China Eximbank provides $984.23 million preferential buyer’s credit for 700MW Zungeru Hydroelectric Power Plant Construction Project

On September 28, 2013, China Eximbank and the Government of Nigeria signed a $984.23 million preferential buyer’s credit (PBC) agreement for the 700MW Zungeru Hydroelectric Power Plant Construction Project. The PBC (loan) carries the following borrowing terms: a 20 year maturity, a 7 year grace period, and a 2.5% interest rate. The loan’s final maturity date is September 21, 2033. As of December 31, 2020, Nigeria’s Debt Management Office (DMO) reported that the China Eximbank loan had achieved a 57.14% disbursement rate ($562.47 million) and the borrower had made interest repayments worth $26.36 million and no principal repayments to the lender. As such, the loan’s (principal) amount outstanding, as of December 31, 2020, was $562.47 million. The borrower is expected to use the proceeds of the loan to finance approximately 75% of a $1.293 billion commercial contract between the Government of Nigeria and a consortium consisting of Sinohydro and China National Electric Engineering Co (CNEEC), which was signed on October 19, 2012. The Government of Nigeria agreed to directly finance the remaining 25% of the commercial contract cost. The purpose of the project is to construct a 700WM hydroelectric power plant — with four, 175MW power generators — on the Kaduna River in Niger State (exact locational coordinates: 9.90091, 6.28723). The project also involves the construction of a dam, electricity transmission lines, and associated substations to evacuate power from the dam. Upon completion, the power plant is expected to generate 2.64 billion kWh of electricity a year. The project is also expected to support flood control, irrigation, as well as water supply and fish breeding facilities. According to a ‘valuation report’ that was undertaken prior to implementation, the project would likely negatively impact 22,100 persons, 15,958 farmlands and 6,762 properties domiciled in 98 communities. Sinohydro and CNEEC are the contractors responsible for project implementation. On May 28, 2013, a groundbreaking ceremony was held. Then, on January 22, 2018, the placement of the first silo of Roller Compacted Concrete (RCC) took place. As of June 18, 2020, the Government of Nigeria’s Debt Management Office (DMO) reported that China Eximbank had disbursed 52.65% of the original face value of the PBC. By October 28, 2019, the project had achieved a 68% completion rate. The rotor of the first power generation unit was hoisted into place on September 30, 2021. Then, on March 28, 2022, the first (175MW) power generation unit went into operation. The unit was officially commissioned on April 1, 2022. However, the broader project has encountered major implementation obstacles and delays. In 2015, the project stalled due to insufficient compensation of communities affected by the power plant (requiring resettlement) and litigation by aggrieved persons. Nigeria’s then Minister of State for Power, Mohammed Wakil, confirmed the stoppage of the project in an interview. He said: ‘immediately [after] the Zungeru project took off, we had legal challenges. Somehow in the communities, some people, I can say powerful people instituted court action and in fact they succeeded in getting an injunction restraining government from further doing the project. […] At a point we had about two to three litigations on the project but the ministry has been trying to resolve the problems outside the court. A committee has been set up and they have held several meetings with the parties involved. It is a national project and we do not want to be unnecessarily bogged down by litigations. […] We are being careful and are engaging the parties with a view to settling out of court. That has tampered with our timetable but even with that there has been a lot of progress.’ Nigeria’s Director of Power, Sanusi Garba, said at the time that ‘you cannot pay 98 communities overnight. We have checks and counter checks at every point in time, and it is a slow and laborious process because you don’t want to pay someone twice and you don’t want to omit anybody.’ Then, in January 2022, three Chinese workers were abducted from the project site after a shoot-out that killed workers and police. In March 2022, Nigeria’s Minister of Power, Abubakar D. Aliyu, said ‘[i]t’s unfortunate that the insecurity in some parts of the country has affected the delivery of the Zungeru Hydro Plant project because some persons were abducted by bandits and have not been released’. The 700MW Zungeru Hydroelectric Power Plant Construction Project was originally scheduled for completion by the end of 2017. However, its scheduled completion date was later pushed back to December 2021 and then December 2022.

Additional details

1. This project is also known as the Zungeru 4x175MW Hydropower Plant. The Chinese project title is 宗盖鲁水电站 or 尼日利亚宗格鲁水电站项目. 2. Boston University’s China's Global Energy Finance Database identifies the face value of this loan as $975 million and SAIS-CARI report the maturity length of this loan as 19 years. AidData records the face value ($984,320,000) and maturity length (20 years) that is reported by Nigeria’s Debt Management Office (DMO) in its ‘Loans Obtained from China Exim As At December 31, 2020’ publication.

Number of official sources

25

Number of total sources

52