China Development Bank provides $214.2 million loan for Moragahakanda Development Project

Project narrative

On June 28, 2012, China Development Bank Corporation (CDB) signed a $214,200,000 loan agreement [ID# 4510201201100000017] with the Government of Sri Lanka for the Moragahakanda Development Project. The loan carried the following borrowing terms: an interest rate of 6-month LIBOR plus a 2.90% margin, a grace period of 4 years, a 16 year maturity, a 0.5% management fee, and a 5.9% Sinosure insurance (risk) premium. The loan was apparently secured by (i.e. collateralized against) cash deposits in an escrow account. $214.2 million was received from CDB on June 29, 2012 and $64.34 million was disbursed on August 24, 2012. Between 2013 and 2015, CDB disbursed an additional $66.86 million. Then, in 2016, an additional $43.9 million with disbursed. The loan had achieved an 81.7% disbursement rate ($175.1 million out of $214.2 million) as of December 31, 2016. CDB disbursed $29,973,757 in 2017, $4,821,082 in 2018, $0 in 2019, $5,104,550 in 2020, and $0 in 2021. The loan had achieved a 100.3% disbursement rate ($214,999,389 out of $214,200,000) as of December 31, 2021. The borrower made repayments worth $20,000,000 in 2018, $20,000,000 in 2019, $20,000,000 in 2020 and $20,000,000 in 2021. The loan's amount outstanding was $160,749,268 as of December 31, 2017, $145,570,350 as of December 31, 2018, $125,570,350 as of December 31, 2019, $110,674,900 as of December 31, 2020, $90,674,900 as of December 31, 2021, and $80,674,900 as of June 30, 2022. By early 2022, it was clear that the loan was non-performing. 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 Development Bank loans with amounts outstanding at the time of the announcement. By March 2023, the Government of Sri Lanka had accumulated $338 million in arrears to China Development Bank. The purpose of the project, which was also known as the ‘Construction of Head Work of Moragahakanda Reservoir Project’ and the ‘Three Gorges Project in Sri Lanka,’ was to provide water for irrigation purposes for those living in northern region of Sri Lanka. Another goal of the project was to supply drinking water to millions of local people. It is also expected to generate 20 megawatts of power, addressing a long-term need for domestic and industrial electricity demand in the north-central, northern and eastern provinces. To achieve these goals, a 61m high and 465m long dam was constructed and reservoir was impounded. Upon completion, it was expected that the Moragahakanda reservoir would hold 570 million cubic metres (MCM) of water covering an extent of 2,950 hectares. The intended beneficiaries of this project are people living in Anuradhapura, Polonnaruwa, Mathale, and Trincomalee districts. Sinohydro was the contractor responsible for project implementation. Construction began on January 25, 2012. A groundbreaking ceremony took place in February 2013. On May 31, 2017 the four units of the Moragahakanda Dam completed debugging ahead of grid connection. Reservoir impoundment took place on January 11, 2017. An official project completion ceremony was organized on January 8, 2018. The Moragahakanda dam is located across the Amban River at Elahera, in the Matale District of Sri Lanka. Its locational coordinates are 07°41′56″N 80°46′12″E. The intended beneficiaries of the Moragahakanda Development Project, which included the construction of the dam and other activities, were people living in Anuradhapura, Polonnaruwa, Mathale, and Trincomalee districts.