ICBC provides $88.13 million loan for Phase 1 of Rural Electrification in 5 Regions Project (Linked to Record ID#73197, #92023)

Project narrative

On December 29, 2015, Ghana's Parliament approved a $90,472,385 term loan facility agreement with the Industrial and Commercial Bank of China (ICBC) for Phase 1 of the Rural Electrification in 5 Regions Project. The loan agreement was countersigned by the lender and borrower on June 28, 2016. The loan, which is captured via Record ID#52991, carries the following borrowing terms: a 15.5 year maturity, a 4 year grace period, an interest rate of 6-month LIBOR plus a margin of 0.5%, a default (penalty) interest rate of 2%, a commitment fee of 1%, and a management (upfront) fee of 1.5%. The final maturity date of the loan is December 28, 2031. China Export & Credit Insurance Corporation (Sinosure) provided buyer’s credit insurance for this loan, and when the upfront (lump sum) premium was reduced from its original estimate of $8,022,385 (as approved by Ghana’s Parliament on December 29, 2015) to $5,682,722.24, the face value of the loan was reduced to $88,132,722.24 (from its original value of $90,472,385) through a June 30, 2017 addendum to the June 28, 2016 facility agreement. The proceeds of the loan were to be used by the borrower to partially finance a commercial (EPC) contract with China International Water and Electric Corporation (CWE), which was signed on April 11, 2016. The loan’s (principal) amount outstanding was GHS 235,660,000 ($42,082,142) as of December 31, 2020 and GHS 432,600,000 ($83,192,307) as of December 31, 2021. Then, on August 12, 2020, the Government of Ghana and the Bank of China and ICBC signed a $95,375,020.36 loan agreement to finance Phase 2 of the Self-Help Electrification Project (SHEP) in 5 Regions. ICBC's contribution is captured via Record ID#73197 and BOC's contribution via Record ID#92023. The loan carries the following (estimated) borrowing) terms: a 15 maturity, a 4 year grace period, an interest rate of 6-month LIBOR plus a margin of 1.95%, a 0.5% commitment fee, and a 1.5% upfront (management) fee. The face value ($95,375,020.36) of this loan is inclusive of an estimated, upfront Sinosure insurance premium of $7,825,020.36. The loan’s (principal) amount outstanding was GHS 79,880,000 ($14,264,285) as of December 31, 2020 and GHS 442,900,000 ($85,173,076) as of December 31, 2021. The purpose of the Rural Electrification Project in 5 Regions is to supply electrical materials and equipment for the electrification of 1,033 communities in the Ashanti, Brong Ahafo, Eastern, Volta, and Western Regions. It is being implemented in two phases and China International Water and Electric Corporation (CWE) is the contractor responsible for implementation of both phases. Phase 1 sought to connect 495 communities in 15 districts within the Ashanti Region, Eastern Region, Western Region, and Volta Region to the national electricity grid. This phase is now complete and it succeeded in connecting 507 communities to the national electricity grid. Phase 2 seeks to connect 582 communities in the Brong Ahafo Region, Ashanti Region, Eastern Region, Western Region, and Volta Region to the national electricity grid. There are some indications that the ICBC loan for Phase 1 of the Rural Electrification in 5 Regions Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans.