China Eximbank provides $789.33 million preferential buyer’s credit loan to Uganda for the 600 MW Karuma Hydropower Dam and Associated Transmission lines and Sub-stations Project (Linked to #36211)

On November 24, 2014, the Government of Uganda and China Eximbank signed two loan agreements worth $1,435,158,682 for the 600 MW Karuma Hydropower Dam and Associated Transmission lines and Sub-stations Project. Then, on February 27, 2015, the Parliament of Uganda ratified these two loan agreements. The first loan agreement, captured by this project entry, is a $789,337,275.36 China Eximbank preferential buyer’s credit (PBC) [CHINA EXIMBANK PBC (2014) 46 TOTAL NO. (340)] and its lending terms are as follows: 2 percent interest rate, 20 year maturity, 7 year grace period, 1% management fee, and 0.75% commitment fee. Under the terms of the PBC loan, the Government to Uganda is responsible for on-lending the full amount of the loan to Uganda Electricity Generation Company Limited (UEGCL) and the Uganda Electricity Transmission Company Limited (UETCL). The second loan agreement, recorded in project #36211, with China Eximbank is a buyer’s credit loan (BCL) worth $645,821,407 with the following terms: annual interest rate of LIBOR plus a 3.5 percent margin, 15 year maturity, 5 year grace period, 0.75% management fee, and 0.5% commitment fee. According to UEGCL, these loans covered 85% of the total contract cost for this project, with the Government of Uganda covering the remaining 15% of costs. The Government of Uganda provided a sovereign guarantee for both China Eximbank loans, and the Government of Uganda is obligated under the terms of these loans to open escrow accounts with Stanbic Bank and deposit funds in the accounts over the terms of the loans to faciliate repayment and provide security (i.e. collateral) in the event of default. Loan repayments will be made through electricity payments under a power purchase agreement (PPA) with UETCL and UMEME Ltd. UMEME Ltd became the major privately owned electricity distributor in Uganda in 2005 after winning a 20-year concession to operate UEDCL's main distribution network. It was involved as a contractual signatory to the Karuma PPA in order to safeguard the repayment mechanism and avoid potential risks of revenues being misallocated. According to the terms of the loan agreements and the PPA, UEGCL is to supply UETCL all available power capacity on “take or pay” basis, which means that UETCL will pay for all available electricity generated by the dam, and not only what is needed. However, in 2019, Uganda’s Auditor General discovered that the generation and sales licences were in contradiction of the PPA and loan agreements because they stated that “the tariff methodology [will] be based on the energy service cost implying that the energy dispatch to UETCL will be influenced by market demand.” The 600 MW Karuma Hydropower Dam and Associated Transmission lines and Sub-stations Project., which is also known as the Karuma Hydropower Plant and Interconnection Project, will involve the installation of 6 turbines (10 million kilowatts each), which will create a total capacity of 600 MW, making it Uganda's largest power plant. After the first two turbines start generating electricity, the remaining four turbines will be turned on once per month. The project includes dams, water diversion pipes, underground power plants, and transmission lines. The purpose of the Interconnection Project is to evacuate power produced from Karuma Hydropower Plant in Northern Uganda to load centers, which include Lira and Olwiyo in Northern Uganda, and Kawanda in Central Uganda. It will involve construction of a 248km, 400kV, Double Circuit Karuma-Kawanda transmission line; a 78km, 132kV, Double Circuit Karuma-Lira Transmission Line; a 55km, 400kV, Double Circuit Karuma-Olwiyo transmission Line (which will be initially operated at 132kV); a new 400/132kV sub-station interconnecting with Karuma HPP and 400kV line bays; a new 400kV/220kV substation with two new incoming 400kV line bays to interface with the existing Kawanda 220/132kV substation; two new incoming 132kV line bays to interface with the existing Lira 132/33kV substation; and a new 132/33kV Olwiyo substation. The contractor responsible for implementation of this project was Sinohydro. The construction of the dam and power station officially started on August 12, 2013. As of March 2016, about 30 percent of the work had been completed. In October 2016, it was estimated that about 1,000 Chinese nationals and about 5,000 Ugandans were working at the power station. As of June 2018, fifty-six months from the beginning of construction, an estimated 76 percent of the physical work had been completed. Of the 6,000 workers, 5,300 were Ugandan. As of September 2019, an estimated 95 percent of construction had been completed, which included 100 percent completion of the Karuma–Lira High Voltage Line, 100 percent of the Karuma–Kawanda High Voltage Power Line and 98 percent of the Karuma–Olwiyo High Voltage Line. As of April 7, 2020, the Aid Management Platform (AMP) of the Government of Uganda's Ministry of Finance, Planning, and Economic Development recorded total disbursements through the PBC and BCL loans as reaching $1,076,677,072.52.

Additional details

In the database of Chinese loan commitments that it released in July 2020, SAIS-CARI records a single China Eximbank loan (preferential buyer’s credit) for the 600 MW Karuma Hydropower Dam and Associated Transmission lines and Sub-stations Project worth $1.445 billion with the following terms: 20 year maturity, 5 year grace period, and 2% interest. Based on the information published in an annual report of the Uganda Electricity Generation Company Limited (UEGCL), AidData records two separate China Eximbank loans for this project: a $789,337,275.36 preferential buyer’s credit [CHINA EXIMBANK PBC (2014) 46 TOTAL NO. (340)] with a 2 percent interest rate, 20 year maturity, 7 year grace period, 1% management fee, and 0.75% commitment fee; and a $645,821,407 buyer’s credit loan [BCL No. 140302052015210069] with an annual interest rate of LIBOR plus a 3.5 percent margin, 15 year maturity, 5 year grace period, 0.75% management fee, and 0.5% commitment fee. The second loan is recorded in Project ID#36211.

Number of official sources

20

Number of unofficial sources

24