (or deferred payment agreement), the company that the project owner in the host country has selected as its engineering, procurement, and construction (EPC) contractor is also a lender to the project owner. The company assigns receivables under its EPC contract with the project owner to one of or more banks. Upon assignment of receivables, the bank or banks will release funds to the company so it can discharge its obligations under the receivables financing agreement as a lender. Receivables financing is also known as accounts receivable financing (finance) or A/R financing (finance) or 应收账款融资 (in Chinese). These other terms are used because the accounts receivable of a company (i.e., unpaid invoices) are being used as collateral to unlock working capital—typically in the form of a bank loan (‘receivables loan’). Sellers often face cash flow problems when their buyers do not make full payment at the due date of the invoice. A receivables financing arrangement addresses this problem by allowing them to sell their outstanding invoices to a bank at a discounted rate. This approach allows the seller to receive the remaining invoice amount before the due date of the invoice. The bank either gets its money back at invoice maturity through the seller (acting as a collecting agent) or directly from the debtor.
3. More likely than not, a Chinese state-owned bank signed an accounts receivable transfer agreement with CPECC to provide financing for the construction period of the project. In this type of arrangement, the exporter (seller) procures insurance from Sinosure and transfers its accounts receivable under the insurance policy to a bank. The bank then grants financing to the exporter (seller) and becomes the insured under the transferred insurance policy. When an insured loss occurs, Sinosure pays indemnity to the financing bank pursuant to the insurance policy and the Accounts Receivable Transfer Agreement. However, this issue requires further investigation.
4. This project is also known as the Rehabilitation Of Iraq South Gas Facilities Project, the Basrah Gas Company/Shell South Gas Facilities Rehabilitation Project, the BGC Rehabilitation Portfolio HP-Lpg Project, the Rehabilitation of Iraq South Gas Facilities West Qurna Unit Project. The Chinese project title is 壳牌伊拉克巴士拉天然气老厂改造项目.
5. The face value of the deferred payment agreement is unknown. For the time being, AidData assumes that it is equivalent to 85% of the value of the EPC contract ($238 million).

📚 Sources & References

• CPECC Major Projects in Iraq
• Li Wei
• Muhammad Servar Khan
• Procurement starts at Iraq gas capture project
• Kazhimukan Aneshov
• CNPC FINANCE (HK) LIMITED 2013 ANNUAL REPORT, 2.8亿美元!中国石油工程建设公司与壳牌签约伊拉克改造项目
• 笃定前行 闯出中东市场新天地
• BNGL项目安全人工时超百万, 2017 Annual Report, 2016 Annual Report 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.