Narrative
Full Description
Project narrative
On September 25, 2007, China Eximbank and the Government of Ghana signed a buyer’s credit loan (BCL) agreement worth $293,506,062 for the Bui Dam Construction Project. Then, on September 3, 2008, China Eximbank and the Government of Ghana signed a government concessional loan (GCL) agreement worth RMB 2.1 billion ($330 million). The BCL carried the following borrowing terms: a 17.2 year-maturity (final maturity date: November 21, 2025), a 5-year grace period (first repayment date: September 3, 2013), an interest rate of CIRR plus a margin of 0.75% (6.13%), a 0.3% commitment fee, and a 0.3% management fee. The GCL carried the following borrowing terms: a 2% interest rate, a 20 year maturity (final maturity date: September 3, 2028), a 7 year grace period (first repayment date: September 3, 2015), a 0.3% commitment fee, and a 0.3% management fee. The GCL is captured via Record ID#30801 and the BCL is captured via Record ID#183. The borrower also purchased a buyer’s credit insurance policy from Sinosure at a cost of $25 million for the BCL (i.e. 8.5% of the face value of the BCL). According to the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS), the $293,506,062 loan (BCL) and the $330,000,000 loan (GCL) jointly achieved a 81.2% average disbursement rate, with China Eximbank making 30 loan disbursements (worth $505,088,349.00) between 2009 and 2012: a $57,786,692.00 disbursement (for invoice/interim payment certificate #1) on May 15, 2009, a $35,217,544.00 disbursement (for invoice/interim payment certificate #2) on February 27, 2009, a $10,896,807.00 disbursement (for invoice/interim payment certificate #3) on October 26, 2009, a $27,469,679.00 disbursement (for invoice/interim payment certificate #4) on December 15, 2009, a $6,865,488.00 disbursement (for invoice/interim payment certificate #5) on January 18, 2010, a $9,390,036.00 disbursement (for invoice/interim payment certificate #6) on February 25, 2010, a $13,754,282.00 disbursement (for invoice/interim payment certificate #7) on May 9, 2010, a $18,208,899.00 disbursement (for invoice/interim payment certificate #8) on July 23, 2010, a $6,755,424.00 disbursement (for invoice/interim payment certificate #9) on July 23, 2010, a $8,919,668.00 disbursement (for invoice/interim payment certificate #10) on August 18, 2010, a $7,321,959.00 disbursement (for invoice/interim payment certificate #11) on September 20, 2010, a $6,563,979.00 disbursement (for invoice/interim payment certificate #12) on December 10, 2010, a $5,515,930.00 disbursement (for invoice/interim payment certificate #13) on December 6, 2010, a $107,904,311.00 disbursement (for invoice/interim payment certificate #14) on December 30, 2010, a $12,367,797.00 disbursement (for invoice/interim payment certificate #15) on February 28, 2011, a $8,689,838.00 disbursement (for invoice/interim payment certificate #16) on March 18, 2011, a $7,321,338.00 disbursement (for invoice/interim payment certificate #17) on April 28, 2011, a $6,870,418.00 disbursement (for invoice/interim payment certificate #18) on June 7, 2011, a $6,957,804.00 disbursement (for invoice/interim payment certificate #19) on July 22, 2011, a $16,330,457.00 disbursement (for invoice/interim payment certificate #20) on September 13, 2011, a $4,248,349.00 disbursement (for invoice/interim payment certificate #21) on October 31, 2011, a $4,071,390.00 disbursement (for invoice/interim payment certificate #22) on November 30, 2011, a $19,056,526.00 disbursement (for invoice/interim payment certificate #23) on December 28, 2011, a $5,071,871.00 disbursement (for invoice/interim payment certificate #24) on April 12, 2012, a $6,955,729.00 disbursement (for invoice/interim payment certificate #25) on April 12, 2012, a $14,889,380.00 disbursement (for invoice/interim payment certificate #26) on May 18, 2012, a $4,807,999.00 disbursement (for invoice/interim payment certificate #27) on June 22, 2012, a $48,355,586.00 disbursement (for invoice/interim payment certificate #28) on July 31, 2012, a $13,242,808.00 disbursement (for invoice/interim payment certificate #29) on October 12, 2012, and a $3,280,361.00 disbursement (for invoice/interim payment certificate #30) on November 30, 2012. Two additional loans from China Eximbank were negotiated on April 30, 2012 to pay for cost overruns on the dam (the so-called ‘Supplementary Bui Hydroelectric Dam Project’): a $75.4 million preferential buyer’s credit (PBC) with a maturity of 20 years (final maturity date: April 30, 2032), a 5 year grace period (first repayment date: April 30, 2017), and a 2% interest rate and a $76,206,939 buyer’s credit loan (BCL) with a maturity of 13.5 years (final maturity date: November 21, 2025), a 2 year grace period (first repayment date: April 30, 2014), and an interest rate of 6-month LIBOR (0.731% in April 2012) plus a 4% margin. The $75.4 million PBC is captured via Record ID#30086 and the $76,206,939 BCL is captured via Record ID#30709. According to the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS), the $75.4 million PBC and the $76,206,939 BCL jointly achieved a 54.7% average disbursement rate, with China Eximbank making 8 loan disbursements (worth $82,949,965.55) between 2014 and 2017: a $18,800,258.00 disbursement (for invoice/interim payment certificate #39) on April 9, 2014, a $8,065,407.00 disbursement (for invoice/interim payment certificate #35) on December 19, 2014, a $1,538,389.00 disbursement (for invoice/interim payment certificate #36) on December 31, 2014, a $3,649,254.00 disbursement (for invoice/interim payment certificate #37) on December 31, 2014, a $6,937,499.00 disbursement (for invoice/interim payment certificate #38) on April 9, 2015, a $14,815,581.00 disbursement (for invoice/interim payment certificate #40) on July 16, 2015, a $12,775,468.25 disbursement (for invoice/interim payment certificate #41) on March 11, 2016, and a $16,368,109.30 disbursement (for invoice/interim payment certificate #42) on January 25, 2017. The 2008 GCL's (principal) amount outstanding was $281,846,000 in 2013, $284,361,000 in 2014, $286,899,000 in 2015, $290,471,000 in 2016, $294,027,000 in 2017, $297,615,000 in 2018, $301,237,000 in 2019, $304,895,000 in 2020, $308,588,000 in 2021, $312,316,000 in 2022, and $315,861,000 in 2023. The 2012 PBC's amount outstanding was $76,934,000 in 2013, $77,754,000 in 2014, $78,582,000 in 2015, $78,583,000 in 2016, $78,582,000 in 2017, $78,582,000 in 2018, $78,583,000 in 2019, $78,583,000 in 2020, $78,583,000 in 2021, $78,583,000 in 2022, and $78,583,000 in 2023. The 2007 BCL’s amount outstanding was $277,441,000 in 2013, $255,235,000 in 2014, $232,241,000 in 2015, $210,435,000 in 2016, $188,847,000 in 2017, $166,166,000 in 2018, $143,051,000 in 2019, $119,757,000 in 2020, $90,048,000 in 2021, $72,353,000 in 2022, and $77,525,000 in 2023. The 2012 BCL’s amount outstanding was $68,544,000 in 2013, $63,077,000 in 2014, $57,420,000 in 2015, $53,701,000 in 2016, $46,771,000 in 2017, $41,348,000 in 2018, $37,137,000 in 2019, $31,601,000 in 2020, $26,123,000 in 2021, $19,306,000 in 2022, and $20,953,000 in 2023. The 2007 BCL and 2012 BCL were collateralized with (a) net revenue from a Power Purchase Agreement (PPA) between Bui Power Authority — an organization with a mandate to plan, execute and manage the Bui Hydroelectric Power Plant Project — and the Electricity Company of Ghana (ECG) for the purchase of the energy to be generated from the Bui hydroelectric power plant; (b) receivables from Ghana Cocoa Board’s sale of up to 30,000 tons of main crop cocoa and 10,000 tons of light crop cocoa per annum to Genertec International Corporation of Beijing under a 20-year, Cocoa Sales Agreement (CSA); and (c) and a mortgage of the land and building and equipment and machinery of the Bui Hydroelectric Power Plant. The cocoa beans were sold at the prevailing market price rather than a fixed price, and the proceeds were to be placed in a Government of Ghana bank account to facilitate loan repayment (and provide a source of security for the 2007 BCL and 2012 BCL). Then, once the dam was operational (and the cocoa agreement came to an end), 85% of the proceeds from sales of energy generated by the Bui hydroelectric power plant were to be placed in an escrow account held by China Eximbank to facilitate loan repayment (and provide a source of security for the 2007 BCL and 2012 BCL). The escrow account balance was $39,513,991 in 2013, $74,173,000 in 2014, $53,579,000 in 2015, $1,681,000 in 2016, $1,038,000 in 2017, $27,275,000 in 2018, $25,582,000 in 2019, $25,851,000 in 2020, $6,452,000 in 2021, $1,000 in 2022, and $1,000 in 2023. The borrower was also expected to maintain a minimum cash balance in a debt service reserve account (DSRA) — also known as a ‘payment reserve account’ — equivalent to six-months of debt service payments under the 2007 BCL and 2012 BCL. The cash balance of the DSRA was $9,554,809 in 2013, $30,526,194 in 2014, and $25,801,000 in 2015. The 2008 GCL and 2012 PBC were only collateralized against receivables from Ghana Cocoa Board’s sale of up to 30,000 tons of main crop cocoa and 10,000 tons of light crop cocoa per annum to Genertec International Corporation of Beijing under a 20-year CSA. The Government of Ghana bank account (for the cash proceeds from COCOBOD’s sale of cocoa to Genertec International Corporation of Beijing) had a balance of $49,069,000 in 2013, $84,707,000 in 2014, $105,042,000 in 2015, $73,828,000 in 2016, $101,277,000 in 2017, $167,816,000 in 2018, $209,783,000 in 2019, $276,100,000 in 2020, $302,003,000 in 2021, $353,905,000 in 2022, and $383,963,000 in 2023. The GCL and PBC were eventually rescheduled such that repayments would commence on July 15, 2023 and end on July 15, 2037, which implies a maturity extension of 8.8 years and a grace period extension of 7.8 years for the GCL and a maturity extension of 5.2 years and a grace period extension of 6.2 years for the PBC. The 2% interest rate that originally applied to both the GCL and PBC also increased to 2.7% as part of the rescheduling. The GCL rescheduling is captured via Record ID#95483. The PBC rescheduling is captured via Record ID#95484. The Bui Dam Construction Project had six components: (1) a roller Compacted Concrete (RCC) gravity dam incorporating a 5-bay spillway; (2) three penstocks in the middle of the dam; (3) a powerhouse at the toe of the dam on the left bank; (4) two rock fill saddle dams on the right bank; (5) a switchyard; and (6) 276 km of transmission lines; and a permanent bridge downstream of the dam. Sinohydro was the contractor responsible for project implementation. Its work was overseen by Bui Power Authority. The dam was designed by the French engineering firm Coyne et Bellier, which also served as the consulting engineers on the project. A groundbreaking ceremony was held on August 24, 2007. However, construction did not begin until December 2, 2008. Then, on May 3, 2013, the first generator was inaugurated. The dam was inaugurated on December 19, 2013. However, the project was not completed and handed over to the Ghanaian authorities until November 28, 2016. There are many indications that the China Eximbank loans for the Bui Dam Construction Project have financially underperformed vis-a-vis the original expectations of the lender. First, in August 2017, the Ghana Cocoa Board (Cocobod) — a state-owned company whose export receipts provide an important source of revenue for loan repayment to China Eximbank — told the country’s parliament it was in financial distress due to its loan repayment obligations related to the construction of the Bui Dam. Second, at least two of the four loans were rescheduled. Third, in April 2023, Samuel Kofi Dzamesi, the Chief Executive Officer of BPA revealed that the ECG had accumulated $612 million of payment arrears (overdue payments) to BPA. ECG’s payments to BPA for electricity purchases were originally intended to be the main source of revenue for repaying China Eximbank. Fourth, according to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Fifth, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans.
Staff comments
1. The Chinese project title is 加纳布维水电站项目. 2. The Loan/Grant Code in the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS) for the two loans that support the Bui Dam Construction Project is CH-GH-BUI-2007. The Loan/Grant Code in the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS) for the two loans that support the Supplementary Bui Hydroelectric Dam Project is CH-GH-BUI-2013. 2007032 is the ID assigned to the loan in the Ghanaian Auditor General Reports 3. The Gh-DCMIS identifies the aggregate value of the two supplementary China Eximbank loans as Gh-DCMIS as $168,400,000 rather than $151,600,000. The Gh-DCMIS also identifies the loan commitment date as January 29, 2013 rather than April 30, 2012. These issues warrant further investigation. 4. Loan repayment for the BCL involved a cocoa sales agreement between Genertec Corporation of China and the Ghana Cocoa Board (Cocobod) for up to 30,000 metric tons of cocoa beans per year until the dam became operational. The cocoa beans were sold at the prevailing market price rather than a fixed price, and the proceeds were placed in an escrow account with China Eximbank to facilitate loan repayment (and provide a source of security for the BCL). Then, once the dam was operational, the cocoa agreement ended and 85% of the proceeds from sales of energy generated by the Bui hydroelectric power plant were placed in an escrow account held by China Eximbank to facilitate loan repayment (and provide a source of security for the BCL). Any excess funds in the escrow account could be withdrawn by Government Ghana, or they could stay in the account and earn interest. The price for the future electricity was tentatively negotiated to fall within a range of $0.035 and $0.055 cents per kilowatt-hour (kW/h). According to the World Bank, the average electricity tariff in Africa is much higher — at $0.13 per kW/h. 5. The Gh-DCMIS identifies the official completion date for the Bui Dam Construction Project as December 2, 2013. The originally expected project implementation start and end dates, according to the Gh-DCMIS, were November 25, 2007 and September 1, 2012, respectively. The Gh-DCMIS identifies the official completion date for the Supplementary Bui Hydroelectric Dam Project as December 31, 2017. The originally expected project implementation start and end dates, according to the Gh-DCMIS, were November 29, 2013 and December 2, 2013, respectively. 6. Solomon Adjetey (soloadjetey@gmail.com) was the Project Manager in the Government of Ghana’s Ministry of Energy. 7. One official source (https://www.dropbox.com/s/dpszqn58wlugiew/BUI%20HYDROELECTRIC%20PROJECT%20PROGRESS%20REPORT%2C%20OCTOBER%202012%20-%20DECEMBER%2C%202012.pdf?dl=0) indicates that the borrower paid a $25 million insurance premium. Two official sources (http://12335.mofcom.gov.cn/article/ydyl/201604/1912776_1.html and http://www.tjjh.gov.cn/xyjh/xydt/gjdt/202008/t20200819_3490848.html) indicate that the insurance premium is the result of a Sinosure buyer’s credit insurance policy. This issue warrants further investigation. 8. Some sources suggest that an interest rate of CIRR plus a margin of 1.075% applied to the 2007 BCL from China Eximbank. Other sources claim that the loan carried a fixed interest rate of 5.94475%. This issue warrants further investigation. 9. Bui Power Authority is responsible for transferring all revenue that it collects from the sale of electricity into the China Eximbank-controlled escrow account (after deducting all of its operating expenditures, administrative expenditures, and capital expenditures). 10. According to a 2011 study published by Deutsches Institut für Entwicklungspolitik, '[t]he financial arrangement is secured by cocoa as collateral. [...] [T]he Chinese government guaranteed to purchase 30,000 tonnes of cocoa per year from the Ghanaian government at going world market prices – rather than a fixed price – until the dam was operational. The reason for this is that China wants to promote cocoa consumption in China. Until the Bui Dam becomes operational and begins generating revenue to service the loan (during the construction period there is a moratorium on the payment of the principal, which means that only interest has to be paid in that period), the proceeds from the sale of cocoa are placed in an escrow account, i. e. a trust account, held by the China Exim Bank as security for loan repayments. If not all the funds in the escrow account are needed to pay the interest, then the excess reverts to the Ghanaian government, i. e. the Ministry of Finance and the Central Bank. Once the dam is operational within five years of the signing of the loan agreement, the cocoa agreement lapses. By that time, the interviewee hoped, China will have developed a taste for cocoa and so become a new and important market for Ghanaian cocoa. When the Bui Dam is operational and the cocoa agreement expires, 85 per cent of the proceeds from sales of energy generated by the completed Bui Dam will be placed in an escrow account held by China Exim Bank to service the debt. The remaining 15 per cent will be used to meet the Bui Power Authority’s administration costs. If not all the 85 per cent is needed for debt servicing, the excess will revert to the Government of Ghana, i. e. the Ministry of Finance and Economic Planning and the Central Bank. If Ghana decides not to withdraw the excess money from the escrow account, it will earn interest." See https://www.idos-research.de/uploads/media/DP_3.2001.pdf 11. According to Bui Power Authority’s financial statements for the year that ended on December 31, 2015, a third bank account (consisting of ‘restricted cash flows) — known as the ‘CEXIM special joint account’ or ‘China Exim joint account’ — had a cash balance of $82,949,966 in 2013, $39,837,000 in 2014, $13,061,000 in 2015, $1,015,000 in 2016, and $0 in 2017. These cash deposits appears to be another form of collateral or quasi-collateral. 12. A January 5, 2017 on-lending agreement between the Government of Ghana and Bui Power Authority indicated that the China Eximbank loan repayment obligations are obligations of Bui Power Authority and not the Government of Ghana. 13. The Sinosure insurance premium was amortized and paid out over time.