China Eximbank provides $249.3 million preferential buyer’s credit for Genale Dawa III-Yirga Alem II-Wolayita Sodo II-Hawassa II Power Transmission Project (Linked to Project ID#69129)

On December 27, 2016, the Ethiopian Government and China Eximbank signed a $249,323,075.34 (ETB 5,608,008,042) preferential buyer’s credit (PBC) agreement for the Genale Dawa III-Yirga Alem II-Wolayita Sodo II-Hawassa II Power Transmission Project. The Ethiopian House of Representatives ratified the PBC agreement on February 7, 2017 under Proclamation No. 1000/2017. The proclamation went into effect on February 22. 2017. The PBC carried the following borrowing terms: a 12 year maturity, a 3 year grace period, and a 2.43% interest rate. The borrower was expected to use the proceeds of the PBC to partially finance a commercial (EPC) contract between Ethiopian Electric Power Corporation (EEPCo), China Energy Engineering Corporation Limited (CEEC), and Xinjiang Electric Power Design Institute, which was signed in September 2014 and modified on August 22, 2015. China Eximbank made 8 loan disbursements (worth $212,287,364.45 or ETB 5,650,372,288) between 2017 and 2019: a $124,304,105.62 disbursement on July 20, 2017, a $30,530,211.81 disbursement on August 18, 2017, a $23,090,272.81 disbursement on November 23, 2017, a $7,237,606.93 disbursement on December 8, 2017, a $4,070,685.80 disbursement on December 18, 2017, a $11,054,217.02 disbursement on June 14, 2018, a $3,806,431.81 disbursement on August 3, 2018, and a $8,193,832.65 disbursement on September 11, 2019. The project involved the construction of a 355 km, 400kV transmission line from the Genale Dawa III substation to the Yirga Alem II substation and the Wolayita Sodo II substation and Hawassa II substation. $195 million of the loan proceeds was earmarked for construction of the transmission line, while the remaining $54 million was earmarked for construction of the substations. Xinjiang Electric Power Design Institute and CEEC were the general EPC contractors responsible for project implementation. Sichuan Electric Power Transmission and Transformation Construction Co., Ltd. was also involved (most likely as a subcontractor). Construction began in November 2015 and the project was completed on May 5, 2017. There are some indications that the China Eximbank loan for the Genale Dawa III-Yirga Alem II-Wolayita Sodo II-Hawassa II Power Transmission Project may have financially underperformed vis-a-vis the original expectations of the lender. 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 Project ID#58616). Then, in August 2021, China Eximbank withheld $339 million loan disbursements for 12 projects and halted project implementation due to Government of Ethiopia’s rapidly dwindling foreign exchange reserves and debt sustainability challenges. Demisu Lemma, the Director of Chinese Cooperation at the Ethiopian Ministry of Finance, noted at the time that the Ethiopian Government was in discussions with China Eximbank about a potential debt rescheduling (that would involved a 5-year maturity extension and a 1-year grace period extension). 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.

Additional details

1. This project is also known as the GDYW-2 Project, the Genale Dawa III Yirgalem II - Wolayita Sodo II - Hawassa II Power Transmission Project, and the Genale Dawa III Yirgalem II Wolyita Sodo II Hawassa II Power Transmission Project. The Chinese project title is GDYW-2 400kV输电线路项目取. 2. Project ID#69129 captures the China Eximbank loan for the construction of the Genale Dawa III Hydroelectric Power Station Project. 3. The system identification number for this project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143436112069. 4. 1 Ethiopian Birr (ETB) was equal to 0.044 United States Dollars (USD) in December 2016 which implies that the loan commitment value recorded in the AMP (ETB 5,608,008,042) was equivalent to USD 246,752,353.8.

Number of official sources

17

Number of total sources

24