China Eximbank contributes to $79.9 million buyer’s credit loan for STELCO’s 5th Power Development Project

Project narrative

On May 28, 2015, the Export-Import Bank of China (Record ID#54277) and Bank of China (Sichuan Branch) (Record ID#105887) signed a $79,946,000 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. On December 27, 2016, the Government of Maldives provided sovereign guarantee of $75,395,226 USD for the project. The loan had achieved a 70% disbursement rate ($55,860,790 out of $79,946,000) as of September 2018 and a 94.3% disbursement rate as of December 2019 ($75,395,226 out of $79,946,000). The borrower made loan repayments to China Eximbank worth $6,282,935 during calendar year 2020, $1,884,881 during calendar year 2021, and $6,282,935 during calendar year 2022. The loan’s (principal) amount outstanding 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, $67,227,410 as of December 31, 2021, and $56,546,420 as of December 31, 2022. 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 Record 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.