China Eximbank provides $381.5 million seller's credit for Merowe Hydroelectric Dam Transmission Lines and Substations Project (Linked to Record ID#178)

Project narrative

On December 23, 2003, a consortium of Chinese companies signed a $400 million commercial contract for the Merowe Hydroelectric Dam Transmission Lines and Substations Project. The commercial contract was financed by a $381,467,000 million export seller's credit agreement between China Eximbank and Harbin Power Equipment Company (HPEC). It appears that HPEC then on-lent the proceeds of the loan to the Government of Sudan. The borrowing terms that applied to the export seller's credit agreement and the on-lending agreement are unknown. The purpose of this project was to evacuate power from the Merowe Hydroelectric Dam, which was also financed by a $608 million China Eximbank loan (as captured via Record ID#178). It involved the construction of 1,776 kilometers of transmission lines and seven substations. More specifically, the project involved the construction of (1) two 500kv parallel transmission lines from the Merowe Hydroelectric Power Plant to Khartoum, (2) two 500/200kv sub-stations in Omdurman and Khartoum North, (3) a 38 km, 500kv transmission line between the Omdurman and Khartoum North substations, (4) the extension of 240 km, 500kv transmission line to Atbara, (5) a 500/200kv substation in Atbara, (6) a 455 km, 220kv, transmission line from Atbara to Port Sudan, (7) 220/110kv substation in Port Sudan, (8) a 310 km, 220kv transmission line from Merowe Dam to Dongola, and (9) three 220/33kv sub-stations in Merowe, Debba and Dongola. The contractors responsible for project implementation included HPEC, China International Water and Electric Corporation (CWE), China Water Resources and Hydropower Engineering Corporation (CWHEC or Sinohydro), and Jilin Province Power Transmission and Substation Project Company. A formal groundbreaking ceremony took place on April 9, 2005 but the project did not enter the installation phase until January 31, 2006. The largest substation was completed on April 13, 2009. There are some indications that the loan issued for the Merowe Hydroelectric Dam Transmission Lines and Substations Project may have underperformed vis-a-vis lender expectations. According to Sudan’s Finance Minister Ali Mahmood Abdel-Rasool, China Eximbank suspended its financing for 11 projects in Sudan following the secession of South Sudan in July 2011, which triggered a major loss of oil revenue (a key source of collateral for China Eximbank loans). Ali Mahmood Abdel-Rasool said at the time that the Government of Sudan had previously pledged oil revenues (worth 120,000 barrels per day) to China Eximbank as a source of collateral. Then, on February 18, 2012, the Chinese Government announced that it had agreed to reschedule the outstanding debt obligations of the Government of Sudan by extending loan repayment periods by 5 years (as captured via Record ID#30421). According to the External Debt Unit of the Central Bank of Sudan, the Government of Sudan's total arrears to Chinese creditors amounted to $3.864 billion ($2.608 billion in principal, $1.129 billion in interest, and $127 million in penalty interest) as of March 31, 2022.