Narrative
Full Description
Project narrative
On August 10, 2017, the Industrial and Commercial Bank of China (ICBC) signed a $36.84 million loan facility agreement with ZESCO Limited — Zambia’s state-owned power company — for the Chipata-Lundazi-Chama 132KV Transmission Line Project. The loan carries the following terms: a 15-year maturity, a 3-year grace period, and an interest rate of LIBOR plus 335 basis points. The proceeds of the loan were to be used by the borrower to partially finance a commercial contract between ZESCO Limited, Jiangsu Etern Co. and Sinohydro Corporation Ltd., which was signed on or around October 2014. As of December 31, 2017, the loan's amount outstanding was $7.4 million. The purpose of this 2-part project was to connect Lundazi and Chama districts to the Zambian national power grid because residents were receiving unreliable power from ESCOM Malawi. It involved the construction of a 305 km, 132 kv transmission line from the Chipata sub-station to Chama via Mwansephangwe, Lundazi, Eggichickeni (Chief Magodis area) as well as four new 33kv substations in Mwasemphangwe, Lundazi, Egichikeni and Chama. Jiangsu Etern Co. and Sinohydro Corporation Ltd were the EPC contractors responsible for project implementation. The first down payments to the two contractors were made in 2016, thus enabling the preliminary design works to commence. According to the ZESCO's 2017 Integrated Report (source ID 114272 p. 62), Sinohydro Corporation Ltd mobilized to the site and commenced works during 2017. However, Jiangsu Etern was still awaiting issuance of a Government of Zambia sovereign guarantee to achieve financial close. It expected to mobilize in the first quarter of 2018. Both projects were scheduled to last 18 months. By the end of 2018, the project had achieved a 40% completion rate. One of the transmissions lines was connected to grid on December 16, 2019. The project as a whole was completed on or around February 21, 2021.
Staff comments
1. This project is also known as the Connection of Lundazi and Chama to the National Grid Project and the 132KV Transmission Line Project in Eastern Province of Zambia. The Chinese project title is L&C305输电线路 or 赞比亚东部省132KV 输电线路项目 or 赞比亚CLC132输电线路项目. 2. The all-in interest rate was calculated by taking average 6-month LIBOR in August 2017 (1.454% and adding 3.35%. 3. Some sources suggest that loan agreement was signed on January 26, 2017 and financial closure was achieved on October 13, 2017. This issue warrants further investigation. 4. The borrowing terms of the loan are drawn from a 2017 financial report from ZESCO (source ID#67341 p. 41). 5. In 2014, Jiangsu Etern Co. (a privately-owned Chinese enterprise) was awarded the substation construction contract, and Sinohydro Corporation Ltd. won the Chipata-Lundazi 132 kV transmission line contract for a combined cost of $64 million. 5. According to one of the lawyers who advised on the transaction, the project scope involved the engineering, design, supply, installation, construction, testing and commissioning of the Chipata-Lundazi-Chama 132KV transmission project LOT 1; the 85 km Chipata West-Mwasemphangwe 132KV transmission line, the 90 km Mwasemphangwe-Lundazi 132KV transmission line, 40 km Lundazi- Engichikeni 132 KV transmission line, and the 90 km Egichikeni—Chama 132KV transmission line. See https://www.dropbox.com/s/5xqey9jvmeo21jn/Project%20Financing.pdf?dl=0