Narrative
Full Description
Project narrative
On July 17, 2018, Dongfang Electric Corporation (DEC) and State Electric Company Limited (STELCO) — a state-owned power utility in the Maldives — signed a $38.9 million supplier's credit (loan) agreement for the Greater Male' Grid Connection Phase I Project. The loan has an 8-year maturity, an estimated grace period of 1.5 years, and an estimated interest rate of 4.8%. The Government of the Maldives issued a sovereign guarantee in support of the loan. The borrower was expected to use the proceeds of the loan to finance approximately 85% of the cost of a $45,619,736 commercial (EPC) contract between STELCO and Dongfang Electric Corporation, which was signed on February 12, 2018. DEC made loan disbursements to STELCO worth $28,491,824 during the calendar year 2020 and $2,909,735 during calendar year 2021. STELCO made loan repayments to DEC worth $6,251,998 during the calendar year 2020, $6,021,791 during calendar year 2021, and $5,791,5841 during calendar year 2022. The loan’s amount outstanding was $7,528,082 as of December 31, 2019, $29,767,907 as of December 31, 2020, $26,655,852 as of December 31, 2021, and $20,864,267 as of December 31, 2022. This project involves the construction of three 132/11kV transformer substations in Male, Hulhumale and Hulhule Airport Island, as well as the 132kV cable lines between the three substations. Northwest Electric Power Design Institute Co., Ltd. of China Power Engineering Consulting Group (NWEPDI) and Dongfang Electric International Cooperation Co., Ltd. are the contractors responsible for project implementation. The EPC contract went into effect on January 2, 2019. The groundbreaking ceremony for this project took place on March 4, 2019. The project was ultimately completed on July 24, 2021 when the 132kV transmission lines and substations went into operation. The project was originally expected to reach completion within 12 months (March 4, 2020). Then, during the calendar year 2020, the Government of Maldives made an MVR 96,405,811 capital contribution to STELCO to ensure that it could honor its obligations under the Dongfang Electric Corporation agreement with Dongfang Electric Corporation.
Staff comments
1. STELCO’s 2020 financial statement refers to the July 17, 2018 with Dongfang Electric Corporation as a deferred payment agreement (DPA). This issue warrants further investigation. 2. Some sources indicated that the 38.9 million supplier's credit (loan) agreement was signed on February 12, 2018 rather than July 17, 2018. This issue warrants further investigation. 3. The contract with Dongfang Electric Corporation is repayable over an 8-year period and the contractor payable is determined based on the percentage of completion of the project and the contractual cash flows have been discounted at a rate of 4.8%. According to the discounted cash flow (DCF) method, the discounted contractual cash flow should be at the financial asset’s effective interest rate. Therefore, AidData assumes an effective interest rate of 4.8%. 4. The Chinese project title is 马尔代夫马累岛环网（一期）项目. 5. Given that the loan was issued on July 17, 2018 and the first known loan repayment took place in 2020, AidData assumes for the time being that the grace period was 1.5 years in length. This issue warrants further investigation. 6. 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 and https://www.audit.gov.mv/Uploads/AuditReports/2024/02February/25._Statement_of_Government_Guarantees_2022___Financial_Statement_Audit.pdf