JBIC Provides Project Finance for Construction of Nacala Railway and Port Infrastructure in the Republic of Mozambique and the Republic of Malawi
Supporting the securing of a stable supply of mineral resources to Japan
- Area: Africa
- Energy and Natural Resources
- [Project Finance]
- Overseas Investment Loans
The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed, on November 27 a loan agreement in project financing*1
with two corporations in the Republic of Mozambique (Mozambique)*2
and two corporations in the Republic of Malawi,*3
in which Mitsui & Co., Ltd. and Vale S.A. hold an equity stake amounting up to USD1,030 million (JBIC portion). This project is an internationally co-financed project by the African Development Bank (AfDB) and private financial institutions, including Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Standard Chartered Bank, Nippon Life Insurance Company, the Bank of Tokyo-Mitsubishi UFJ, Ltd., as well as Sumitomo Mitsui Trust Bank, Limited. The syndicated loans bring the total co-financing amount to USD2,730 million. The financing provided by the private financial institutions will be covered by insurance from Nippon Export and Investment Insurance (NEXI) and the Export Credit Insurance Corporation of South Africa SOC Ltd (ECIC).
The aim of this project is to construct the railway and port infrastructure which is needed to transport and export coal produced from the Moatize coal mine in Mozambique. This project is expected to boost the quantity of coal exported to Japan from Moatize coal mine. Japan is totally dependent on the import of coking coal from abroad which is used to produce steel, and about half of coking coal imports come from Australia. In recent years, the supply of coking coal from Australia has become unstable because of the impact of natural disasters. Also, it is observed that several large coal companies form an oligopoly in the global coal mining market. Under such circumstances, it is important for Japan to secure a stable supply of high-quality coking coal from new sources over the long term and diversify its supply sources. The coking coal obtained from the Moatize coal mine is of high quality and suitable for use in producing iron and steel. This project will contribute to securing a stable and long-term supply of mineral resources to Japan.
The promotion of economic structural reform in Africa through economic diversification and industrialization was raised as an important topic of discussion at the 6th Tokyo International Conference on African Development (TICAD VI). During the conference, the Japanese government expressed its commitment to supporting further economic development in the African region through public and private sector cooperation. Following the launch of JBIC's Facility for African Investment and Trade Enhancement (FAITH) in June 2013, JBIC established FAITH2*4
to expand the financial support provided under the previously launched FAITH. This project is the first natural resources-related infrastructure project financed by JBIC under FAITH2 and JBIC's largest financial commitment in Africa.
As Japan's policy-based financial institution, JBIC will provide financial support for securing a stable supply of mineral resources to Japan and raising its self-development ratio of mineral resources, while proactively encouraging Japanese companies to participate in development of mineral resources abroad or acquire interests in those resources, through use of various financial instruments for structuring projects and expansion of JBIC's risk-taking ability.
- *1 Project finance is a financing scheme in which repayments for a loan are made solely from the cash flows generated by the project.
- *2 Corredor Logístico Integrado De Nacala SA and Corredor De Desenvolvimento Do Norte SA
- *3 Vale Logistics Limited and The Central East African Railways Company PLC
- *4 For details, please refer to the news issued on August 29, 2016.