Case | HBS Case Collection | June 1988 (Revised December 1991)

An Tai Bao Coal Mining Project

by W. Carl Kester and Richard P. Melnick

Abstract

An Tai Bao is the world's largest open-pit coal mine and is located in China's Shanxi province. After eight years of planning and negotiating, Occidental Petroleum, the foreign partner in the deal, is about to sign an ownership and financing agreement for $475 million that involves $20 million of its own equity and limited recourse. The deal contains a number of unusual features including the tying of recourse to nonconcurrent, partial competition tests, and a covenant forcing sponsors to buy back the entire project from the joint venture owning it in the event of postcompletion default. Students are required to determine if the terms of the deal are attractive to each of the parties involved.

Keywords: Planning; Agreements and Arrangements; Non-Renewable Energy; Equity; Partners and Partnerships; Negotiation Deal; Joint Ventures; Mining Industry; China;

Citation:

Kester, W. Carl, and Richard P. Melnick. "An Tai Bao Coal Mining Project." Harvard Business School Case 288-041, June 1988. (Revised December 1991.)