operate and maintain the plant under normal circumstances, taking responsibility for liqui-
dated damages and other obligations normally assumed by experienced power plant opera-
tors. However, if the Power Bureau has difficulty running the plant, it can require InterGen to
take over responsibility for running it under a 20-year backup O&M agreement.
Land use rights transfer agreements
In the early stages of negotiation with the Power Bureau the project sponsors thought that
they had done everything that was required to acquire the plant site. However, in 1997, just
after the sponsors and local land bureau had signed the Land Use Rights Transfer
Agreements, the central government issued a moratorium on the grant of arable land. The
land bureau delayed issuing the land use rights certificates that were required to mortgage the
land use rights to the project site until it had sorted out the ramifications of the moratorium
on the Meizhou Wan project.
How the financing was arranged
Originally the International Finance Corporation (IFC), the private financing arm of the
World Bank, and the ADB were expected to provide most of the financing. After two years,
however, the sponsors decided not to go forward with the IFC component of the financing
and to rely on the ADB, along with strong underwriting and syndication commitments from
four commercial banks: Banque Paribas, Bank of America, Credit Suisse First Boston and
Tokai Bank. This was the first project in China in which the ADB took an equity interest in
addition to providing cover.
Additional financing commitments came from Coface, the French ECA; Cesce, the
Spanish ECA; and the lenders that joined the commercial bank syndicate. The Coface facility
provided both political and commercial risk cover, while the Cesce facility provided political
risk cover only. The presence of two ECAs led to complex security and intercreditor issues,
especially in a country such as China, where law develops on a provincial rather than a nation-
al basis and therefore lessons learned from provinces other than Fujian are of limited value.
Although many recent joint-venture projects between Chinese and foreign entities had
been financed partly in Chinese currency (renminbi (Rmb)), the sponsors preferred to rely
only on US dollar-denominated debt facilities. In this way they were able to avoid lengthy
intercreditor negotiations with renminbi lenders.
In May 2002 the Fujian provincial government reportedly reneged on its obligations
under the PPA and proposed that the tariff be reduced from Rmb0.56 to Rmb0.44 per KW
hour.^2 After prolonged negotiations with the provincial government, the project sponsors
were reported in November 2002 to be trying to replace the project’s dollar-denominated
loans with renminbi-denominated financing. They were reported to believe that the reduced
revenues proposed by the provincial government would not be sufficient to service the orig-
inal project financing provided by the foreign bank consortium and the ADB.^3
Lessons learned
Wigmore and Woo of Milbank, Tweed believe that Meizhou Wan serves as a model for what
can and must be done to close a large, complex project financing in the turbulent Asian envi-
MEIZHOU WAN, CHINA