China Eximbank provides RMB 1.445 billion government concessional loan for Addis Ababa Power Network Rehabilitation and Upgrading Project

Project narrative

On July 28, 2016, China Eximbank and the Government of Ethiopia signed an RMB 1,445,000,000 (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 20.165 year maturity, a 8.158 year grace period, a 0.25% management fee, and a 0.25% commitment fee. The loan's first and last scheduled principal payment dates were September 21, 2024 and September 21, 2036, respectively. Its first and last scheduled interest payment dates were March 21, 2020 and September 21, 2036, respectively. The proceeds of the loan were on-lent to Ethiopian Electric Power Corporation (EEPCo) and the borrower was expected to use the proceeds of the GCL to finance a commercial (EPC) contract between 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 one section of the power network (in Addis Ababa) was officially completed on March 15, 2019. The project as a whole was 'fully operationalized' as of 2022. However, the project was originally expected to reach completion within 12 months (February 28, 2017). The Addis Ababa Power Network Rehabilitation and Upgrading Project 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 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 Record 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.