China Eximbank provides RMB 1.636 billion government concessional loan for Kandy North Pathadumbara Integrated Water Supply Project

Project narrative

On May 16, 2017, the Chinese Government and the Government of Sri Lanka signed a preferential loan framework agreement for the Kandy North Pathadumbara Integrated Water Supply Project. Then, on December 22, 2017, China Eximbank and the Government of Sri Lanka's Ministry of Finance and Mass Media signed an RMB 1,636,553,500 government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2017) 07 TOTAL NO. (612)] for the Kandy North Pathadumbara Integrated Water Supply Project (KNPIWSP). The GCL carries an interest rate of 2%, a default (penalty) interest rate of 0%, a maturity of 20 years, a 6-year grace period, a 0.25% commitment fee, and a 0.25% (RMB 4,091,383.75) management fee. The loan went into effect on May 29, 2018. Sri Lanka's Ministry of Finance and Mass Media on-lent the proceeds of the loan to Sri Lanka’s National Water Supply and Drainage Board. The borrower was expected to use the loan proceeds to finance a $254,518,429.03 commercial contract (ID# P&P/DB/PATHADUMBARA/2013) between Sri Lanka’s National Water Supply and Drainage Board and Sinohydro Corporation Limited, which was signed on June 16, 2015. China Eximbank disbursed an unknown amount in 2017 and 2018, RMB 274,817,342.53 in 2019, RMB 349,089,845 in 2020, RMB 346,713,167 in 2021, and RMB 50,798,397.47 in 2022. The loan had achieved a 62.4% disbursement rate (RMB 1,021,418,752 out of RMB 1,636,553,500) as of September 2022. The borrower made no repayments between 2017 and 2021. The loan's amount outstanding was RMB 349,089,845 as of December 31, 2020, RMB 695,803,012 as of December 31, 2021, and RMB 746,601,410 as of June 30, 2022. The objective of the project is to provide a safe pipe-borne water supply facility to six divisions, namely Pathadumbara, Harispattuwa, Akurana, Pujapitiya, Kandy Four Gravets, and Thumpane. The scope of the project includes the construction of a clear water reservoir (2100m3 within the existing water treatment plant), a filtration unit, a flocculation unit, a new pump station, and improvements to existing stations, sludge lagoon, service reservoirs, and pump houses. The project also includes the improvement of existing pump stations and the supply and laying of distribution lines and transmission lines. The project is distributed in 6 administrative areas in the north of Kandy. The construction area is about 318 square kilometers. The main construction content is the laying of 83 kilometers of water supply pipelines, 567 kilometers of water distribution pipelines, 29 pools, and 18 pumping stations. After all the planning of the project is completed, it is expected to meet the domestic water demand of 470,000 people. PowerChina is the contractor responsible for project implementation. As of September 30, 2018, the project had achieved a ‘physical progress’ rate of 4%. The loan agreement had already been finalized at that time, but cabinet approval was needed for deviations in the project scope. Land acquisition and procurement activities were underway. As of December 31, 2018, the project had achieved a 'physical progress rate' of 7.42%. Then, on September 21, 2019, a groundbreaking ceremony took place. As of June 30, 2022, the project had achieved a ‘physical progress’ rate of 79.1%. The project was originally expected to reach completion in August 2022.