ICBC provides $470 million buyer’s credit loan for 1870MW Gilgel Gibe III Hydropower Project (Linked to Record ID#59363, 105839)

Project narrative

On June 30, 2010, the Industrial and Commercial Bank of China (ICBC) and Ethiopian Electric Power Corporation (EEPCo) signed a $470 million buyer’s credit loan agreement for the 1870MW Gilgel Gibe III Hydropower Project. The borrowing terms of the loan are as follows: a 13.985 year maturity (final maturity date: June 20, 2024), a 2.978 year grace period, and an annual interest rate of 6-month LIBOR plus a 2.4% margin. The Government of Ethiopia’s Ministry of Finance issued a sovereign guarantee in support of the loan. The borrower also purchased buyer’s credit insurance from Sinosure. The borrower was expected to use the proceeds of the loan to finance approximately 95% of the cost of a $495,506,200 commercial contract between EEPCo and Dongfang Electric Corporation (DEC) for the electro-mechanical and hydraulic steel structure works component of the 1870MW Gilgel Gibe III Hydropower Project, which was signed on May 12, 2010. According to the Government of Ethiopia’s Aid Management Platform (AMP), 15 loan disbursements (worth ETB 21,904,463,534) took place between 2012 and 2019: an ETB 1,102,591,696 disbursement on January 8, 2012, an ETB 1,256,266,119 disbursement on April 8, 2012, and an ETB 241,864,376 disbursement on October 10, 2012, an ETB 519,482,004 disbursement on April 8, 2013, an ETB 149,053,030 disbursement on October 7, 2013, an ETB 1,120,000,000 disbursement on October 7, 2014, an ETB 323,232,323 disbursement on January 7, 2015, an ETB 450,503,881 disbursement on October 7, 2015, an ETB 200,679,002 disbursement on January 7, 2016, an ETB 286,223,972 disbursement on April 7, 2016, an ETB 164,701,197 disbursement on July 7, 2016, an ETB 1,359,428,420 disbursement on April 7, 2017, an ETB 116,911,052 disbursement on July 7, 2017, an ETB 1,045,494,392 disbursement on March 20, 2018, and an ETB 13,568,032,070 disbursement on September 9, 2019. The purpose of the project was to supply and install electrical and mechanical equipment (turbines) for the construction of the Gilgel Gibe III Dam (also known as the Gibe III Dam). The Gilgel Gibe III Dam is 610 m-long (2,000 ft) and 243 m (797 ft) high roller-compacted concrete dam. It withholds a reservoir with a capacity of 14.7 km3 (3.5 cu mi) and a surface area of 210 km2 (81 sq mi), collecting with a catchment area of 34,150 km2 (13,190 sq mi). The reservoir's live (active or ‘useful’) storage is 11.75 km3 (2.82 cu mi) and dead storage 2.95 km3 (0.71 cu mi). The normal operating level of the reservoir is 892 m (2,927 ft) above sea level with a maximum of 893 m (2,930 ft) and minimum of 800 m (2,600 ft). The dam's spillway is 108 m (354 ft) long and floodgate-controlled with a maximum discharge capacity of 18,000 m3/s (640,000 cu ft/s). Water above 873 m (2,864 ft) above sea level can be discharged through its gates. Feeding the dam's power house are two penstocks that each branch into five separate tunnels for each individual turbine. The power house contains ten 187 MW generators supported by Francis turbines for a total installed capacity of 1,870 MW. DEC was responsible for the electro-mechanical and hydraulic steel structure works component of the project. Salini Costruttori S.p.A.(SPA), an Italian contractor, completed the civil engineering construction of the project. The electro-mechanical portion of the project involved the design; build; site testing and commission of 10 vertical type hydraulic turbines; 10 vertical axis synchronous generators; and other transformer-related tasks. The hydro mechanical portion included the installation of steel structures; gates; a draft tube; a diversion tunnel; a spillway and ecological discharge gates. The construction of the Gibe III dam began in July 2006 along the Omo River but the project provoked a backlash from environmental activists. The African Development Bank and the European Investment Bank were originally supposed to fund the electro-mechanical costs for the project, but they eventually backed out due to the project's perceived negative environmental and social impacts. Two Environmental and Social Impact Assessments and a Resettlement Action Plan were completed. In August 2015, Ethiopia commissioned the first phase of electricity generation at the Gibe III plant from three turbines with an output of 561MW. Then, on December 17, 2016, the Gibe III dam was officially inaugurated. The plant has 10 turbines each with a capacity of 187MW equaling a total capacity of 1,870MW, increasing Ethiopia's total electricity output to 4,238 megawatts. This project also reportedly created more than 7,000 jobs. There are some indications that the ICBC loan for the 1870MW Gilgel Gibe III Hydropower Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2016, the ICBC loan was restructured to reduce total principal and interest payments by 50% over a 3-year period. The debt restructuring agreement was 'restructured such that [the borrower] [would] only be required to pay 20% of the amount [outstanding] in 10 instalments starting immediately [after the 3-year principal and interest payment moratorium] on a semi-annual basis and the remaining 80% [of the amount outstanding would] be paid in 10 subsequent instalments.' It reportedly provided $20 million of annual cash flow relief to the borrower. After the debt restructuring agreement was finalized, the loan's last scheduled principal payment date was July 20, 2026 and the loan's last scheduled interest payment date was January 20, 2026. As such, the debt restructuring agreement effectively provided a 2-year maturity extension. Then, according to the Government of Ethiopia’s Aid Management Platform, as of September 2019, ICBC suspended about $67 million worth of loan disbursements 'due to [the] cross-default situation of the country’ (see Record ID#58616). Then, after considerable delay, the G20 Common Framework (CF) creditor committee for Ethiopia convened in September 2021, with the French Government and the Chinese Government serving as co-chairs. The CF debt rescheduling talks were still ongoing in mid-2023.