China Eximbank provides RMB 154.8 million government concessional loan for Phase 1 of Kenya Power Distribution System Modernization Project (Linked to Record ID#16392, #58359, 92446)

Project narrative

In August 2005, the Chinese Government and the Government of Kenya signed a preferential loan framework agreement for Phase 1 of the Kenya Power Distribution System Modernization and Strengthening Project. Then, on January 23, 2006, China Eximbank signed an RMB 161,028,810 government concessional loan (GCL) agreement [CHINA EXIMBANK No GCL 2006(02)(144)] with the Government of Kenya for Phase 1 of the Kenya Power Distribution System Modernization and Strengthening Project. The face value of the loan was subsequently revised to RMB 154,835,394.23. The loan carried the following borrowing terms: a 2% interest rate, a 6.75-year grace period, and a 20.25-year maturity (final maturity date: March 21, 2026). The borrower was expected to make semi-annual repayments to the lender between September 23, 2012 and March 21, 2026. The Government of Kenya, in turn, on-lent the proceeds of the loan to a Kenyan state-owned enterprise called Kenya Power and Lighting Company (KPLC) at a 2.5% interest rate. KPLC later signed a novation agreement, which transferred ownership of the project and loan repayment responsibility to another Kenyan state-owned enterprise called Kenya Electricity Transmission Company Limited (KETRACO). The borrower made principal repayments worth RMB 6,193,415.70 between July 1, 2020 and June 30, 2021 and RMB 12,386,831.54 between July 1, 2021 and June 30, 2022. The loan’s amount outstanding was RMB 74,320.989.16 as of June 30, 2020, RMB 61,934,157.62 as of June 30, 2021, and RMB 49,547,326.08 as of June 30, 2022. The Government of Kenya’s External Public Debt Register suggests that this loan was rescheduled in early 2021. The purpose of the project was to construct (1) a 61km, 132kV transmission line from the Chemosit to Kisii substations and (2) a 122km, 132kV transmission line from Meru to Embu -- which then connects all the way to the Kamburu hydropower station (see Record ID#58707). China CAMC Engineering Co. Ltd. (CAMCE) was the contractor responsible for project implementation. Works were originally expected to begin in July 2006 and end in July 2008. However, works actually began in July 2007 and were officially completed on November 24, 2010. There are some indications that the China Eximbank government concessional loan for Phase 1 of the Kenya Power Distribution System Modernization Project financially underperformed vis-a-vis the original expectations of the lender. On March 21, 2021, China Eximbank and the Government of Kenya signed a debt suspension agreement (captured via Record ID#92446). Under the terms of the agreement, the lender agreed to suspend principal and interest payments due during the March 21, 2021-June 30, 2021 period under two government concessional loan (GCL) agreements with outstanding balances: the loan for Phase 1 of the Kenya Power Distribution System Modernization and Strengthening Project and the loan for the Rural Telecommunication Development Project.