[Disbursed] ICBC disbursed $63.16 million for $169.64 million loan for Phase II of the Nkana Water and Sanitation Project (Linked to Record ID#107881)

Project narrative

In December 2015, the Industrial and Commercial Bank of China (ICBC) and the Government of Zambia signed a $169,642,996.60 loan agreement for Phase II of the Nkana Water And Sanitation Project (NWSSP II). The borrowing terms of the loan are unknown. However, it is known that the proceeds of the loan were to be used by the borrower to finance 85% of the cost of a $199,579,996.00 commercial (EPC) contract between the Government of Zambia and China Henan International Cooperation Group (CHICO), which was signed on September 5, 2012 and amended in January 2015. As of July 2022, the loan had achieved a 37.2% disbursement rate ($63,156,958.23 out of $169,642,996.60). The purpose of this project is to improve access to adequate water supply and sanitation services in the urban and peri-urban areas of Kitwe, Kalulushi, and Chambishi through rehabilitation and extension of the existing water supply and sanitation facilities in these areas. Upon completion, the project is expected to benefit 750,000 people. CHICO is the EPC contractor responsible for implementation. Construction began in June 2017. By the end of 2018, the project had achieve an overall completion rate of 36%. More specifically, it had achieved the following milestones: replacement of water transmission mains (81.6% completion rate with 19.17 km of rising mains installed out of the planned 23.5 km in Kitwe Kalulushi and Chambishi); 30.6 km of distribution mains installed in Kitwe, Kalulushi and Chambishi; 67.5km of trunk sewers replaced out of 80 km new planned total in Kitwe, Kalulushi and Chambishi (84.4% completion rate); and 13,740 prepaid meters installed out of the 14,100 planned and installed in Buchi, Kamitondo and other low-cost areas in Kitwe (97.75% completion rate); and the replacement of worn out sewer trunk mains and networks in Kalulushi (100% completion rate). However, CHICO reportedly abandoned the project for a period of time in 2019 due to inconsistent payments from the Government of Zambia. CHICO was reportedly owed $30 million for work that it had performed. The project was originally expected to reach completion by June 2021. However, as of February 2022, AidData had not identified any evidence of project completion. On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the ICBC loan’s undisbursed balance ($106,486,038.37); however, it also noted that it had not yet secured formal lender approval for this action. This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club. MOFNP also announced on July 29, 2022 that it planned to finance the completion of Phase II of the Nkana Water and Sanitation Project with general government revenues, but it also signaled its intention to rescope the project to focus on ‘critical works’.