[Disbursed] Bank of China disbursed $195.4 million out of $332 million contribution to $381.7 million syndicated loan tranche — via EPC+F arrangement — for Kafulafuta Water Supply System Project (Linked to Record ID#108550)

Project narrative

On June 5, 2013, China National Complete Engineering Corporation — a subsidiary of China National Chemical Engineering Corporation (CNCEC) — signed a memorandum of understanding (MOU) with the Government of Zambia for water supply projects in Copperbelt Province. One of these projects was the Kafulafuta Water Supply System Project. Then, on July 11, 2016, Bank of China and Standard Chartered signed a $449,090,629.71 syndicated (EPC+F) loan agreement with CNCEC for the Kafulafuta Water Supply System Project. The loan was provided in two separate tranches and backed by a sovereign repayment guarantee from the Government of Zambia’s Ministry of Finance & National Planning (MOFNP). As part of the first ($381,727,035.28) tranche, Bank of China contributed approximately $332 million (captured via Record ID#56970) and Standard Chartered contributed approximately $50 million. This loan tranche has a 15-year maturity. Sinosure provided political and commercial risk insurance for 95% of the principal and interest under this loan tranche. As of July 2022, the $381,727,035.28 syndicated loan tranche had achieved a 58.8% disbursement rate ($224,609,249.30 out of $381,727,035.28). Standard Chartered also provided the second tranche worth $67.3 million with a 4-year maturity. The proceeds of these two loan tranches were use to finance 100% of the cost of a $449,090,629.71 commercial (EPC) contract between Zambia’s Ministry of Local Government and Housing with China National Complete Engineering Corporation (CNCEC), which was signed in February 2016. This project involves the construction of a reservoir dam at Kafulafuta with a 125 million cubic meter storage capacity, a water intake pumping station, a midway booster pumping station, an independent water supply system in Mupenggui region, a transmission main line from the dam to Ndola, and waterlines from the Kafulafuta dam to Msayiti (V.), Luanshya and Ndola water works. It also involves the upgrading and reconstruction of a city pipe network, the procurement of domestic water meters and regional water meters, and resettlement engineering activities. The project is expected to create 3,000 jobs and improve water access and quality for 700,000 people in the Ndola, Luanshya and Masaiti districts. The dam site is located in Ibenga area of Masaiti District of the Copperbelt Province of Zambia. It lies 50km west of Ndola City. The site is within Her Royal Highness Chieftainess Malembeka and His Royal Highness Senior Chief Mushili. Project implementation began in August 2017. However, a formal project commencement ceremony did not take place until September 21, 2018. Then, in June 2019, a shipment of 3,336 tons of building materials — including water pipelines — arrived via the Port of Walvis Bay in Namibia. According to Zambia's Ministry of Water and Sanitation Development as of September 11, 2019, the project had achieved a 55% completion rate. On February 5, 2020, CNCEC notified the Zambian Government that it was halting work on the project due to overdue payments, which would leave 450 employees and 50 subcontractors out of work. Japhen Mwakalombe, Zambia’s Minister of the Copperbelt province, disputed this point, arguing that the work stoppage was because of heavy rains in the area. Then, in November 2021, Kafubu Water and Sanitation Company (KWSC) Director of Engineering Bernard Phiri reported that the stalled project was being affected by rampant vandalism and theft. Valves and other water installations from the project site were reportedly stolen and vandalized. The project was originally scheduled for completion in January 2021. On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the undisbursed balance ($157,117,785.98) of the $381,727,035.28 syndicated loan tranche; however, it also noted that it had not yet secured formal lender approval for this action. This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club. MOFNP also announced on July 29, 2022 that it planned to finance the completion of the Kafulafuta Water Supply System Project with general government revenues. As of March 30 2025, the dam flow target was achieved and entered full operation stage.