China Eximbank provides $1.68 billion buyer's credit loan for 1500MW Coca Codo Sinclair Hydroelectric Facility Project (Linked to Record ID#58432, #93431, #96292)

Project narrative

On June 2, 2009, China Eximbank and the Ministry of Finance of the Republic of Ecuador signed a confidential memorandum of understanding (MOU) regarding the financing of the 1500 MW Coca Codo Sinclair Hydroelectric Project. On June 3, 2010, China Eximbank and the Ministry of Finance of the Republic of Ecuador signed a $1,682,745,000 buyer’s credit loan (BCL) agreement [Contract No. 1410202052010210644] for the 1500 MW Coca Codo Sinclair Hydroelectric Project. The loan carried the following borrowing terms: an annual interest rate of 6.9%, a default (penalty) interest rate of 1.5%, a grace period of 5.5 years, a maturity of 15 years, a 0.4% commitment fee, and a 0.4% management fee ($6,730,980). The loan agreement required that the borrower purchase buyer’s credit insurance from Sinosure. The proceeds of the loan were to be used by the borrower to finance 85% of the cost of the $1,979,700,000 EPC contract between Coca Codo Sinclair E.P. and Sinohydro Corporation, which was signed on October 5, 2009. China Eximbank made an initial disbursement of $26,277,978.64 on February 22, 2011. By December 2016, the loan (BCL) had achieved an 87.7% disbursement rate ($1,476,205,953.32 out of $1,682,745,000). The borrower made principal repayments worth $93,485,833.33 on March 21, 2017, $93,485,833.33 on September 21, 2017, $93,485,833.33 on March 21, 2018, $93,485,833.33 on September 21, 2018, $93,485,833.33 on March 21, 2019, $93,485,833.33 on September 21, 2019, $93,485,833.33 on March 21, 2020, and $128,543,020.84 on March 21, 2022. It did not make any principal repayments on the originally scheduled repayment dates of September 21, 2020, March 21, 2021, September 21, 2021, and September 21, 2022. The loan’s (principal) amount outstanding was $1,589,259,166.67 as of March 20, 2017, $1,495,773,333.34 as of September 20, 2017, $1,402,287,500.01 as of March 21, 2018, $1,308,801,666.68 as of September 21, 2018, $1,2015,315,833.35 as of March 21, 2019, $1,121,830,000.02 as of September 21, 2019, $1,028,344,166.69 as of March 21, 2020, $1,028,344,166.69 as of September 21, 2020, $1,028,344,166.69 as of March 21, 2021, $1,028,344,166.69 as of September 21, 2021, $1,028,344,166.69 as of December 31, 2021, $899,801,145,85 as of March 21, 2022, $899,801,145,85 as of September 21, 2022, and $$899,801,145.86 as of November 30, 2022. The Coca Codo Sinclair hydroelectric project was first proposed in the early 1980s but could not be implemented because of the Reventador volcanic eruption in 1987 and financial constraints. Then, in 2007, Ecuadorian President Rafael Correa restarted the project and Italian company Electroconsult was contracted to conduct a new feasibility study. In February 2008, Coca Codo Sinclair SA was established as a joint venture company between Ecuador’s state-owned power company Termopichincha (70% ownership stake) and Energia Argentina (30% ownership stake). The Government of Ecuador then bought the entire 30% ownership stake of Energia Argentina for $5.5 million in September 2009. Coca Codo Sinclair E.P. — a project company (special purpose vehicle) — was eventually established to oversee the design and implementation of the Coca Codo Sinclair Hydroelectric Project. Its sole shareholder is La Corporación Eléctrica del Ecuador E.P. (CELEC), an Ecuadorian state-owned holding company engaged in electricity generation, transmission, distribution, and commercialization. The purpose of the project was to construct a 1500 MW hydroelectric power plant in El Reventador on the Coca River between the provinces of Napo and Sucumbíos. The plant’s eight turbines were designed to produce 8.8 billion kWh per annum, supplying 35% of the country’s overall electricity consumption and saving about two billion liters of imported diesel for thermal power plants per year. The project was developed in an area where the Coca River flows in a great curve at a natural slope of 620 meters. The water intake complex is located on the Coca River, 1 km downstream of the confluence of the Quijos and Salado rivers. It comprises a concrete face rockfill dam built on the existing river channel, a concrete spillway built on the left bank of the river, and the sedimentation basin and intake built between the dam and spillway. Any water diverted from the intake passes via the 120 meter-long sedimentation basin to run through a 24.8 km-long concrete-lined headrace tunnel, with an excavation diameter of 9.1 meters, into the compensating reservoir, which has a usable volume 800,000m³. Water from the compensating reservoir is fed through two 1,900 meter-long penstocks to the eight Pelton turbines installed in the underground powerhouse, which measure 26m x 50m x 192m. A parallel cavern of 16.5m x 33m x 192m houses 24 single-phase transformers of 68.3 MVA each and a 500kV substation. The access path to the powerhouse is 495m long, 6.5m wide and 7.5m high. A tailrace tunnel delivers water back to the Coca River. The hydroelectric project is designed to use a 620 meter-high natural waterfall with a maximum regulated flow of water of 278m³/s. Coca Codo’s run-of-river intake has a maximum capacity of 7,500m³/s. The sedimentation basin has six bays and a design sediment particles size of 0.25mm, while the maximum derived flow in the headrace tunnel is 222m³/s. Two penstocks with vertical shaft and horizontal reach feed the water from the compensating reservoir to the eight generating units of the plant. In addition, the power plant is equipped with eight six-nozzle vertical Pelton turbines, each with a rated output of 187.7MW. Each turbine is powered by a runner with 22 buckets with a width of 835mm. Sinohydro was the EPC contractor responsible for project implementation and its work was overseen by Coca Codo Sinclair E.P. and CELEC. Project implementation commenced on July 28, 2010. The access road to the powerhouse was completed in October 2012. A tunnel collapse at the plant construction site killed 13 people and injured 12 in December 2014. It also caused partial damage to the high-pressure pipes inside the engine room. The project was ultimately completed on November 18, 2016. Its originally scheduled completion date was January 28, 2016. Since then, the project has been plagued by a variety of engineering problems and corruption accusations. In 2017, the Ecuadorian tax authority (SRI) uncovered pending taxes of $198 million from Sinohydro. One of the main controversies involved a payment of $172.5 million by Sinhohydro to China Export and Credit Insurance Corporation (Sinosure) for the purchase of an insurance policy, for which Sinohydro sought tax deductions, which SRI rejected. Then, in December 2018, the New York Times reported that ‘7,648 cracks have developed in the dam’s machinery, according to the government, because of substandard steel and inadequate welding by Sinohydro. Sand and silt are also big concerns because they can damage vital equipment.’ In May 2021, CELEC requested arbitration through the International Chamber of Commerce to settle a dispute over cracks in the power plant’s machinery that prevented it from operating at full capacity since it was completed in 2016 (after $2.2 billion in construction costs). Then, in July 2021, Reuters reported that new problems at the hydroelectric plant threatened water flow and electricity generation. During a shutdown of four of the facility’s eight turbines for planned maintenance, CELEC discovered missing bolts on some of its valves. CELEC CEO Gonzalo Uquillas said that the problem could prevent valves from opening and closing to adequately regulate the flow of water. ‘Of the 96 bolts that secure the seals on these valves, some bolts are missing,’ Uquillas said in an interview on July 16, 2021. He added that ‘I don’t want to believe they weren’t installed, but they are missing.’ Then, in March 2023, Ecuador's Prosecutor General filed charges against 37 people, including the former President of Ecuador Lenín Moreno (2017-2021) and five former employees of Sinohydro (Cai Runguo, Yan Huijun, Song Dongsheng, Wu Yu, and Liu Aisheg) for allegedly accepting bribes worth $1.1 million to secure the commercial contract for the 1500MW Coca Codo Sinclair Hydroelectric Facility Project. The China Eximbank loan (BCL) that supported the Coca Codo Sinclair Hydroelectric Project has also financially underperformed. It was rescheduled twice — once in September 2020 (as captured via Record ID#93431) and again in September 2022 (as captured via Record ID#96292).