China Eximbank and Bank of China provide $75.3 million buyer’s credit loan for STELCO’s 5th Power Development Project (Linked to Project ID#54280)

On December 27, 2016, the Export-Import Bank of China and Bank of China (Sichuan Branch) signed a $75,395,226 buyer’s credit loan agreement with State Electric Company Limited (STELCO) — a state-owned power utility in the Maldives — for the Hulhumalé 5th Power Development Project. The loan carries the following borrowing terms: an interest rate of 6-month LIBOR plus a 3% margin, a 14.5-year maturity (final maturity date: July 31, 2031), and an estimated grace period of 3 years. The Ministry of Finance and Treasury of the Government of Maldives provided a sovereign guarantee for this loan. The borrower also purchased buyer’s credit insurance from Sinosure. The borrower was expected to use the proceeds of the loan to partially finance a $90 million EPC turnkey contract between STELCO and Dongfang Electric International Corporation (DEC), which was signed on May 28, 2015. The loan had achieved a 74% disbursement rate ($55,860,790 out of $75,395,226) as of September 2018 and a 100% disbursement rate as of December 2019 ($75,395,226 out of $75,395,226). The borrower made loan repayments to China Eximbank worth $6,282,935 during calendar year 2020 and $1,884,881 during calendar year 2021. The loan’s outstanding amount was $10,627,589 as of December 31, 2017, $37,584,605 as of December 31, 2018, $75,395,226 (MVR 1,118,854,580) as of December 31, 2019, $69,112,290 (MVR 1,081,698,614) as of December 31, 2020, and $67,227,410 as of December 31, 2021. The project involved the construction of a diesel engine power plant with an installed capacity of 50MW and two sets of seawater desalination systems each with a capacity of 960 tons per day (by utilizing flue gas from the power plant). Once operational, the power plant was expected to provide sufficient electricity to satisfy the demand of consumers for economic and social development in the greater Malé region, as well as guarantee a supply of power transmission in the area. The plant was also expected to become a supply of fresh water for residents, tourists, and industry. The Maldivian reported that the plant would guarantee electricity coverage for the next 10 to 20 years for Malé and Hulhumalé. The power plant was also expected to provide electricity to Malé and Hulhumalé via an interconnection through the China Eximbank-financed Malé-Hulhumalé Bridge (China-Maldives Friendship Bridge) (captured via Project ID#54280). Dongfang Electric International Corporation (DEC) was the EPC contractor responsible for project implementation. A groundbreaking ceremony for the 5th Power Development Project was on July 31, 2016. The project had achieved a 70% completion rate as of March 26, 2018. The first unit of the plant was connected to the grid on January 6, 2019. The project was ultimately completed on July 22, 2019, 38 days ahead of what was scheduled in the contract (August 29, 2019). However, there are some indications that the China Eximbank and Bank of China loan for STELCO’s 5th Power Development Project may have financially underperformed. During the calendar year 2020, the loan’s guarantor (the Ministry of Finance and Treasury of the Government of Maldives) made an MVR 154,007,552 capital contribution to STELCO to ensure that it could honor its repayment obligations to China Eximbank and Bank of China. Repayments also declined from $6,282,935 during calendar year 2020 to $1,884,881 during calendar year 2021.

Additional details

1. Most sources only refer to the China Eximbank as the financier, but some Maldives Ministry of Finance documents identify Bank of China, Sichuan Branch, as a financier. 2. This project is also known as the Hulumale Power Plant (5th Power Project) and STELCO’s 5th Power Development Project. The Chinese name of the project is 胡鲁马累第五发电站项目. 3. AidData has estimated the all-in interest rate by adding 3% to average 6-month LIBOR in December 2017 (1.306%). 4. Given that the loan was issued on December 27, 2016 and the first known loan repayment took place in 2020, AidData assumes for the time being that the grace period was 3 years in length. This issue warrants further investigation. 5. The amounts outstanding and repayments data are drawn from https://www.dropbox.com/s/q82x5hte85kc20e/105._Statement_of_Government_Guarantees_Audit_Report_2021.pdf?dl=0 and https://www.dropbox.com/s/rik8ynrjweat5aw/StatementOfGovernmentGuaranteesFinancialYear2020%20%281%29.pdf?dl=0

Number of official sources

11

Number of total sources

20