China Eximbank provides $612.3 million buyer’s credit loan for 405MW Al-Fulah Gas-Fired Power Plant Construction Project (Linked to Record ID#979, #57039)

Project narrative

On July 29, 2008, China Eximbank and the Government of Sudan signed a $3 billion oil-backed master framework agreement (or line of credit) to finance various infrastructure projects (as captured via Umbrella Record ID#57039). This 'resources-for-credit' cooperation package is backed by future revenues from the sale of oil exports. Each subsidiary buyer’s credit loan (BCL) issued through the framework agreement carries a 15-year maturity and 5.6% interest rate. One of the subsidiary loans approved through this agreement in 2009 was a $612,305,397 BCL for the 405 MW Al-Fulah Gas-Fired Power Plant Construction Project. The proceeds of the BCL were used to be used by the borrower finance 90% of the cost of a $680,339,330 commercial (EPC) contract signed on December 24, 2008 with China National Machinery and Equipment Import and Export Corporation (CMC). The project involved the installation of three 135 MW power generating units at a gas-fired power plant in the city of Al-Fulah. Its ultimate goal was to supply electricity to the entire Kodorfan region through an electricity transmission line than runs from the city of El-Obeid (in central Sudan within North Kordofan State) to Al-Fulah (or al-Fula or EI Fula or الفولة) in West Kordofan State. The transmission line project was funded through a separate China Eximbank PBC (as captured via Record ID#979). CMC was the EPC contractor responsible for project implementation. Its EPC contract went into effect on November 16, 2009. A groundbreaking ceremony for the project took place on March 24, 2010. However, the loan that supported this project underperformed vis-a-vis lender expectations, which led to major project implementation delays. 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 Record ID#30421). In November 2012, the Sudanese Minister of Electricity and Dams, Osama Abdulla, told the Sudanese Parliament that work on the Al-Fulah Gas-Fired Power Plant Construction Project had halted due to the Sudanese Government failing to make oil shipments to China repay its debts the loans. At the time of this work stoppage, $366.5 million had been disbursed through the China Eximbank BCL. As of 2017, the project was still stalled because Sudan’s Central Bank had not paid the Chinese contractor responsible for implementation in a timely manner. The project was officially cancelled by the Government of Sudan in 2018; however, it was later reinstated by the Transitional Government of Sudan in October 2019. 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.