China Eximbank provides EUR 189.4 million loan for 159.9 MW Dabar Hydroelectric Power Plant Construction Project

On July 28, 2011, the Government of the Republic of Srpska granted a concession to HE DABAR d.o.o. Trebinje (also known as Hidroelektrana na Trebišnjici and HET) — a project company and special purpose vehicle — for the construction and operation of the 159MW Dabar Hydroelectric Power Plant. Then, in July 2013, China Eximbank signaled its willingness to provide a buyer’s credit loan to finance 85% of the cost of the commercial contract (85% x EUR 179.9 million = EUR 152.9 million) for this project. The expected borrowing terms of the loan were as follows: 3% interest rate, 15-year maturity, and 4-year grace period. Then, on December 7, 2015, the Republic of Srpska and China International Water & Electric Corporation (CWE) signed an MOU regarding the 159MW Dabar Hydroelectric Power Plant Project. However, this agreement did not result in the signing of an EPC contract. Almost five years later, on May 4, 2020, Energy China Gezhouba Group and HPP Dabar L.L.C. — a wholly owned subsidiary of HET — signed an ‘EPC + F’ contract (worth approximately EUR 222,834,120 or RMB 1.7 billion) for the 159MW Dabar Hydroelectric Power Plant Project. Then, on December 31, 2021, Hidroelektrana Dabar (HPP Dabar) — a special purpose vehicle that is owned by HET — signed an 189,409,002 loan agreement with China Eximbank for the 159.9 MW Dabar Hydroelectric Power Plant Construction Project. The borrowing terms of the loan were as follows: a 20-year maturity, a 4-year grace period, and interest rate of EURIBOR plus a 2.3% margin, a 0.5% commitment fee, a 0.5% management fee, and a Sinosure insurance fee of 6.42% of the value of the sum of loan's principal and interest (EUR 15,649,101.14). The loan was collateralized. However, as additional credit enhancements, the Republic of Srpska issued a government repayment guarantee and the borrower purchased a 20-year credit insurance policy from Sinosure. The proceeds of the loan are to be used by the borrower to finance approximately 85% of the cost of a EUR 222.8 million commercial contract that Hidroelektrana Dabar (HPP Dabar) and China Gezhouba Group Company Limited signed on May 4, 2020. The purpose of the project is to construct the 159.9 MW Dabar Hydroelectric Power Plant located in the city of Trebinje within the Republic of Srpska. The power plant, which will be part of the planned Gornji Horizonti hydropower complex, is expected to generate 250 GW per year upon completion. In January 2022, the state-owned power utility Elektroprivreda Republike Srpske (ERS) announced plans for a EUR 218 million capital increase in its subsidiary Hidroelektrane na Trebišnjici (HET) in order to raise money for the construction of the 159.9 MW Dabar Hydroelectric Power Plant. However, ERS insisted that the capital injection would not result in a takeover of HET.

Additional details

1. Milbank LLP advised the lender. See https://www.milbank.com/en/news/milbank-advises-export-import-bank-of-china-on-financing-of-central-and-eastern-europes-largest-hydro-ipp.html 2. The largest shareholders of HET are ERS (65%), the Pension Reserve Fund Management Company of the Republic of Srpska (10%), the investment fund management company Kristal invest (5,3%), and the Republic of Srpska Restitution Fund (5%). 3. Evidence of the issuance of a government repayment guarantee can be found at http://sluzbenilist.ba/page/akt/p09Jc0xogztz5k76kjn45hQM=. 4. AidData has estimated the all-in interest rate by adding 2.3% to average 6-month EURIBOR in December 2021 (-0.545%).

Number of official sources

20

Number of total sources

38