CET provides $79.11 million supplier's credit for Power Supply System for Addis Ababa Light Rail Transit (AA-LRT) Project (Linked to Record ID#1471 and ID#69479)

Project narrative

On December 12, 2014, China Electric Power Equipment and Technology Co., Ltd. (CET) and the Ethiopian Railways Corporation (ERC) — an Ethiopian state-owned enterprise — signed a $74,810,622.30 (ETB 1,572,763,419) supplier's credit agreement for the Power Supply System for Addis Ababa Light Rail Transit (AA-LRT) Project. The face value of the loan was subsequently upsized to $79.11 million. The borrowing terms of the loan include an 10.76-year maturity, a 1.502-year grace period, and an 8.76% interest rate. The loan's first and last scheduled principal payment dates were June 12, 2016 and September 12, 2025, respectively. Its first and last scheduled interest payment dates were December 12, 2015 and September 12, 2025, respectively. 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 under the loan agreement. However, it does appear that the loan disbursed since Ethiopia’s Office of the Auditor General later reported that the ERC had fallen into arrears and paid $2.8 million in fines to China Eximbank for overdue loan repayments. 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.”