China Eximbank provides RMB 1.059 billion government concessional loan for 9 Cities Water Supply Project (Linked to Record ID#58421)

Project narrative

On October 20, 2013, China Eximbank and Cameroon's Ministry of Water Resources and Energy signed a government concessional loan (GCL) [CHINA EXIMBANK GCL NO.51 (2013) TOTAL NO. (496 1420303052013110305)] agreement worth RMB 1,653,018,595.78 (CFA 89 billion) for the 9 Cities Water Supply Project. The borrowing terms of the GCL were as follows: an interest rate of 2%, a default (penalty) interest rate of 0%, a maturity of 20 years, a grace period of 5 years, a management fee of 0.25%, and a commitment fee of 0.25%. The borrower agreed to deposit project-related revenues in a special account to facilitate repayment. The proceeds of the China Eximbank loan were on-lent by Cameroon's Ministry of Water Resources and Energy to the Cameroon Water Utilities Corporation (Camwater) of the Republic of Cameroon to finance the commercial contract (worth RMB 1,653,018,595.78 and later amended to RMB 1.059 billion) with CGC Overseas Construction Group Co. Ltd. (CGCOC), which was signed on September 12, 2011 and amended on November 19, 2011. As of December 31, 2020, the loan (GCL) had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 84.4 billion. Its outstanding amount was equivalent to CFA 66 billion as of December 31, 2016, CFA 89 billion as of December 31, 2017, CFA 88 billion as of December 31, 2018, and CFA 88 billion as of December 31, 2019. This project took place in two phases. The first phase of the project took place in four cities (Bafoussam, Bamenda, Kribi, and Sangmelima). It was supposed to take approximately 36 months (12 months for feasibility studies and 24 months for project execution) to complete. Phase 1 started October 1, 2013 and it was completed in August 2017. There are some indications that the China Eximbank loan for the 9 Cities Water Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’