China Eximbank provides $295.9 million buyer’s credit loan for 254MW Genale Dawa III Hydroelectric Power Station Project (Linked to Record ID#52938)

Project narrative

On October 27, 2010, China Eximbank and the Ethiopian Electric Power Corporation (EEPCo) signed a $295,927,735.98 buyer’s credit loan (BCL) agreement for the Genale Dawa III Hydroelectric Power Station Project. The borrowing terms of the BCL were as follows: a 12 year maturity, a 3 year grace period, and a 2.43% interest rate. The Government of Ethiopia issued a sovereign guarantee in support of the loan. The borrower was expected to use the proceeds of the loan to partially finance a $451,058,001 commercial (EPC) contract [Contract N0.33.20/1/02)] between EEPCo and China Gezhouba Group Company (CGGC) which was signed on September 18, 2009 and modified on September 26, 2010. China Eximbank and EEPCo subsequently rescheduled the 2010 loan through a 4.24-year maturity extension and a 3.73-year grace period extension. After the debt rescheduling agreement was finalized, the loan's first and last scheduled principal payment dates were reset to July 21, 2017 and January 21, 2027, respectively. Its first and last scheduled interest payment dates were reset to July 21, 2014 and July 21, 2027, respectively. According to the Government of Ethiopia’s Aid Management Platform (AMP), the ETB 4,053,424,658 loan achieved a 111% disbursement rate, with China Eximbank making 15 loan disbursements (worth ETB 4,499,623,058) between 2014 and 2019: an ETB 234,280,303 disbursement on October 8, 2013, an ETB 158,812,261 disbursement on January 8, 2014, an ETB 194,174,757 disbursement on April 8, 2014, an ETB 1,200,000,000 disbursement on October 8, 2014, an ETB 404,040,404 disbursement on January 8, 2015, an ETB 265,556,593 disbursement on April 8, 2015, an ETB 102,387,246 disbursement on July 8, 2015, an ETB 405,453,493 disbursement on October 7, 2015, an ETB 153,171,320 disbursement on January 7, 2016, an ETB 244,603,535 disbursement on April 7, 2016, an ETB 145,293,164 disbursement on July 7, 2016, an ETB 27,576,322 disbursement on October 7, 2016, an ETB 522,418,088 disbursement on January 7, 2017, an ETB 45,062,662 disbursement on April 7, 2017, and an ETB 396,792,911 disbursement on March 27, 2019. The purpose of the project was to construct the 254MW Genale-Dawa III multipurpose hydropower plant. The plant consists of a concrete faced rock fill dam and an underground powerhouse. Based on the estimated sedimentation level, the project will have a lifetime of more than 1,000 years. The dam site is located in a low seismic hazard area of class I. The dam is 110m high, 456m wide and 450m long. It is made with groutable and non-erodible rock and has a volume of 3.2 million cubic metres (mm3). At the full capacity, the dam can store up to 2,570mm3 of water. It has a catchment area of 10,445km2 and a fill volume of 890,000m3. The dam spillway is an open chute type with an ogee weir crest and three radial spillway gates. The underground powerhouse is installed with three vertical Francis turbine generators with a capacity of 84.7MW each. It is housed within an underground cavern measuring 60m-long, 20m-wide and 41m deep and also includes auxiliary equipment. A 12.4km long, 8.1m diameter headrace tunnel carries water from the dam through a 188m deep steel-lined vertical shaft to a three-pronged manifold. The manifold feeds the water to the turbine inlet valves of the three turbines housed in the powerhouse. A 820m long tailrace tunnel and a 480m long open channel returns the water back to the river. A transformer cavern is located downstream of the powerhouse and includes three step-up transformers. The electricity generated is transferred from the transformers to a 230kV/400kV switchyard located above ground through a 500m long cable tunnel. The project area is located in Kobadi, some 400 km (air distance) south-east of Addis Ababa and some 200 km (air distance) north of the border with Kenya. The scheme, including the reservoir and power waterways, extends over a river corridor some 55 km long. The approximate centroid of the project area lies at latitude 5º 38' North and longitude 39º 43' East. CGGC was the EPC contractor responsible for implementation. However, several other contractors were involved in the project. Stantec, a US-based company, provided design, planning, management and consulting services. Lahmeyer International, a German company, conducted the feasibility study. Tunnelpro, an Italy-based supplier, provided tunnel boring machines. Project implementation commenced in March 2011 and the project was originally expected to commence on January 1, 2010 and reach completion within 48.5 months (January 15, 2014). However, the project encountered multiple implementation delays. An inauguration ceremony was held to commemorate the project’s completion on February 4, 2020. The project temporarily employed 390 Ethiopian workers. There are some indications that the China Eximbank loan for the 254MW Genale Dawa III Hydroelectric Power Station 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 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.