China Eximbank provides $891 million preferential buyer’s credit for Phase II of the Puttalam/Norochcholai Coal Power Project (Linked to Project ID #33244 and #33463)

On December 25, 2009, China Eximbank signed a $891,000,000 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC 2009 NO. (42) Total No.(104)] with the Ministry of Finance of the Government of Sri Lanka for the Phase II of Puttalam/Norochcholai Coal Power Project. The PBC carries a 20 year maturity, 5 year grace period, an interest rate of 2%, a 0.5% commitment fee, and a 0.5% management fee. The Ministry of Finance of the Government of Sri Lanka then used the proceeds from the PBC (loan) to on-lend to Ceylon Electricity Board (CEB), which is a state-owned electricity company that controls all major functions of electricity generation, transmission, distribution and retailing in Sri Lanka. CEB was expected to use the proceeds of the loan to partially finance a commercial contract [ID# PCPP/CANC/2009/01] with China National Machinery Import & Export Corporation, which was signed on July 29, 2009. China Eximbank disbursed an unknown amount in 2009, and unknown amount in 2010, an unknown amount in 2011, $127,781,680 in 2012, $110,377,930 in 2013, $50,765,212 in 2014, and $66,952,892 In 2015. The loan's amount outstanding was $772,200,000 as of December 31, 2016, $445,500,000 as of June 30, 2022. The project involved the establishment of two power plants with a capacity of 300MW, a transmission line from Norochcholai to Anuradhapura, new substations at Chilaw and Anuradhapura and the construction of the expansion of coal handling port facilities and employees' housing. China Machinery Engineering Corporation was the contractor responsible for project implementation and its work was overseen by the CEB. Phase I of the project, which was also financed by China Eximbank, ran from 2007 to 2011 (as captured via Project ID#33244 and #33463). The groundbreaking ceremony for Phase II of the project took place on March 18, 2010. Phase II was completed on September 16, 2014. However, the project has encountered debt repayment problems. On April 12, 2022, the Government of Sri Lanka announced a ‘pre-emptive’ sovereign debt default, noting that it would suspend debt repayments to all external creditors other than multilateral institutions. Its decision to suspend external debt service reportedly affected all China Eximbank loans with amounts outstanding at the time of the announcement.

Additional details

1. The Chinese project title is 普特拉姆燃煤电站. 2. This Puttalam/Norochcholai power plant is sometimes referred to as the Lakvijaya power plant. 3. The Government of Sri Lanka loan key number is 2009027. 4. The commercial contract [ID# PCPP/CANC/2009/01] between Ceylon Electricity Board (CEB) and China National Machinery Import & Export Corporation, which was signed on July 29, 2009, can be accessed in its entirety via https://www.dropbox.com/s/qul59h2khujrj5l/PuttalamCoalPower-Contract-2009.pdf?dl=0

Number of official sources

49

Number of total sources

56