[CPEC, IPP] China Eximbank contributes to $1.416 billion syndicated loan for 870MW Suki Kinari Hydropower Project (Linked to Record ID#98851, #54309 and #54319)

Project narrative

On January 9, 2017, the Export-Import Bank of China (China Eximbank) and the Industrial and Commercial Bank of China (ICBC) signed a syndicated loan agreement worth $1.416 billion to SK Hydro (Private) Limited (SKHPL) -- a special purpose vehicle -- for the 870.25MW Suki Kinari Hydropower Project. Each lender reportedly contributed $708.1 million. The loan was provided on the following borrowing terms: a maturity of 12 years, a grace period of 5 years, and an interest rate of 6-month LIBOR (0.41326%) plus an 4.75% margin. However, as of July 1, 2023, the loan's interest rate was reset to daily simple SOFR plus a 4.75% margin. The borrower purchased a credit insurance policy from Sinosure (at an estimated cost of $95.919 million). The loan's (principal) amount outstanding was $1.28 billion as of July 2024. SKHPL is a project company (special purpose vehicle) that was established to finance, design, implement, and maintain the 870.25 MW Suki Kinari Hydropower Project. The shareholders of SKHPL are China Gezhouba Group International Engineering Company Limited, White Crystals Limited (a wholly owned company of Saudi Arabia’s Al Jomaih Group), Malaysia’s Eden Inc., and Pakistan’s Haseeb Khan. SKHPL is expected to eventually sell all of the power its generates to the Pakistani government — at a cost of 8.8415 US cents per kilowatt hour — under a 30-year power purchase agreement (PPA). This independent power project (IPP) is being implemented on a Build, Own, Operate and Transfer (BOOT) basis and financed according to a debt-to-equity ratio of 75:25. Equity financing for the project was arranged by the shareholders of Suki Kinari Hydro (Private) Limited. China Gezhouba Group Corporation, Al Jomaih, and Eden each agreed to provide $160.09 million equity contributions. The dam, located on River Kunhar in the District Mansehra of Khyber Pakhtunkhwa, is being constructed as a 54.5 meter high and 336 meter wide concrete gravity dam with 2 gated spillways. Four 218MW turbines are to be installed as part of the project, and they are expected to generate approximately 870MW of electricity in total. Construction of the dam is expected to result in the formation of a 3.1 kilometer long reservoir with a capacity of 9 million cubic meters of water. The dam is reportedly not expected to create large scale displacement of populations as no villages or towns are expected to be inundated by the resulting dam's reservoir, although a four kilometer section of the Kaghan-Naran highway is expected to be diverted as a result of construction works and the resulting reservoir. China Gezhouba Group Company Ltd. is the EPC contractor responsible for project implementation. Construction began on January 1, 2017 and the power plant was expected to reach its commercial operations date (COD) and inject 3,081 GWh million of clean reliable and affordable units of electricity each year to the national grid by December 2022. On April 25, 2019, it was reported that 70% of the project had been completed with an expected completion date in 2022. A significant milestone was held when the project held a river closure ceremony on September 28, 2019. However, the power plant’s expected COD was pushed back until August 2024. The plant successfully completed the testing phase and was prepared to connect to the national grid on September 19, 2024. However, as September 19, 2024, the power plant had not achieved COD, which resulted in the project’s completion ceremony being indefinitely postponed. There are also some indications that the syndicated loan for the 870.25MW Suki Kinari Hydropower Project is financially underperforming vis-a-vis the original expectations of lenders. In July 2024, the Government of Pakistan reportedly requested that ICBC and China Eximbank grant a 5-year maturity extension to SKHPL. However, as of October 2024, a debt reprofiling agreement had not yet been finalized.