China Development Bank provides $365 million loan for 209.3 MW San Gabán III Hydroelectric Power Plant Construction Project (Linked to Record ID#72868)

Project narrative

In late 2015, China Three Gorges Corporation and Energías de Portugal S.A. submitted a declaration of interest in the 209.3 MW San Gabán III Hydroelectric Power Plant Construction Project. Then, on March 22, 2016, Hydro Global Perú S.A.C. (环球水电秘鲁有限公司) — a special purpose vehicle and joint venture of China Three Gorges Corporation (50% equity stake) and Energías de Portugal S.A. (50% equity stake) — signed a 30-year concession agreement [Concession Definitiva de Generación Contract 494-2016] with Peru’s Ministry of Energy and Mines and PROINVERSION for the project. The $438 million independent power project (IPP) is being implemented on a build, operate, and transfer (BOT) basis and financed with an estimated debt-to-equity ratio of 87:13. On November 29, 2017, the Hebei Branch of China Development Bank signed a $365 million loan agreement with Hydro Global Perú S.A.C. for the 209.3 MW San Gabán III Hydroelectric Power Plant Construction Project. The loan, which is captured via Record ID#53087, reportedly carries a 19-year maturity. It is backed by an insurance policy (most likely from Sinosure) and a corporate repayment guarantee from China Three Gorges Corporation. It is collateralized against the cash deposits in bank accounts and equity stakes that China Three Gorges Corporation and Energías de Portugal S.A. hold in the project company (Hydro Global Perú S.A.C.). Its interest rate and grace period are unknown. The first loan disbursement (worth $95 million) took place on December 22, 2017. The equity contribution is captured via Record ID#72868. The purpose of the project is to construct a 209.3 MW hydroelectric power plant — with two 104.6-megawatt impulse turbines — on the San Gabán River in San Gabán District, Carabaya Province, and Puno Department. The San Gabán III Hydroelectric Power Plant builds upon the San Gabán II Hydroelectric Power Plant, which is located upstream on the San Gabán River. The project also involves the construction of a 220 kV, 139 km transmission line from the Paquillusi substation in Puno to the Onocora substation in Cusco, as well as a low-pressure tunnel, a vertical shaft, a high-pressure tunnel, a cavern power station, and a discharge tunnel that will return the turbine water to the river. Upon completion, the power plant is expected to generate 1.255 billion kWh per year. At the end of the 30-year concession period, Hydro Global Perú S.A.C. will turn the power plant over to San Gabán Electrical Generation Company S.A. (Empresa de Generación Eléctrica San Gabán S.A.), which is a state-owned corporation that is wholly owned by Peru's National Fund for the Financing of the State Business Activity (Fondo Nacional de Financiamiento de la Actividad Empresarial del Estado/Fonafe). Sinohydro Bureau 6 Co. Ltd. — a subsidiary of Sinohydro Group Limited — is the EPC contractor responsible for project implementation. Dessau S&Z S.A. carried out the project’s feasibility study. Construction began on September 1, 2017 and the originally scheduled project completion date was February 1, 2022. However, the project encountered various implementation challenges and fell behind schedule. Hydro Global Perú S.A.C. sought permission from Peru’s Ministry of Energy and Mines to declare force majeure due to the Covid-19 pandemic. As of September 2020, the project had only achieved an 18% completion rate. Then, in August 2022, Hydro Global Perú S.A.C. filed a request with the environmental certification service for sustainable investments (Senace) to change the route of the transmission line so that it would connect to the already operational Azángaro Nueva (Pumiri) substation. At that time, the project had only achieved a 34% completion rate, Then, on September 5, 2022, construction of the earth-rock dam began. The dam is now expected to begin operations in 2027.