CET provides $74.81 million supplier's credit for Power Supply System for Addis Ababa Light Rail Transit (AA-LRT) Project (Linked to Project ID#1471 and ID#69479)

On September 1, 2014, the Chinese Government and the Ethiopian Railways Corporation (ERC) — an Ethiopian state-owned enterprise — signed an agreement that provided a $74.81 million seller's credit for the Power Supply System for Addis Ababa Light Rail Transit (AA-LRT) Project. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to use the proceeds of the loan to partially finance an $85 million commercial contract between ERC and China Electric Power Equipment and Technology Co., Ltd. (CET), which is a wholly owned subsidiary of State Grid Corporation of China (SGCC). The Government of Ethiopia’s Aid Management Platform (AMP) does not record any disbursements through this loan agreement. The purpose of the project was to provide smooth and reliable power supply to the Addis Ababa Light Rail Transit (AA-LRT). The project involved the construction of GIS substations in the Kality, Ayat, Menelik Square, Egziabher-Ab Church, and Torhayloch areas of Addis Ababa. Of these, three are 132/15kVGIS substations and one is a 230/15kVGIS substation. The project also included the construction of three supporting facilities. The project reached completion on June 7, 2015. The Addis Ababa light rail metro system has faced an array of operational performance and revenue generation problems. It initially began operating with 40 trains, but as of 2021, it was regularly operating with approximately 20 trains. Addis Ababa’s deputy mayor has also noted that the city’s electrical grid lacked the capacity to power the system before construction began. Even with its own dedicated power supply, the Addis Ababa light rail metro system still experiences power outages and delays, leading to packed cars and poor service. Additionally, in 2021, Ethiopia’s Office of the Auditor General found that, during its first four years in operation, the Addis Ababa light rail metro system generated $11.1 million of revenue but cost $154 million to operate. It found that the system was falling far short of its original feasibility study, which said it would pay for its construction costs within 10 years through ticket sales, advertising and renting out spaces in stations, among other methods: “[t]he feasibility study has been inadequate, and it was conducted without collecting enough information. […] This, coupled with the absence of a maintenance center to fix the trains that need repair and other factors, have contributed to the losses sustained by the light railway.” Ethiopia’s Office of the Auditor General also found that the ERC had fallen into arrears and paid $2.8 million in fines to China Eximbank for overdue loan repayments.

Additional details

1. This project is also known as the Addis Ababa Light Rail way transport power 2x15 KV air insulator switch gear line construction project and the Addis Ababa Light Rail GIS Substations Project. The Chinese project title is 埃塞俄比亚首都轻轨配套输变电工程 or 埃塞轻轨配套输变电项目. 2. The system identification number for this project in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143436112185. 3. There is not explicit evidence linking the loan as entered into Ethiopia's AMP, which records an ETB 1,572,763,419 loan for the Power Supply System for AA-LRT (but does not specify the lender) and the loan as entered into the Government of Ethiopia's Annual Public Sector Debt Portfolio, which records a $74.81 million loan from CET (but does not specify the project it is for). However, there is sufficient evidence for AidData to believe these are the same transaction. First, the commitment dates line up: the Debt Portfolio lists the loan as contracted during Fiscal Year 2014-2015 and AMP lists September 1, 2014. Second, no other financier for the AMP loan can be identified. Third, the loan recorded in the debt portfolio is very likely seller's credit. The substation project was also funded by seller's credit, per the China Electric Power International Capacity Cooperative Enterprise Alliance (中国电力国际产能合作企业联盟). Lastly, the transaction amounts are sufficiently similar that any difference can be attributed to differences which exchange rate is used to report the loan value, inflation, and rounding error. That is, the exchange rate used by AMP to report the loan's value in ETB may not be the same as the exchange rate when the loan was originally contracted, or similar issues vis a vis differences in the time the loan values were reported. As of September 2014, 1 Ethiopian Birr (ETB) was equal to 0.049 United States Dollars (USD), indicating the USD face value of the loan according to the AMP is an estimated $77,065,407.531. The value recorded in the debt portfolio is $74,810,000. 4. The debt portfolio value, rather than the estimated USD value based on the AMP, has been recorded as the transaction amount, insofar as (1) it is in US dollars already, (2) is also from a government official source, and (3) is the more conservative value. 5. This China Eximbank loan is not included in the database of Chinese loan commitments that SAIS-CARI released in July 2020. Nor is it included in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 6. On June 22, 2011, China Eximbank and Ethiopian Railways Corporation (ERC) — an Ethiopian state-owned enterprise — signed a $475,000,000 (ETB 7,347,972,973) loan agreement for the Addis Ababa Light Rail Project. This loan is captured via Project ID#1471 7. The China Electric Power International Capacity Cooperative Enterprise Alliance indicates the value of the commercial contract between ERC and CET was about $83 million rather than $85 million.

Number of official sources

8

Number of total sources

22