required by the project, and therefore required more education and processing time than the
sponsors had originally anticipated.
The project sponsors’ negotiations for approval and support were more at the provincial
than at the central government level. Even though various provincial government support let-
ters did not represent legally enforceable obligations, they were viewed positively by the pro-
ject lenders because they were evidence of strong local support for the project. The project’s
unique, pathbreaking nature could not escape the attention of the central government, but the
Meizhou Wan project has no explicit guarantees or even support letters from central govern-
ment ministries or authorities. Nonetheless, the State Planning Commission approved and
reapproved the project, and the Ministry of Foreign Trade and Economic Cooperation
approved the establishment of a wholly owned foreign enterprise. Central government author-
ities also orally confirmed their support of the project to the lenders during the due diligence
process and presumably kept abreast of the project negotiations.
Gary Wigmore and Desiree Woo of Milbank, Tweed, Hadley & McCloy explain that for
many years developers had looked for ways to apply true project finance in China, but had
been held back by factors such as the need for local partners to ease the way, the lack of infra-
structure regulations, and the reluctance of lenders to rely solely on project revenues in this
uncertain legal and regulatory environment. From the beginning of their efforts the develop-
ers of the Meizhou Wan project envisioned a structure in which a wholly foreign-owned enti-
ty would complete the development and obtain true limited-recourse financing from
international lenders. Such a financing required world-standard documentation that never had
been used in China. As in many other developing countries, the first financing of its kind
required lengthy, painstaking education of, and negotiation with, local government officials.
Unlike the Laibin B, Changsha and other BOT projects, the Meizhou Wan project does not
rely on the state-sponsored BOT programme. As a result the sponsors could not take advantage
of a comprehensive concession agreement with the provincial government or a preassembled
regulatory approval and government support package. Without the benefit of the BOT regula-
tions to fast-track any approvals, the sponsors had to obtain approvals one by one from various
authorities at the state and provincial levels. However, their not being bound by the BOT pro-
gramme gave the sponsors more freedom to design project arrangements and a financing pack-
age tailored to the project. For example, they were able to draft and execute various support and
clarification letters, to demonstrate and verify the commitment by numerous government bod-
ies to support the project and carry out the intentions of the underlying project documents.
Among other legal issues that the sponsors had to resolve before financial closing was
the enforceability of arbitration in China. As with other joint ventures between Chinese and
foreign entities, the agreements between the project company and the Power Bureau provid-
ed for arbitration by the China International Economic and Trade Arbitration Commission
(CIETAC). However, the project company, notwithstanding its 100 per cent ownership by
foreign interests, was an entity established under Chinese law. The project lenders had doubts
about CIETAC’s jurisdiction over disputes between Chinese entities and sought to duplicate
the central government’s support for CIETAC arbitration as provided to the BOT projects.
Unlike the BOT projects, the Meizhou Wan project was not state sponsored. One of the ben-
efits of delay was that the problem resolved itself over time. In May 1998 CIETAC’s arbitra-
tion rules were amended, explicitly giving it jurisdiction over disputes between domestic
Chinese entities and foreign investment enterprises such as cooperative joint ventures, equi-
ty joint ventures and wholly foreign-owned enterprises.
MEIZHOU WAN, CHINA