China Eximbank provides $141.8 million buyer’s credit loan for Phase 2 of 211 MW Memve'ele Hydroelectric Power Plant Project (Linked to Record ID#289)

Project narrative

On February 28, 2017, China Eximbank signed an a buyer’s credit loan (BCL) agreement with Cameroon's Ministry of Power and Water Resources worth $141,839,830 for Phase 2 of the 211 MW Memve'ele Hydroelectric Power Plant Project. The borrowing terms of the BCL are as follows: a 15 year maturity, a 3 year grace period, and an interest rate of 6-month LIBOR plus 320 basis points. The borrower was expected to use the proceeds of the BCL to partially finance the cost of a commercial contract between Cameroon’s Ministry of Water and Energy and Sinohydro Corporation. As of December 31, 2020, the loan (BCL) had achieved a 90.9% disbursement rate (with an undisbursed balance of CFA 6.9 billion) and the its outstanding amount was equivalent to CFA 69.1 billion. The purpose of the project is to evacuate 211MW of electricity from the Memve'ele dam (on River Ntem) to Yaounde. The project scope includes (1) the construction of 294 pylons between Nyabizan and Ebolowa; (2) the installation of a 225kV, 280 km electricity transmission line between Nyabissan (Memve'ele), Ebolowa and Ahala substations; (3) deviation of the existing 225kV Mangombé-Oyomabang single-circuit electricity transmission line and the existing 90kV Edéa-Yaoundé single-circuit electricity transmission line; (4) the construction of two new Ebolowa and Nkol Nkumu 225kV substations; and (5) extension of the existing Ahala substation from 90kV to 225kV. Upon completion, these transmission lines to Ebolowa and substations are expected to connect the dam to Cameroon’s southern network and to Yaoundé. Sinohydro 16th Bureau is the contractor responsible for project implementation. The project construction began in 2011 and the dam was completed since June 2017, but energy evacuation works are being built and it is expected to be announced in August 2020. As of September 30, 2021, the construction of the Nyabizan-Yaoundé evacuation line had achieved a 92% completion rate (and at least 280 of the 294 pylons were installed). However, the completion of the project (commissioning of the dam) depends on payment of compensation to the people affected by the transmission line’s corridor. The people located along a 5 km route of this 270 km line are claiming nearly FCFA 3 billion (EUR 5 million) in compensation, and as of December 2021, this issue had not been resolved (after several failed attempts and deadlines). In late June 2021, during a special plenary session of the National Assembly, Cameroon’s Minister of Water and Energy (MINEE) Gaston Eloundou Essomba provided an update on the status of the project. He explained that “Memve’ele hydroelectric plant is already injecting 90MW of energy into the South Interconnected Network” and “once the 225kV line is completed […] the volume of production injected will rise to 211 MW.” However, according to Sinohydro 16th Bureau, the hydroelectric power plant will not operate at full capacity after the completion of the 280 km electricity transmission line between Nyabizan and Ebolowa because of the flow of the Ntem River. The company’s experts believe claim that the flow of the Ntem River will not be sufficient to regularly drive the power plant’s four (52.75 MW) turbines. The solution suggested by Sinohydro 16th Bureau is the construction of a reservoir and the project is reportedly being ‘fine-tuned’ to address this issue. According to the Government of Cameroon, the revenue generated by the Memve’ele hydroelectric power plant and Nyabizan-Yaoundé transmission line since ‘powering up’ from April 2019 to October 2021 amounts to CFAF 45 billion. In addition, the partial completion of the 211MW Memve'ele Hydroelectric Power Plant Project enabled the shutdown of the Ahala, Oyom-Abang, Mbalmayo and Ebolowa thermal power stations, which has led to a substantial reduction in the fuel costs that were previously borne by the Government of Cameroon. Phase 1 of the project was also financed by China Eximbank in 2012 and completed in 2016 (as captured via Record ID#289). There are some indications that the China Eximbank loan for Phase 2 of the 211MW Memve'ele Hydroelectric Power Plant Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’