China Eximbank provides $84.9 million buyer’s credit loan for Luzira Industrial Park, Mukono Industrial Park, Iganga Industrial Park, and Namanve South Industrial Park Substations and Remote Ends Project

On February 3, 2016, China Eximbank and the Government of Uganda signed a buyer’s credit loan (BCL) agreement (Contract No. 1410302052015212960) worth $84,979,502.53 for the Luzira Industrial Park, Mukono Industrial Park, Iganga Industrial Park, and Namanve South Industrial Park Substations and Remote Ends Project. The borrowing terms of the BCL are as follows: an interest rate of 6-month LIBOR plus 300 basis points, a 1% default (penalty) interest rate, a 15 year maturity, a 3 year grace period, a management fee of 0.5% ($424,897.51), and a commitment fee of 0.5%. The BCL is also supported by a Sinosure buyer’s credit insurance policy. The borrower is expected to use the proceeds of the BCL to finance 85% of the cost of a $99,975,885.34 commercial (EPC) contract between Uganda Electricity Transmission Company Ltd and China CAMC Engineering Co. Ltd, which was signed on August 30, 2013 and amended on March 26, 2014 an April 28, 2014. According to the Government of Uganda’s Aid Management Platform (AMP), this loan achieved a 100% disbursement rate, with China Eximbank making 6 loan disbursements (worth $84,979,502.53) between 2017 and 2020: a $4,998,794.27 disbursement on January 25, 2017, a $3,492,800 disbursement on June 19, 2017, a $25,204,618.77 disbursement on April 3, 2018, a $11,154,866.56 disbursement on December 14, 2018, a $7,912,008.56 disbursement on December 20, 2018, and a $32,216,414.37 disbursement on July 20, 2020. According to the Uganda Ministry of Finance, Planning, and Economic Development's Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2021/2022, as of December 31, 2021, total loan disbursements amounted to $84,979,502.53 and the loan’s amount outstanding (including arrears) was $74,357,064.70. The objective of the project is provision of adequate transmission capacity to cater for the projected demand from within 4 industrial park areas. The project has 4 components: (1) Construction of Luzira Industrial Park 132/33kV Substation and Transmission Line Project (15 km); (2) Construction of Mukono Industrial Park 132/33kV Substation and Transmission Line Project (5 km); (3) Construction of Iganga Industrial Park 132/33kV Substation and Transmission Line Project (10 km); and (4) Construction of Namanve Industrial Park 132/33kV Substation and Transmission Line Project (5 km). China CAMCE Engineering Co. Ltd is the contractor responsible for project implementation. The project officially commenced implementation on June 29, 2016. The first disbursement through the loan took place on January 25, 2017. Another loan disbursement took place on December 20, 2018. As of April 7, 2020, the Aid Management Platform (AMP) of the Government of Uganda's Ministry of Finance, Planning, and Economic Development recorded a total loan disbursement value of $52,763,088.16. As of December 31, 2020, the AMP identified the $84,979,502.53 as being fully disbursed. By mid-2021, tower foundation work was 59% complete (30 out of 58 towers), tower erection work was 39% complete (23 out of 58 towers), the construction of the 3X40MVA, 132/33kV Luzira substation was 98% complete, the construction of the 2X40MVA, 132/33kV Iganga substation was 100% complete, the construction of the 3X60MVA, 132/33kV Namanve substation was 100% complete, and the construction of the 3X60MVA, 132/33kV Mukono substation was 100% complete, the construction of the 15 km Namanve South-Luzira transmission was 47% complete (with completion expected by December 31, 2021), the construction of the Namanve North-Namanve South transmission line was 100% complete (and commissioned on January 26, 2021), the construction of the Mukono T-off was 100% complete (and commissioned on July 4, 2019), the construction of the Iganga T-off was 100% complete (and commissioned on December 8, 2019), and the implementation of the resettlement action plan (RAP) was 60% complete (427 out of 707 actions). This project has encountered multiple obstacles and delays during implementation. First, due to compensation delays that arose from the wetland ownership queries and a notice to cancel the titles within the wetland, one of the wetland claimants went ahead and built a printery at the terminal tower spot of the Luzira transmission line corridor. Second, an increase in a nearby lake’s water level has affected the Luzira wetland, thus making construction harder for the contractor. (The Luzira transmission line corridor is located in Luzira wetland; therefore, access to the tower spots has proven very difficult during construction of tower foundations and tower erection.) Third, as of October 26, 2021, there were still right of way (RoW) acquisition issues at Luzira Port Bell Market, Miami Beach, Kilombe and Panda PL Villages. Project implementation is running behind schedule; its originally scheduled completion date was February 28, 2019.

Additional details

1. The China Eximbank loan agreement for this project can be accessed in its entirety at: https://www.dropbox.com/s/nn76ig3tlzbbe5v/China%20EximBank%20Loan%20-%20Four%20Industrial%20Substations%20and%20Transmission%20Lines%20%281%29.pdf?dl=0. 2. This project is not a duplicate of Project ID#53493. 3. The February 3, 2016 version of the China Eximbank loan contract does not reference an escrow account or a requirement that the borrower maintain a minimum cash balance in an escrow account. However, in its 'Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for Financial Year 2021/2022' (https://www.finance.go.ug/sites/default/files/Publications/REPORT%20ON%20PUBLIC%20DEBT%2C%20GRANTS%2C%20GUARANTEES%20AND%20OTHER%20FINANCIAL%20LIABILITIES%20FY%202021-22.pdf), Uganda's Ministry of Finance notes that the borrower had fulfilled the lender's escrow account conditions. This issue warrants further investigation. 3. According to Uganda's Ministry of Finance, Planning, and Economic Development National Budget Framework Paper, the forecasted disbursement of the 2018/19 loan was US$76.46 million and US$89.57 million for 2019/20. The final disbursement through this loan is scheduled for June 29, 2019. 4. This project is also known as the Construction of 4 Industrial Parks Substations of Luzira, Mukono, Iganga and Namanve Project and the Electrification of Industrial Parks Project.

Number of official sources

14

Number of total sources

18