Project ID: 178

China Eximbank provides $608 million loan for 1250 MW Merowe Hydroelectric Power Plant Project (Linked to Project ID#695, #56927, #56959)

Commitment amount

$ 1481126754.1501508

Adjusted commitment amount

$ 1481126754.15

Constant 2021 USD

Summary

Funding agency [Type]

Export-Import Bank of China (China Eximbank) [State-owned Policy Bank]

Recipient

Sudan

Sector

Energy (Code: 230)

Flow type

Loan

Level of public liability

Central government debt

Financial distress

Yes

Infrastructure

Yes

Category

Intent

Development (The next section lists the possible statuses.)

Commercial

Development

Representational

Mixed

Financial Flow Classification

ODA-like (The next section lists the possible statuses.)

Official Development Assistance

Other Official Flows

Vague (Official Finance)

Flows categorized based on OECD-DAC guidelines

Project lifecycle

Status

Completion (The next section lists the possible statuses.)

Pledge

Commitment

Implementation

Completion

Suspended

Cancelled

Milestones

Commitment

2003-12-23

Planned start

2005-07-30

Planned complete

2008-07-30

Actual complete

2010-04-08

NOTE: Red circles denote delays between planned and actual dates

Geography

Description

In October 2002, a joint venture called CCMD Corporation, which is between China International Water and Electric Corporation (CWE) and China Water Resources and Hydropower Engineering Corporation (CWHEC or Sinohydro), applied to China Eximbank for a loan guarantee before bidding on the 1250 MW Merowe Hydroelectric Power Plant Project in Sudan. On May 20, 2003, this Chinese consortium ended up winning three different contracts for this project: (1) a $600 million (EUR 550 million) contract signed on June 7, 2003 for construction of the dam; (2) a $60 million contract signed on December 23, 2003 for auxiliary projects related to the metal frame and hydraulic mechanics; and (3) a $400 million contract signed on December 23, 2003 for construction of substations and transmission lines. (Note: A $381.5 million loan for this project component is captured via Project ID#695). On December 23, 2003, China Eximbank and the Government of Sudan signed three different loan agreements worth a total of $519 million in order to partially finance the first two contracts: (1) a $400 million loan; (2) a $65 million loan; and (3) a $54 million loan. These loans carried the following borrowing terms: a 20 year maturity, a grace period between 6 and 7 years, and interest rate of 3-4%. China Eximbank later increased its total lending for the 1250 MW Merowe Hydroelectric Power Plant Project to $608 million (as captured via Project ID#178). The total project cost is unclear but estimates range from $1 billion to $3 billion. Therefore, several other entities served as co-financiers. The 1250 MW Merowe Hydroelectric Power Plant Project was co-financed with: (1) $250 million from Arab Fund for Social and Economic Development (and possibly an additional $211 million) (2) $150 million from the Kuwait Development Fund (and possibly an additional $50 million) (3) $150 million from the Abu Dhabi Foundation (4) $200 million from the Saudi Fund for Development (5) $15 million from the Government of Qatar (6) $106 million from the Government of Oman (7) $575 million from the Government of Sudan The 1250 MW Merowe Hydroelectric Power Plant Project involved the construction of a 9.7-kilometer-long and 65-meter-high dam with a total installed capacity of 1250 MW and a storage capacity at 12.4 billion cubic meters. It is located near Merowe Town in northern Sudan, about 350 kilometers (220 mi) north of the capital Khartoum. The project had 8 main components: (1) Dam: This component included the construction of concrete and embankment sections of the dam on the Nile River channel. The dam crest was to be 9.7 km long and 10 m wide, and its height 60 m above river bed. The dam was also to include the appurtenant structures such as spillway, water intakes and sediment sluices, as well as a hydropower station. (2) Preparatory Works: This component included the construction of housing facilities for construction supervision and operations personnel, the construction of 27 km access roads from Karima to the dam site, and a loading platform and storage areas at the nearby railway station. (3) Civil Works: This component included excavation, fill, drilling and grouting works, and concrete works for the dam and its appurtenant structures. It also included all civil works for the hydropower station, as well as all necessary instrumentation and monitoring equipment for the operation of the dam. (4) Mechanical Works: This component included the supply and installation of gates, pipes and related mechanical equipment for the dam and its appurtenant structures. (5) Hydro-Mechanical Works: This component included the supply and installation of gates, penstocks, cranes and related hydro-mechanical equipment necessary for the control of water, and operation and maintenance of the dam and its appurtenant structures. (6) Electromechanical and Electrical Works for the Power Station: This component included the furnishing and installation of ten turbines, each rated at 125 MW, and ten 150 MVA generators. It also included the construction of 500 and 220 kV switchyards, and the supply of the necessary transformers and bus bars, as well as control, protection and monitoring systems. (7) Transmission Lines: This component included the construction of 500 and 220 kV overhead lines having a total length of 1700 km, as well as seven sub-stations. (8) Consultancy Services: This component included the consultancy services required to review the conceptual design, prepare the detailed design, and construction supervision. The project owner was Sudan’s Ministry of Irrigation and Water Resources’ Merowe Dam Implementation Unit. The contractors responsible for implementation included China International Water and Electric Corporation (CWE), Sinohydro, Harbin Power Engineering Company (HPEC), and Alstom, a French company. The originally anticipated project commencement and completion dates were July 30, 2005 and July 30, 2008, respectively. The project began construction on July 8, 2003, and the first two generators were officially connected to the national grid on March 3, 2009. However, it was not until April 8, 2010 that the tenth unit of the Merowe dam was officially connected to the grid. However; issues with silt and debris accumulation threaten the long-term life of the dam. By 2020, the dam had lost 1.7% of its holding capacity. According to a 2015 book (entitled "Water, Civilisation and Power in Sudan") by Harry Verhoeven, Dr. Sabir Mohamed Hassan (the Governor of the Central Bank of Sudan) has "described one of the reasons for prioritising Merowe as 'the government needed something big to show to the people'. It was no coincidence that Omar Al-Bashir campaigned for the Sudanese presidency in April 2010 with a picture of himself in front of the Merowe Dam, the symbol of civilisation delivered by Al-Ingaz, as his main electoral poster." The project was awarded the Luban Prize, a master prize in the PRC for development projects. However, it was also plagued by controversy. The project participants were required to prepare or contract an environmental impact assessment (EIA) in accordance with specific guidelines that address three major topics: (1) Social issues -- consequences of people resettlement from future flooded area; and (2) Archeological issues -- resulting from destruction or submerging important archeological sites or places of high cultural value; and (3) Environmental issues -- effect of large scale hydrological alteration of the natural river system with major impacts on the environment and water quality. In April 2002, Lahmeyer International prepared the EIA report for the Merowe Dam Project. The report focused on complex resettlement issues involving about 7500 families. Among the environmental impacts it discussed were the hydrological changes, the erosion of the river bed and its banks, greenhouse gas emissions, and changes in the aquatic ecosystem. The 150 page report was far from meeting European or international standards, such as the guidelines of the World Commission on Dams. No serious attempt was made to use the vast scientific knowledge base on environmental effects of large dams, although four decades of research on the Aswan High Dam (Lake Nasser in Egypt, Lake Nubia in Sudan) had revealed a dramatic sediment accumulation in the upper part of the reservoir, problematic water quality issues and detrimental downstream effects such as river bed erosion or water level fluctuations. An estimated 60,000 civilians were ultimately displaced during the construction of the dam. Sudanese civilians protested the project’s execution from the start, and in a confrontation with authorities in April 2006, five people from a displaced community were killed. There are also some indications that the loans that were issued for the construction of the Merowe Hydroelectric Power Plant may have underperformed vis-a-vis lender expectations. According to Sudan’s Finance Minister Ali Mahmood Abdel-Rasool, China Eximbank suspended its financing for 11 projects in Sudan following the secession of South Sudan in July 2011, which triggered a major loss of oil revenue (a key source of collateral for China Eximbank loans). Ali Mahmood Abdel-Rasool said at the time that the Government of Sudan had previously pledged oil revenues (worth 120,000 barrels per day) to China Eximbank as a source of collateral. Then, on February 18, 2012, the Chinese Government announced that it had agreed to reschedule the outstanding debt obligations of the Government of Sudan by extending loan repayment periods by 5 years (as captured via Project ID#30421). According to the External Debt Unit of the Central Bank of Sudan, the Government of Sudan's total arrears to Chinese creditors amounted to $3.864 billion ($2.608 billion in principal, $1.129 billion in interest, and $127 million in penalty interest) as of March 31, 2022.

Additional details

1. This project is also called Sudan's Three Gorges Project. The Chinese project title is 麦罗维电站工程 or 麦洛维大坝工程 or 苏丹的麦洛维水库大坝工程 or 苏丹麦洛维项目 or 麦罗维大坝 or 苏丹麦洛维大坝工程 or 蘇丹麥洛維水電站項目 or 阿特巴拉-海亚公路项目. 2. SAIS-CARI's Chinese Loans to Africa Database claims that this project was financed with an export buyer's credit. However, according to an official source (http://www.tjjh.gov.cn/xyjh/xydt/gjdt/202008/t20200819_3490848.html), the project was financed with an export seller’s credit. This issue warrants further investigation. 3. AidData relies on the borrowing terms that are reported by the Government of Sudan. 4. According to an official source (http://www.tjjh.gov.cn/xyjh/xydt/gjdt/202008/t20200819_3490848.html), the borrower purchased a credit insurance policy from Sinosure. 5. Although China Eximbank increased its total lending for the 1250 MW Merowe Hydroelectric Power Plant Project to $608 million, it is unclear if the additional $89 million was provided through a separate loan agreement or an amendment to an existing loan agreement. This issue warrants further investigation. The joint venture between CWE and Sinohydro won four different contracts: 2A, 2B, 2C, and 3D worth a total of EUR 603 million (RMB 6 billion). Contracts 2A-C were probably signed in 2003 (described in first paragraph of the project description) and contract 3D (unknown) likely explains the increase in financing from China Eximbank. 6. The arrears data from the External Debt Unit of the Central Bank of Sudan are drawn from https://web.archive.org/web/20230208195131/https://cbos.gov.sd/sites/default/files/Quarter%201%20Report%20%202022%20.pdf 7. In order to facilitate the resettlement of people displaced by the Merowe Dam, the Chinese Government provided another $37.7 million for the Kehaila East Agriculture Scheme, the El Makabra Agriculture Scheme (Merowe Resettlement) Project (as captured via Project ID#56959), and $110.7 million for the New Amri Agriculture Scheme (Merowe Resettlement) Project (as captured via Project ID#56927). China Eximbank also provided a $381,467,000 loan for the Merowe Hydroelectric Dam Transmission Lines and Substations Project (as captured via Project ID#695).

Number of official sources

26

Number of total sources

51

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Details

Cofinanced

Yes

Cofinancing agencies [Type]

Kuwait Development Fund [Government Agency]

Government of Qatar [Government Agency]

Arab Fund for Economic and Social Development [Intergovernmental Organization]

Saudi Fund for Development [Government Agency]

Abu Dhabi Development Fund [Government Agency]

Government of Oman [Government Agency]

Direct receiving agencies [Type]

Government of Sudan [Government Agency]

Implementing agencies [Type]

China International Water and Electrical Corporation (CWE) [State-owned Company]

SinoHydro [State-owned Company]

Sudan Ministry of Water Resources, Irrigation and Electricity [Government Agency]

Alstom [Private Sector]

Sudan National Electricity Corporation (NEC Sudan) [State-owned Company]

Harbin Electric Company Limited [State-owned Company]

Insurance provider [Type]

China Export & Credit Insurance Corporation (Sinosure) [State-owned Company]

Collateral

Oil revenues worth 120,000 barrels per day

Loan Details

Maturity

20 years

Interest rate

3.5%

Grace period

7 years

Grant element (OECD Grant-Equiv)

39.8335%

Bilateral loan

Investment project loan