[Sino-Congolese Programme] China Eximbank provides $660 million commercial loan for 240 MW Busanga Hydroelectric Power Plant Project (Linked to Project ID#450 and #73145)

On November 19, 2009, a feasibility study for the 240 MW Busanga Hydroelectric Power Plant Project was undertaken. Then, on March 12, 2010, the Government of the Democratic Republic of the Congo and a consortium of Chinese enterprises (consisting of China Railway Resources Group Co., Ltd and PowerChina Resources Limited) signed a Memorandum of Understanding (MOU) — known in French as ‘Le Protocole d'accord en vue de la Construction de la Centrale Hydroelectrique de Busanga a Kolwezi au Katanga’ — regarding the 240 MW Busanga Hydropower Plant Project. 11 months later, on February 18, 2011, Sinohydro Corporation Limited signed an EPC contract with Sino–Congolais des Mines (Sicomines) — a joint venture between several Chinese firms and la Générale des Carrières et des Mines (Gécamines) — for the 240 MW Busanga Hydropower Plant Project in Katanga Province. Then, on July 4, 2016, a joint venture and special purpose vehicle known as Sino-Congolaise Hydroélectrique (Sicohydro) was created by Sicomines (75% ownership stake), Gécamines (7% ownership stake), la Société Nationale d’Electricité (SNEL, 3% ownership stake), and Congo Management Sarl (COMAN, 15% ownership stake). In August 23, 2016, DRC’s Minister of Energy and Water Resources Jeannot Matadi Nenga signed a concession agreement with Sicohydro to implement the project on a Build-Operate-Transfer (BOT) basis. According to Moïse Ekanga Lushyma, the Executive Secretary of the Bureau for Coordination and Monitoring of the Sino-Congolese Program (BCPSC), the project was originally going to be funded with $330 million from a “mining investment loan” that was issued to Sicomines and $330 million from an “infrastructure loan” that was issued to Sicomines. However, Sicohydro ultimately contracted a $660 million commercial loan in 2016 (with a 6.1% interest rate) from China Eximbank to finance the construction of the hydroelectric power plant. The purpose of the project is to construct a 240 MW hydroelectric power plant near the village of Busanga in Katanga Province on the Lualaba River. The project is expected upon completion to supply up to 170 MW of its 240 MW electricity production capacity to the Sicomines-managed copper mines (see more details in Project ID#450). The project also involves the construction of a ±500 kV, 13.15 km UHVDC electricity transmission line to evacuate power from the hydroelectric power plant. Once the hydroelectric power plant and transmission line are compete, the Sicomine copper mine in Kolwezi is expected to double its annual production of copper, which in principle would unlock more resources through the $2 billion ‘infrastructure loan’ from China Eximbank captured via Project ID#73145. Sinohydro Corporation Limited is the EPC contractor responsible for project implementation. In July 2015, the DRC’s Ministry of Energy and Hydraulic Resources examined the project’s feasibility study report and issued a document for its approval. Then, in February 2016, an Environmental Certificate was issued for the project by the Congolese Environment Agency (ACE). A formal groundbreaking ceremony was held on November 6, 2016. However, construction of the dam did not begin until November 20, 2017. River closure was achieved on August 25, 2018. Construction of a ±500 kV, 13.15 km UHVDC electricity transmission line to evacuate power from Busanga dam began on May 17, 2019. The line became operational on November 6, 2020. The hydropower station officially began water storage in May 2021, which represented a key milestone prior to power generation. By September 2021, the project as a whole had achieved a 95% completion rate. Then, in January 2022, the concrete pouring of the dam crests on the left and right banks of the hydropower station was completed. The project was originally expected to be officially commissioned on November 20, 2021. However, as of May 2022, the hydropower station had not yet been commissioned. The 240 MW Busanga Hydroelectric Power Plant Project has encountered several different problems and controversies. On July 17, 2020, the provincial minister of the interior of Lualaba asked residents of four villages in Busanga (Kamalenge, Monga Lubuza and Wafinya) who had already received compensation to release their homes by July 29, 2020 to allow Sicohydro to dig the basins useful for the dam’s operation. Eleven civil society organizations called for a postponement of the deadline to reach a final and satisfactory compromise for all parties. The 240 MW Busanga Hydropower Plant Project has also been plagued by accusations of corruption. In 2018, reports emerged that Sicohydro had a a "phantom" (15%) shareholder (Congo Management Sarl, or Coman) with close ties to people in President Kabila’s entourage. Coman was represented by Norbert Nkulu, a close adviser and personal lawyer to President Kabila. Nkulu also served as a legal representative for a port operations company majority-owned by President Kabila and his family that received $3.3 million in misappropriated public funds through its accounts at BGFIBank DRC. Coman’s director was Claudine Paony, a Congolese government officially who worked for Moïse Ekanga Lushyma, the Executive Secretary of the Bureau for Coordination and Monitoring of the Sino-Congolese Program (BCPSC). According to an investigation by The Sentry, communications at BGFIBank DRC indicate Paony received as much as $662,500 from Congo Construction Company (CCC)—a shell company created by a Chinese national names Du Wei in December 2012—in early 2014. Also, according to the Sentry, Sicomines sent three payments totaling $25 million to the bank accounts of CCC at BGFIBank DRC, and CCC then immediately routed the vast majority of these funds to companies and people associated with President Kabila. The remittance information—“contract costs,” “payment”—offered no details on the purposes of the sizable transfers, and BGFIBank DRC’s internal auditors were later unable to locate any contract underlying the payments. Citibank in New York processed at least $17 million of the money Sicomines sent to CCC. In 2016, Sicomines wired CCC approximately $8 million. Citibank processed the transaction in New York. The bare-bones remittance information was “contract costs,” even though evidence suggests this was a fictional pretext and there was no such contract in existence. That day, CCC transferred about $7.5 million to another BGFIBank DRC client called Sud Oil and moved the remaining half a million dollars to accounts in Du Wei’s name in Hong Kong and the DRC, via ING Belgium and HSBC. The justification for the Sud Oil transfer was the purchase of “petroleum products.” Despite its name, Sud Oil was a Kabila family enterprise that no longer had any connection to the petroleum sector. BGFIBank DRC’s longtime board president Pascal Kinduelo had originally established Sud Oil as a fuel distribution firm in 2008 but reportedly divested three years later, selling off all of the company’s assets. Sud Oil gained new life in late 2013 when it was re-registered under the ownership of Kabila family member Gloria Mteyu, co-owner of BGFIBank DRC, and Aneth Lutale, Kabila’s sister-in-law and wife of BGFIBank DRC Managing Director Francis Selemani. According to sources consulted by The Sentry, the newly registered Sud Oil was a shell company with no productive assets other than its headquarters, which were situated in a garage. Experts on the oil and gas sector in the DRC told The Sentry it was implausible the company had any activity in the sector.336 Investigations by The Sentry, Congo Research Group, and other members of the Congo Hold-up consortium reinforce the notion that Sud Oil merely served as a mechanism for moving money. These investigations show that the company received at least $85 million in funds from Congolese government institutions without any reasonable justification. In 2021, Congolese President Felix Tshisekedi authorized investigations of the Sicomines (minerals-for-infrastructure) deal and the Busanga hydroelectric power plant project.

Additional details

1. The Chinese project title is 布桑加水电站项目 or 布桑加水电站. The French project title is Projet de construction du barrage hydroélectrique de Busanga or Le projet hydroélectrique de Sicohydro. 2. The July 4, 2016 joint venture agreement can be accessed in its entirety via https://www.dropbox.com/s/yxqf9g6h82qkiip/5220-gecamines-sino-congolaise-des-mines-sarl-jva-2021.pdf?dl=0. The articles of incorporation for Sicohydro can be accessed in their entirety via https://www.dropbox.com/s/e4b7nl2r5znz48j/Busanga%20Articles%20of%20Incorporation.pdf?dl=0. 3. Sicomines is a joint venture between CREC (33% ownership stake), Sinohydro (30% ownership stake), Zhejiang Huayou Cobalt (5% ownership stake), Gécamines (20% ownership stake), and Mr. Gilbert Kalam Babanika (12% ownership stake). 4. AidData records the full face value of this loan ($660 million). SAIS-CARI records a $165 million loan rather than a $660 million loan for this project, which captures the implicit debt obligation of the Congolese equity holders in the Sicohydro joint venture (i.e. 25% of the equity is held by DRC parties and 25% of $660 million is $165 million). 5. AidData relies on the 6.1% interest rate that is specified in the July 4, 2016 joint venture agreement. The maturity length and grace period of the China Eximbank loan are unknown. This issue warrants further investigation. 6. COMAN is registered under CD / LUSH / RCCM / 15-B-3667 and has national identification number 6-910-N63800Z. Its registered office address is 156 avenue Mazaz, Golf district, municipality of Lubumbashi.

Number of official sources

22

Number of total sources

59