Narrative
Full Description
Project narrative
On April 26, 2013, China Electric Power Equipment and Technology Co, Ltd (CET) — a subsidiary of the State Grid Corporation of China (SGCC) — and the Ethiopian Electric Power Corporation (EEPCO) signed a $1,002,970,414.05 supplier's credit (loan) agreement and commercial contract for the 500kV Power Transmission Line of the Great Ethiopian Renaissance Dam (GERD) Project. Mihret Debebe from the Ethiopian Electric Power Corporation and Jia Zhi Qiang from SGCC signed the agreement. The loan carries the following borrowing terms: a 3.08% interest rate, a 3.219 year grace period, and a 14.715 year maturity. The loan's first and last scheduled principal payment dates were June 30, 2016 and December 26, 2027, respectively. Its first and last scheduled interest payment dates were June 30, 2016 and December 26, 2027, respectively. The borrower was expected to use the proceeds of the loan to finance approximately 85% of a $1.2 billion commercial (EPC) contract between CET and EEPC, which was signed on April 26, 2013. The Ethiopian Government was responsible for directly funding the remaining 15% of the commercial contract cost. Then, on December 29, 2014, China Construction Bank, the Industrial and Commercial Bank of China (ICBC), and CET signed an accounts receivable financing agreement. The purpose of the project was to evacuate power from the 6,000 MW Great Ethiopian Renaissance Dam (GERD) via 500kV and 400kV power transmission lines. The project involved the construction of transmission lines (measuring somewhere between 1,136 km and 1,338 km in length), the construction of two 500kV substations, and the expansion of three existing 400kV substations. More specifically, the project involved the construction of the 345 km GERD-Dedesa transmission line (two 500kV double circuit transmission lines from GERD to the new Dedesa substation); the construction of the 275 km Dedesa-Holeta transmission line (two 500kV double circuit transmission lines from the Dedesa substation to the Holeta substation); the construction of the Holeta-Akaki II transmission line (a 400kV transmission line from the Holeta substation to the Akaki II substation); the construction of the Holeta-Sebeta II transmission line (a 400kV transmission line from the Holeta substation to the Sebeta II substation); the construction of a Holeta-Sululta II transmission line (a 400kV transmission line from the Holeta substation to the Sululta II substation); the construction of the 500kV Dedesa and Holeta substations; and the expansion of the 400kV Akaki II, Sebeta II, and Sululta II substations. CET was the EPC contractor responsible for implementation. The project was originally scheduled to begin construction in 2014 and reach completion by 2016. A project kick-off meeting was held in Beijing on January 10, 2014. Then, on March 1, 2014, the project officially commenced. Construction of the first base tower began on August 19, 2014. The first batch of large equipment -- such as transformers and reactors -- arrived at the Port of Djibouti on December 13, 2014. The wiring construction phase started on January 1, 2015. A project completion certificate was issued on December 22, 2015. There are indications that the CET loan for the 500kV Power Transmission Line of the Great Ethiopian Renaissance Dam (GERD) Project financially underperformed vis-a-vis the original expectations of the lender. In 2019, the CET loan was restructured to reduce total principal and interest payments by 50% over a 5-year period. The debt restructuring agreement reportedly provided $18 million of annual cash flow relief to the borrower.
Staff comments
1. This project was also known as the GDHA 500 kV Power Transmission and Transformation Project and the Grand Renaissance Dam-Transmission and Sub-station Dedesa-Holeta 500Kv Project, the Grand Renaissance Dam-Transmission and Sub-station Dedesa-Holeta 500Kv Project, and the GERD-Dedesa-Holeta-Akaki (GDHA) 500KV power transmission and transformation project. The Chinese project title is 塞俄比亚复兴大坝500千伏输电项目 or 塞俄比亚复兴大坝水电站500千伏送出工程 or GDHA 埃塞俄比亚复兴大坝 500KV 超高压输变电项目 or 埃塞复兴大坝输变电工程项目. 2. The Ethiopian Electric Power Corporation (EEPC) is a state-owned enterprise. 3. Some sources identify the total cost of the commercial contract as $1.458 billion rather than $1.2 billion. This issue warrants further investigation. 4. The system identification number for the CET loan (supplier’s credit) in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143319101798. The AMP identifies the value this loan commitment as ETB 18,642,572,862. 1 Ethiopian Birr (ETB) was equal to 0.53 United States Dollars (USD) in April 2013 (at the time that the loan agreement was signed). 5. In a typical receivables financing agreement (or deferred payment agreement), the company that the project owner in the host country has selected as its engineering, procurement, and construction (EPC) contractor is also a lender to the project owner. The company assigns receivables under its EPC contract with the project owner to one of or more banks. Upon assignment of receivables, the bank or banks will release funds to the company so it can discharge its obligations under the receivables financing agreement as a lender. Receivables financing is also known as accounts receivable financing (finance) or A/R financing (finance) or 应收账款融资 (in Chinese). These other terms are used because the accounts receivable of a company (i.e., unpaid invoices) are being used as collateral to unlock working capital—typically in the form of a bank loan (‘receivables loan’). Sellers often face cash flow problems when their buyers do not make full payment at the due date of the invoice. A receivables financing arrangement addresses this problem by allowing them to sell their outstanding invoices to a bank at a discounted rate. This approach allows the seller to receive the remaining invoice amount before the due date of the invoice. The bank either gets its money back at invoice maturity through the seller (acting as a collecting agent) or directly from the debtor. 6. More research is needed to identify the precise date on which the CET debt rescheduling agreement was signed. One source suggests that it may have come shortly after April 9, 2019 (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf). 7. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20847000 and the corresponding project name in DMFAS is ‘DEDESSA-HOLETA 500KV’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0