By Julius Barigaba, KAMPALA Uganda
Sponsors of the East African Crude Oil Pipeline (Eacop) are looking for only $1.8 billion, which is expected to come from several Chinese lenders and two African banks, top officials of Uganda’s Ministry of Energy said on Friday.
“We are looking for $1.8
billion for the remainder on debt financing,” said Ugandan Energy Minister Ruth
Nankabirwa.
“So far two companies from two
African countries are offering,” the minister said, declining to name the
companies or where they are domiciled.
She confirmed that equity financing for the project is fully paid up by its
four shareholders.
However, the Permanent
Secretary Ministry of Energy Irene Batebe told TheEastAfrican that
most of the money required to complete the project’s debt financing will come
from the “main Chinese banks”, Afriexim Bank and other African “funders that we
cannot mention for now.”
Sources close to the project mentioned China Exim Bank, a long-time lender to
Uganda’s infrastructure projects, as one of the financiers expected to provide
some of the loans for the $5 billion project that will transport Uganda’s oil
over 1,443km from Lake Albert oilfields to the Tanzania port of Tanga.
Industry analysts say that the
growing number of Chinese companies getting project contracts for upstream
production and Eacop suggests that China is the source of loans, and Beijing is
leveraging on this to influence its firms' getting business.
Last month, China Petroleum
Pipeline Engineering signed a deal for construction and supply of line pipe for
Eacop, making it the fourth Chinese firm with big money tender in the
oilfield's development contracts and export pipeline deals.
French supermajor TotalEnergies
is the lead investor in the pipeline project with 62 percent stake while the
Uganda National Oil Company and Tanzania Petroleum Development Corporation each
own a 15 percent stake. China National Offshore Oil Corporation owns eight
percent stake.
Eacop is financed 60 percent debt and 40 percent equity, with debt estimated at $2-3 billion, according to TotalEnergies shareholders meeting records for 2022.
During the just concluded 10th
East African Petroleum Conference and Exhibition in Kampala, speakers, including
the executive chairman of the African Energy Chamber NJ Ayuk, guaranteed the
success of the cross-border project because “no pipeline project has ever
failed due to financing”.
Ayuk, a passionate defender of
Africa’s use of its minerals, oil and gas resources for energy transition, says
the West should not dictate that Africa abandons its fossil fuel projects to
decarbonise as this would hinder industrialisation programmes, condemning
populations to poverty.
“No one should make any
apologies for using their resources to get their people out of poverty,” he
said.
We could not confirm if one of
the African banks mentioned is Standard/Stanbic bank, which besides being a
financial giant on the continent, is also one of the transaction advisers,
alongside Japan’s Sumitomo Mitsui Banking Corporation, and the Industrial and
Commercial Bank of China (ICBC).
There have been unconfirmed
reports within the project finance industry that Chinese giant ICBC moved an
estimated $1-2 billion to Standard Bank of South Africa, where it is
shareholder, to capitalise the lender for purposes of lending to Eacop, which
advisers to the transaction cannot confirm.
Kenneth Agutamba, head of
corporate communications at Stanbic Bank Uganda, said the bank cannot comment
on the transactional questions relating to the project due to client confidentiality
provisions.
The lender says its
participation in the funding of the Eacop remains subject to its credit
approval process, which includes consideration of the findings of the
environmental and social due diligence assessments and meeting the Equator
Principles requirements.
It is also subject to a full
assessment of the Eacop sponsors’ climate change strategies and targets.
“Potential lenders, including
Standard/Stanbic Bank, are relying on the services of an independent
environmental and social consultant (IESC/LESC) to undertake their
environmental and social due diligence.
“The LESC recently concluded
an update of the environmental and social due diligence report which has been
shared with the lenders for their consideration. The findings of the
report are currently being reviewed by internal experts,” said Stanbic/Standard
Bank, adding that project finance deals are subject to a full suite of due
diligence to inform decision-making processes, covering legal, technical,
security, market, reserves, environmental, social and other considerations.
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