Bank of China contributes $260 million to $298.9 million syndicated loan for the Cañar and Naranjal Flood Control Project

Project narrative

On August 27, 2012, Bank of China sent a strictly confidential set of indicative terms and conditions for the financing of the Cañar and Naranjal Flood Control Project. Then, on July 31, 2013, the Republic of Ecuador signed a $298,880,591.93 syndicated loan agreement [identification number: 0033039-0000070 BJ: 1749986.10] with Bank of China Limited and Deutsche Bank (China) Co., Ltd. for the Cañar and Naranjal Flood Control Project. Bank of China Limited contributed $260,026,114.98, while Deutsche Bank (China) Co., Ltd. contributed $38,854,476.95. The loan carried the following borrowing terms: a variable interest rate of 6 month LIBOR plus a 3.50% margin, a 3% default (penalty) interest rate, a 4 year grace period, a 14 year year maturity, a 0.75% commitment fee, a 1% management fee, a 3% default (penalty) interest rate, and a 7.2% Sinosure credit insurance premium. The borrower was responsible for making 20, equal, semiannual principal payments to the lender. The borrower was expected to use the proceeds of the loan to partially finance two commercial contracts (no. 2012-061 and 2012-062) worth $351,624,225.80 between China International Water & Electric Corporation and Secretaria Nacional del Agua (Senagua), which were signed on August 8, 2012 and August 9, 2012. The loan’s (principal) outstanding amount was $179,328,355.13 as of December 31, 2021 and $149,440,295.93 as of November 30, 2022. The purpose of the Cañar and Naranjal Flood Control Project was to set fluvial defenses along the Cañar river, and thereby protect some 37,000 hectares and 176 km along the river and its effluents, as well as Patul, Piedras, Norcay rivers and the Trobador streams. With a total of 10 gates, the project sought to regulate up to 1,500 m3/s of water coming from the overflows of the river, to a 23 km long bypass which will have a deposit in La Lagartera lakes, which was designed to store 14 million cubic meters of water for irrigation. The project was carried out by China International Water & Electric Corporation (CWE). It was originally scheduled to commence on August 9, 2012 and reach completion by August 2015. However, the $393.8 million contract with CWE did not become effective until 2015. Construction began on April 21, 2015. Project activities included the construction of a diversion dam; the construction of a 23 km long canal; the construction of 2 bridges; and the rehabilitation of 4 bridges. The project fed river water to eight giant Chinese turbines designed to produce enough electricity to power more than a third of Ecuador. The project was completed and handed over to the authorities on January 12, 2016.