CDB provides $290 million buyer's credit for Omo Kuraz 3 Sugar Factory Construction Project

On October 1, 2013, China Development Bank and Ethiopian Sugar Corporation (ESC) signed a $290 million ((ETB 5,482,041,588) buyer's credit (loan) agreement for the Omo Kuraz 3 Sugar Factory Construction Project. The borrowing terms of the loan were as follows: an interest rate of 6-month LIBOR plus a 2.6% margin, a grace period of 3 years, a maturity of 13 years, a commitment fee of 0.5%, and an upfront (management) fee of 0.5%. The Government of Ethiopia provided a sovereign guarantee for this loan. Sinosure provided buyer’s credit insurance. The proceeds of the loan were to be used by the borrower to partially finance a $682 million commercial (EPC) contract that it had signed with China National Complete Plant Import Export Corporation (COMPLANT) in March 2013 for the construction of the Omo Kuraz 2 sugar factory and Omo Kuraz 3 sugar factory. According to the Government of Ethiopia’s Aid Management Platform (AMP), the $290 million (ETB 5,482,041,588) loan for the Omo Kuraz 3 Sugar Factory Construction Project achieved a 127% disbursement rate, with China Development Bank making 26 loan disbursements (worth ETB 6,979,336,757) between 2014 and 2020: an ETB 1,172,821,984 disbursement on October 22, 2014, an ETB 453,001,024 disbursement on January 7, 2016, an ETB 330,122,628 disbursement on October 24, 2016, an ETB 471,115,889 disbursement on October 24, 2016, an ETB 643,304,404 disbursement on February 15, 2017, an ETB 495,381,177 disbursement on February 24, 2017, an ETB 56,046,934 disbursement on February 24, 2017, an ETB 67,915,564 disbursement on February 24, 2017, an ETB 135,831,105 disbursement on February 24, 2017, an ETB 192,758,737 disbursement on September 25, 2017, an ETB 173,552,435 disbursement on September 25, 2017, an ETB 178,567,566 disbursement on September 25, 2017, an ETB 155,187,936 disbursement on September 25, 2017, an ETB 197,510,830 disbursement on September 25, 2017, an ETB 150,937,431 disbursement on September 25, 2017, an ETB 162,720,344 disbursement on October 30, 2017, an ETB 69,543,834 disbursement on November 28, 2017, an ETB 180,489,645 disbursement on November 28, 2017, an ETB 336,584,726 disbursement on January 3, 2018, an ETB 115,129,471 disbursement on November 2, 2018, an ETB 145,502,387 disbursement on November 2, 2018, an ETB 67,849,473 disbursement on November 2, 2018, an ETB 22,531,224 disbursement on November 2, 2018, an ETB 791,866,055 disbursement on October 15, 2020, an ETB 123,566,488 disbursement on October 15, 2020, and an ETB 89,497,465 disbursement on October 15, 2020. The purpose of the project was to construct the Omo Kuraz 3 Sugar Factory in South Nations Nationalities and Peoples Regional State (SNNPRS) — specifically, within the Kaffa zone (Decha woreda) and Bench Maji zone (Maji and Meinit Shasha woredas) bordering the Omo River. Upon completion, the facility was expected to produce 800 to 1000 tons of raw, plantation white, and refined sugar a day. COMPLANT was the EPC contractor responsible for project implementation. Construction began on March 11, 2016 and a project completion ceremony took place on October 14, 2018. However, in October 2019, Ethiopia's Auditor-General Gemechu Dubiso announced that he was investigating the possibility that funds earmarked by ESC for ten state-owned sugar factories (potentially including the Omo Kuraz 3 Sugar Factory) were stolen or misappropriated. Then, in July 2021, the Government of Ethiopia announced that it would privatize the Omo Kuraz 3 sugar factory due to debt sustainability problems and the inability of the ESC to fund the operations of the faltering sugar factory and several others.

Additional details

1. This project is also known as the Omo Kuraz 3 Facility Project. The Chinese project title is OMO3糖厂 or 埃塞奥姆3糖厂. The Amaric project title is ኦሞ ኩራዝ ቁጥር 3 ስኳር ፋብሪካ. 2. The all-in interest rate (2.961%) was estimated by adding a 2.6% margin to average 6-Month LIBOR in October 2013 (0.361%). 3. The AMP system identification number for the project is 87143436112184. 4. In 2012, China Development Bank issued a $500 million loan (export buyer’s credit) to the Ethiopian Sugar Corporation (ESC) for the construction of the Omo Kuraz 2-3 Project (i.e. the construction of the Omo Kuraz 2 sugar factory and the construction of the Omo Kuraz 3 sugar factory). $210 million of this loan was initially earmarked for the construction the Omo Kuraz 2 facility. However, it appears the CDB later increased the overall lending envelope for the Omo Kuraz 2 facility and the Omo Kuraz 3 facility. The Economic and Commercial Counsellor's Office of the Embassy of the People's Republic of China in Ethiopia also reported that the China Construction Bank (CCB) supported the Omo Kuraz 3 project, but it is unclear how much, if any, the CCB actually contributed to the project (see '埃塞总理和厄特总统出席中企承建的OMO3糖厂竣工仪式’).

Number of official sources

16

Number of total sources

27