[Suspended] China Eximbank provides $171 million buyer’s credit loan -- via EPCF arrangement -- for Bosto Dam Water Supply Project

Project narrative

In March 2016, feasibility studies were completed for the Bosto Dam Water Supply Project. Then, in July 2017, an Environmental and Social Impact Assessment (ESIA) was completed and a NEMA license [No.NEMA/EIA/PSL/5292] was issued. On September 4, 2018, China Eximbank and China GeoEngineering Corporation International Ltd (CGCINT) signed a $171,021,786.35 buyer’s credit loan agreement for the Bosto Dam Water Supply Project. The loan has a maturity of 15 years (final maturity date: July 21, 2033). The other borrowing terms of the loan are unknown. The borrower purchased buyer’s credit insurance from Sinosure. The Government of Kenya also appears to have issued a sovereign guarantee in support of the loan. The borrower (CGCINT) was expected to use the proceeds of the loan to finance 85% of the cost of its $193,760,000 Engineering, Construction, Procurement, and Financing (EPCF) contract [NWC/RT/005/2016-2017] with the Government of of Kenya (National Water Harvesting and Storage Authority), which was signed on August 3, 2017. The Government of Kenya was responsible for providing counterpart financing to cover 15% of the cost of the EPCF contract. The lender did not make any loan disbursements between July 1, 2020 and June 30, 2022 (Fiscal Year 2020-2021 and Fiscal Year 2021-2022). Nor did the borrower make any principal repayments between July 1, 2020 and June 30, 2022 (Fiscal Year 2020-2021 and Fiscal Year 2021-2022). The loan’s amount outstanding was zero as of June 30, 2021 and zero as of June 30, 2022. As of 2023, the loan still had no recorded amount outstanding. In the Kenyan Treasury Summary Statement of Public Debt For 2023/2024, the loan was no longer recorded. As of July 29, 2019, insurance premiums to Sinosure had been paid and a performance and advance payment guarantee was submitted by CGCINT. China Eximbank then notified the borrower that the loan had officially gone into effect on September 24, 2019. However, as of November 2021, the CGCINT had still not received payment from the Government of Kenya. A Member of Kenya’s Parliament noted in November 2021 that 'the delayed payment of 15% counterpart funding equivalent to [KES] 3.06 billion and the refusal by the Kenya Forest Service to approve access to the dam site No.1, which according to feasibility studies shows it is technically viable and has all necessary dam functionalities, has exposed the Government of Kenya to default and [it is] straining […] our country’s relations with the People’s Republic of China.’ The purpose of the project is to supply portable water to Bomet Town, Silibwet Town, Sotik Town, Siongiroi Town and Ndanai town and replace pump fed water service schemes that are not sustainable due to the high cost of electricity. The project site is located in Bomet County, 18 km from the edge of South Western Mau Forest as measured along the longitudinal profile of Kipsonoi River (35030.216E, 0032.259S). The project involves the construction of a 45 meter high zoned rockfill dam (with an impermeable clay core and an embankment crest length of 300 meters), a reservoir with storage capacity of 29.5 million cubic meters, a water treatment plant with a capacity of 80,300m3 per day, a 1 MW hydropower substation, a raw water main pipeline with a diameter of 900 mm extending 19 km, a 210 km transmission and distribution pipeline, and 30 storage tanks with 29,050m3 of total capacity. Upon completion, the project is expected to provide potable water to 705,857 people in the 4 constituencies of Konoin, Bomet Central, Sotik, and Chepalungu. The main urban areas to be covered by the project include Bomet Town, Silibwet Town, Sotik Town, Siongiroi Town and Ndanai town. CGCINT is the general EPC contractor responsible for project implementation. However, Hunan Construction Engineering Group Corporation is involved in implementation. Media reports from 2020 and parliamentary records from 2021 suggest that project implementation has been delayed due to an array of political, financial and environmental issues, including the fact that the Kenya Forest Service has refused to grant the EPCF contractor access to the project site.