China Eximbank provides RMB 1.145 billion government concessional loan for Addis Ababa Power Network Rehabilitation and Upgrading Project

On July 28, 2016, China Eximbank and the Government of Ethiopia signed an RMB 1,145,000,000 (ETB 4,759,718,710) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL No. (2016) 18 TOTAL NO. (588) 1420303052016111722] for the Addis Ababa Power Network Rehabilitation and Upgrading Project. The Ethiopian House of Representatives ratified the agreement under Proclamation No. 987/2016 on December 27, 2016. The borrowing terms of the GCL are as follows: a 2% interest rate, a 20 year maturity, a 7 year grace period, a 0.25% management fee, and a 0.25% commitment fee. The borrower was expected to use the proceeds of the GCL to finance a commercial (EPC) contract between Ethiopian Electric Power Corporation (EEPCo), Ethiopia Electric Utility (EEU), and a consortium (joint venture) consisting of Sinohydro 1st Bureau, Sinohydro 4th Bureau, and PowerChina Hubei Bureau, which was signed in April 2016. China Eximbank made an initial loan disbursement worth RMB 326,789,264.68 (as part of an advance payment) on December 24, 2019. The World Bank also issued a $62 million loan in support of this project. The purpose of the project is to rehabilitate and upgrade the power grid — by, among other things, replacing 45kV transmission lines with transmission 132kV lines — in Addis Ababa, Jimma, Dire Dawa, Bahir Dar, Mekele, Hawassa, Adama and Dessie. Sinohydro 1st Bureau, Sinohydro 4th Bureau, and PowerChina Hubei Bureau are the EPC contractors responsible for project implementation. The implementation of the project commenced on February 29, 2016 and it was originally expected to reach completion within 12 months (February 28, 2017). However, this project has encountered major implementation problems and delays. There are also indications that the China Eximbank loan for the Addis Ababa Power Network Rehabilitation and Upgrading Project has financially underperformed vis-a-vis the original expectations of the lender. According to the Government of Ethiopia’s Aid Management Platform, as of September 2019, ICBC suspended about $67 million worth of loan disbursements 'due to [the] cross-default situation of the country’ (see Project ID#58616). Then, in August 2021, China Eximbank withheld $339 million loan disbursements for 12 projects (including the Addis Ababa Power Network Rehabilitation and Upgrading Project) and halted project implementation due to Government of Ethiopia’s rapidly dwindling foreign exchange reserves and debt sustainability challenges. Demisu Lemma, the Director of Chinese Cooperation at the Ethiopian Ministry of Finance, noted at the time that the Ethiopian Government was in discussions with China Eximbank about a potential debt rescheduling (that would involved a 5-year maturity extension and a 1-year grace period extension). Then, after considerable delay, the G20 Common Framework (CF) creditor committee for Ethiopia convened in September 2021, with the French Government and the Chinese Government serving as co-chairs. The CF debt rescheduling talks were still ongoing in mid-2023.

Additional details

1. This project is also known as the 8 Major Cities Distribution Rehabilitation and Upgrading Project and the Addis Abeba Power Network Rehabilitation & Upgrading Project. The Chinese project title is 公司总承包建设的埃塞俄比亚中低压配网升级改造项. 2. The system identification number for the project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143359111146. 3. As of December 24, 2019, the China Eximbank had achieved a 28.5% disbursement rate. The AMP reference to an ETB 48,057,245 loan disbursement on December 24, 2019 appears to be a typographical error (since it represents only 1% of the face value of the loan).

Number of official sources

16

Number of total sources

28