China Eximbank provides $58.695 million buyer’s credit loan for Mugher Production Line of the Mugher Cement Expansion Project (Linked to Project ID#45047, ID#92136)

In November 2006, China Eximbank and the Government of Ethiopia’s Ministry of Finance and Economic Development signed a $500 million buyer’s credit facility agreement (互惠贷款) — also known as a master loan framework agreement and a master facility agreement — for an unspecified set of development projects. All subsidiary loans approved under the buyer’s credit facility agreement (captured via Project ID#45047) carried the following borrowing terms: a 13-year maturity and an interest rate of LIBOR plus a 2-3% margin. All of the subsidiary loans were secured with (i.e., collateralized against) Ethiopia's export receipts to China, which at the time primarily consisted of sesame seed export receipts. The buyer’s credit facility agreement also required that all Ethiopian exports (export receipts) to China to be overseen by the Commercial Bank of Ethiopia, the country’s largest state-owned financial institution. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. According to the Government of Ethiopia’s Aid Management Platform (AMP), China Eximbank and the Commercial Bank of Ethiopia signed a subsidiary buyer’s credit loan worth approximately ETB 1,145,843,829 ($91 million) for the Mugher Production Line of the Mugher Cement Expansion Project on March 31, 2009. The Commercial Bank of Ethiopia then on-lent the proceeds of the loan to Mugher Cement Enterprise (an Ethiopian state-owned enterprise). The ultimate borrower (Mugher Cement Enterprise) was expected to use the proceeds of the loan to finance approximately 64% of the cost of a $138 million commercial (EPC) contract that it signed with Sinoma International Engineering Co., Ltd. on December 6, 2006. The Government of Ethiopia’s Industrial Development Fund directly funded the remainder (34%) of the commercial contract cost. 64.5% of the face value of the loan ($58.695 million or ETB 739,357,683) was earmarked for the Mugher Production Line of the Mugher Cement Expansion Project (‘Lot 1’), and 35.5% of the face value of the loan ($32.305 million or ETB 406,486,146) was earmarked for the Tatek Production Line of the Mugher Cement Expansion Project (‘Lot 2’). Project ID#725 captures Lot 1 and Project ID#92136 captures Lot 2. According to the Government of Ethiopia’s AMP, the ETB 739,357,683 ($58.695 million) loan for Lot 1 achieved an 18% disbursement rate, with China Eximbank making 2 loan disbursements (worth ETB 135,479,525) between 2009 and 2010: an ETB 130,927,573 disbursement on December 31, 2009, and an ETB 4,551,952 disbursement on March 31, 2010. According to the Government of Ethiopia’s AMP, the ETB 406,486,146 ($32.305 million) loan for Lot 2 achieved a 31% disbursement rate, with China Eximbank making 3 loan disbursements (worth ETB 126,558,996) between 2009 and 2011: an ETB 30,000,000 disbursement on December 31, 2009, an ETB 12,804,711 disbursement on March 31, 2010, and an ETB 83,754,286 disbursement on April 8, 2011. The purpose of Lot 1 was to install clinker production machinery installed at Mugher cement factory, which is located approximately 150 km west of Addis Ababa. The purpose of Lot 2 was to construct a new cement factory 12 km west of the capital in the Tatek locality (near Tatek Military Camp). Upon completion, it was envisaged that the two factories would have the capacity to crush 900,000 tons of clinker per year and 2.4 million tons of cement per year (a 150 percent increase over the baseline level of 900,000 tons of cement per year). Sinoma International Engineering Co., Ltd. was the general EPC contractor responsible for project implementation. However, Chengdu Design & Research Institute of Building Materials Industry was also involved in the project (most likely as a subcontractor). Project implementation commenced in January 2008. The project was originally scheduled to commence in mid-December 2006 and each completion within 21 months (approximately October 15, 2008). However, the cement plant did not go into operation until February 27, 2011.

Additional details

1. AidData has estimated the all-in interest rate by adding 2.5% (the midpoint between a 2% and 3% margin) to the average 6-month LIBOR rate in March 2009 (1.827%). 2. In the database of Chinese loan commitments that it released in 2020 and re-released in 2021, SAIS-CARI does not identify the borrowing terms of the loan that supported this project. 3. The AMP system identification number for the Tatek Production Line of the Mugher Cement Expansion Project is 8714327100831. The AMP system identification number for the Mugher Production Line of the Mugher Cement Expansion Project is 8714327100830. 4. One source suggests that the monetary value of the December 6, 2006 commercial (EPC) contract was $129.97 million rather than $138 million. This issue warrants further investigation.

Number of official sources

10

Number of total sources

39