China Eximbank provides $89.8 million loan for Bahir Dar-Woldiya-Combolcha Substation Project

On December 25, 2017, China Eximbank and Ethiopian Electric Power Corporation (EEPCo) — an Ethiopian state-owned power company — signed an $89,817,892.24 loan agreement for the Bahir Dar-Woldiya-Combolcha Substation Project. The Ethiopian Government issued a sovereign guarantee in support of the loan. The borrower was expected to use the proceeds of the loan to finance approximately 85% of the cost of a $99.4396 million (ETB 2 billion) commercial (EPC) contract between EEPCo and Shanghai Electric Group Company, which was signed on May 9, 2016. The project involves electricity substation construction and expansion in three towns: Bahir Dar, Woldiya and Combolcha (Kombolcha). More specifically, it involves the construction of a new 400/230/33/15kV Woldiya II substation, the construction of a new 400/230/33kV Combolcha III substation, and the expansion of the existing 400kV Bahir Dar II substation (by 1 line bay), and the expansion of the existing 230kV Combolcha II substation (by 1 line interval). Upon completion, the project is expected to meet the power demands of industrial parks, an electrified train, and condominiums near the towns of Bahir Dar, Woldiya and Combolcha (Kombolcha). Shanghai Electric Group Company is the general EPC contractor responsible for project implementation. However, it hired Powerchina Jiangxi Electric Power Construction Co., Ltd. as a subcontractor on August 30, 2017. Project implementation was originally scheduled to commence in October 2017 and reach completion within 18 months (May 2019). Construction of the 400/230/33/15kV Woldiya II substation had achieved a 48% completion rate as of June 2, 2021. There are some indications that the China Eximbank loan for the Bahir Dar-Woldiya-Combolcha Substation Project may have 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 Project 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.

Additional details

1. This project is also known as the Bahir Dar-II, Woldiya-II/400/230/33/15KV and Combolcha-III 400/230/33 KV Substations Project, the Bahirdarii-Woldiaii-Kombolcha Substation Project, and the BDWC 1 - LOT3A substation project. 2. The Chinese project title is BDWC-1-LOT3A变电站 or 埃塞俄比亚BDWC-1/LOT3A变电站总承包项目. 3. Azeb Asnake, EEPCo’s CEO, signed the May 9, 2016 commercial contract with Shanghai Electric Group Company’s representative, Xiang Rui. 4. The system identification number for the project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143436115460. The AMP identifies the face value of the loan as ETB 2,456,509,914. It does not record any loan disbursements as of April 2022.

Number of official sources

11

Number of total sources

17