The picture shows the construction site of the 1.1GW wind power project in Suez, Egypt. (Photo provided by ABC)
"The Agricultural Bank of China (ABC)'s service is truly acting fast, solving a major problem for us," on January 17, 2025, Xu Panlong, the financial director of the China Power Construction Corporation's Egyptian project, said joyfully when he received the guarantee letter for the 1.1GW wind power project in Suez, Egypt. It took only more than ten days from the project signing to the submission of the guarantee letter, thanks to the rapid support of ABC. The enterprise won the project opportunity in advance and also reduced financial costs.
The guarantee letter was delivered to the owner on time, and the project was able to proceed smoothly. During this process, ABC Dubai Branch, leveraging its onshore banking license advantage, worked in tandem with the domestic branches to smoothly open an engineering guarantee letter for the overseas subsidiary of a Chinese-funded enterprise, becoming an effective practice of financial connectivity under the Belt and Road Initiative in the Middle East.
Chinese Contractors Take Active Part in Middle East Market
Major Middle East countries such as the United Arab Emirates (UAE), Saudi Arabia, and Qatar have long relied on oil and gas energy revenues. However, global energy transformation and fluctuations in international oil prices have prompted these countries to launch economic diversification strategies, such as Saudi Arabia's Vision 2030 and the UAE's Centennial Plan 2071. The core of these plans is to fully utilize the income from the oil industry to vigorously develop non-oil industries such as new energy, finance, technology, and tourism. As a result, there is a large demand for new energy projects, urban infrastructure, and industrial park construction.
China has good diplomatic and economic relations with major Middle Eastern countries, and the bilateral trade volume between China and the Arab world has been increasing year by year. Chinese contractors have advantages such as strong cost control capabilities, advanced engineering technology, and rich project construction experience. Therefore, Middle Eastern countries all hope to improve their infrastructure levels through China's investment and technology. For Chinese enterprises, actively participating in projects in the Middle East not only means more business opportunities but also serves as an important springboard for China's technology to go global and for its brands to internationalize.
Against this backdrop, Chinese engineering contracting enterprises are increasingly involved in key projects in the Middle East countries. To ensure the smooth start of construction, project owners require the winning bidder to provide a letter of guarantee issued by a bank. What troubles many Chinese-funded enterprises is that project owners have special requirements for the qualifications of the banks that issue guarantees. Generally, they only accept guarantees issued by banks under the supervision of the central bank of their own country or region. Guarantees issued unilaterally by Chinese domestic banks are difficult to be accepted, and foreign banks in the local area have strict terms and high fees for issuing guarantees.
Banking Against the Clock to Provide Fast-Track Engineering Guarantees
The Middle East Company, a subsidiary of PowerChina Huadong Engineering Corporation Limited (hereinafter referred to as "HDEC"), was registered in the Dubai Free Trade Zone of UAE. It is mainly responsible for business in the Middle East and North Africa (MENA) region, including project development and execution in the fields of new energy, water and desalination in countries such as the UAE, Saudi Arabia and Oman. After several rounds of fierce competition, on December 26, 2024, the Egypt Branch of PowerChina International Group Limited, HDEC Middle East Company and Suez Wind Energy Company signed the EPC contract for the 1.1GW wind power project in Suez, Egypt.
The project is located on the coast of the Gulf of Suez, about 357 kilometers southeast of Cairo, the capital of Egypt. It includes two wind farm areas each with a capacity of 550MW respectively and three on-site step-up substations. Once completed, it will become the largest onshore wind power plant in the MENA region, with an estimated annual power generation of 4,111 GWh, providing clean, reliable and reasonably priced energy to over one million households and reducing about 1.71 million tons of carbon dioxide emissions annually.
Due to the large contract amount of the project, the performance guarantee and advance payment guarantee that the HDEC Middle East Company needed to provide exceeded the existing credit line of HDEC and the time limit for submitting the guarantee was only about ten days.
"This is a huge challenge for us," said Xu Panlong, who was troubled and immediately contacted ABC Dubai Branch for support. The Dubai Branch, on the one hand, actively communicated with ABC Zhejiang Branch to seek rapid processing and credit line support, and on the other hand, promptly shared the progress of the guarantee issuance with the HDEC Middle East Company and reminded them to pay attention to potential risks in the guarantee document to enable the enterprise to take preventive measures in advance.
Under the circumstances of high guarantee amount and tight time limit, after receiving the application from the HDEC Middle East Company, ABC Zhejiang Branch immediately initiated the credit assessment process and opened a "green approval channel". Based on the credit status, historical cooperation records and actual project conditions of the HDEC Middle East Company, the credit plan was optimized, and the credit line for the guarantee business of the HDEC headquarter was increased within a few days. At the same time, in response to the strict time requirements for guarantee issuance, a priority acceptance, rapid approval and dedicated follow-up working mechanism was adopted. From the submission of materials to the official issuance of the guarantee, it only took about ten days.
Through the joint efforts of all parties, on January 17, 2025, the HDEC Middle East Company received the letter of guarantee issued by ABC Dubai Branch and submitted it to the owner.
Bank-Enterprise Cooperation Powers Belt and Road Cross-Border Financial Flows
In this practice of bank-enterprise cooperation to support overseas projects, ABC Dubai Branch leveraged its onshore banking license advantage and collaborated with domestic branches. By using the credit line of the domestic parent company of the engineering contracting enterprise at ABC's domestic branches, it successfully addressed the issue of credit line for overseas subsidiaries and smoothly issued various types of engineering performance guarantees for them.
Yu Dongzhi, the General Manager of ABC Dubai Branch, summarized that issuing performance guarantees through the domestic and overseas interaction approach not only fully exploits the advantage of overseas branches being more familiar with the local financial, regulatory, and business environment to provide opinions and financial support in line with international standards. It also takes full advantage of the long-term cooperation between domestic branches and customers and their better understanding of the enterprises' production and operation conditions to quickly provide credit endorsements for enterprises, reduce credit costs, improve financing efficiency, and thereby better support Chinese enterprises "going global" in participating in large-scale Belt and Road project construction.
This cooperation between the bank and the enterprise has enabled the enterprise to gain an early advantage in the project, reduce its financial costs, effectively solve the difficulties and pain points faced in the engineering contracting, and significantly enhance the enterprise's competitiveness in the overseas market. Xu Panlong believes that such practices are also conducive to ABC in building a complete international financial service system and enhancing its influence in the Belt and Road engineering contracting market. (By Zhang Jian)
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