Bank of China provides $90.1 million buyer’s credit loan for Phase 1 of Solar Rural Electrification Project (Linked to Project ID#53234)

On September 26, 2012, Huawei and Cameroon’s Ministry of Water Resources and Energy signed a memorandum of understanding regarding a $400 million project to deploy the Huawei PowerCube5000 micro-grid solution to convert solar energy into electric energy. Then, in February 2015, Cameroonian President Paul Biya issued a presidential decree authorizing the Minister of Economy, Planning and Territorial Rehabilitation to sign a $90.1 million financing (supplier credit) agreement with Huawei Technologies Co., Ltd. for the PowerCube5000 Micro-Grid Solution Project. The borrowing terms of the supplier credit are unknown. It is also unclear if the supplier credit agreement was ever finalized. However, it is known that Bank of China and the Government of Cameroon signed a $90.1 million buyer’s credit loan agreement for Phase 1 of the Solar Rural Electrification Project on February 1, 2015, and Bank of China and the Government of Cameroon signed a $123,250,000 loan agreement for Phase 2 of the Solar Rural Electrification Project on September 1, 2017. The Bank of China loan for Phase 1 carried a 13 year maturity, 4 year grace period, and 4.2% interest rate. As of December 31, 2020, the loan for Phase 1 had achieved a 91.4% disbursement rate (with an undisbursed balance of CFA 4.2 billion) and its outstanding amount was equivalent to CFA 31.4 billion. The Bank of China loan for Phase 2 carried a 12 year maturity, 3 year grace period, and 5% interest rate. As of December 31, 2020, the loan for Phase 2 had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 59.5 billion. Project ID#53117 captures the supplier credit that Huawei offered to the Government of Cameroon in 2015. Project ID#57697 captures the buyer’s credit loan from Bank of China for Phase 1 of the Solar Rural Electrification Project. Project ID#53234 captures the loan from Bank of China for Phase 2 of the Solar Rural Electrification Project. The purpose of the Solar Rural Electrification Project was to supply, install and operate photovoltaic infrastructure (known as solar mini-grids or solar micro-grids) in 350 localities (villages and towns) in Cameroon. The project, which was implemented in two phases, sought to cover 58 states within 10 major regions across the country and deliver 70MW of solar energy to 150,000 people across 1,000 sites and 350 localities. Phase 1 targeted 166 localities and Phase 2 targeted 184 localities. It was originally envisaged that villagers would pay less than FCFA 100 for a kilowatt of power once the project was fully operational. Huawei was the contractor responsible for the implementation of both phases of the project. Phase 1 officially commenced on November 29, 2016. Huawei reportedly installed a number of solar-backed micro-grid systems across the country in 2017, with systems ranging from 30 kW to 300 kW in size, featuring advanced maximum power point tracker (MPPT) technology, high-efficiency inverters, and advanced charging-discharging management. Phase 1 ultimately delivered 11.2MW of solar energy to 166 localities (villages and towns) and it reportedly benefited between 13,984 and 22,240 households (including 3,100 households that secured electricity connections in 2021). These localities received electricity from a solar power plant in the village of Nsem, which was officially commissioned in November 24, 2018. However, the first phase of the project was plagued by accusations of corruption and embezzlement. As of late 2021, Phase 1 was not yet complete. However, the management of all photovoltaic infrastructure that was installed during Phase 1 was handed over to Cameroon’s Rural Electrification Agency in February 2021. Phase 2 commenced in 2018, and as of December 14, 2018, it had achieved a 31% completion rate. As of late 2021, all Phase 2 construction activities were complete and 9,820 household electricity connections had been established (including 3,946 in 2021), but the Phase 2 campaign to increase the number of households with electricity connections was still underway and efforts to transfer management of all photovoltaic infrastructure installed during Phase 2 to Cameroon’s Rural Electrification Agency were ongoing. In November 2020, the Government of Cameroon announced plans to pursue a third phase of the project, which would seek to reach an additional 200 localities (villages and towns). There are some indications that the Bank of China loans for the first and second phases of the Solar Rural Electrification 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 Project 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.’

Additional details

1. The Solar Rural Electrification Project is also known as the Microgrid Solar Solution Project. The Chinese project title is 施喀麦隆166个村镇光伏基础设施供货、安装和运营项目 or 喀麥隆166個村莊太陽能電站項目. The French project title is PROJET D'ELECTRIFICATION DE 360 LOCALITES PAR SYSTEME SOLAIRE PHOTOVOLTAIQUE (Phase 1) or Le projet d’électrification de 166 Localités par systèmes solaires photovoltaïques. 2. In the database of Chinese loan commitments that SAIS-CARI released in July 2020 and updated in March 2021 (which is now maintained by Boston University’s Global Development Policy (GDP) Center), the lender is identified as China Eximbank and no borrowing terms are recorded. The Government of Cameroon’s Development Assistance Database (DAD) identifies the face value of the loan as $106,000,000. AidData relies on the face value of the loan ($90.1 million), the borrowing terms of the loan (13 year maturity, 4 year grace period, 4.2% interest rate), and the financing institution (Bank of China) that are recorded in a March 2021 publication of the Government of Cameroon’s Caisse Autonome d'Amortissements (CAA) (https://www.dropbox.com/s/a400557jut579m5/Government%20of%20Cameroon%202020%20Register%20of%20Chinese%20Loans%20and%20Borrowing%20Terms.pdf?dl=0).

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