[China Co-Financing Fund] IDB administers $50 million loan from CHC for Distribution Network Rehabilitation Program

Project narrative

On July 31, 2014, the Inter-American Development Bank (IDB) signed two loan contracts with the Government of Ecuador for the Distribution Network Rehabilitation Program: a $170 million loan that IDB issued from its ordinary capital (Loan 3188/OC-EC), and a $50 million loan from the People's Bank of China (Loan 3188/CH-EC) via the China Co-Financing Fund for Latin America and the Caribbean (CHC). The IDB identified the total anticipated project cost as $248,475,520, and noted that the Government of Ecuador was expected to provide $28,475,520 of counterpart financing. Then, on September 30, 2015, the IDB provided an additional loan for the improvement of the National Distribution System (SND) with funding from the IDB’s ordinary capital and the CHC (captured via Record ID#85318). The IDB approval date for its loan financing was June 12, 2014, and it refers to this project as ‘EC-L1136 : Distribution Network Rehabilitation Program’. The $50 million CHC loan that was issued on July 31, 2014 carries the following borrowing terms: a 25-year maturity, a 13.5-year grace period, a 0.75% commitment (credit) fee, no management fee, and an annual interest rate of 3-month LIBOR plus a 0.04% funding margin (also known as the ‘Bank’s Cost of Funding’) and a 0.85% IDB lending spread. The first loan repayment date was scheduled for December 15, 2027 and the loan’s final maturity date is June 15, 2039. Four disbursements of the CHC loan were made to Ecuador's Ministry of Finance on the following dates: a $47 million disbursement on August 20, 2014, a $450,000 disbursement on June 16, 2016, and a $2,467,960 disbursement on November 27, 2017, and a $82,040 disbursement on December 12, 2018. The project took 60 months to execute, from the first disbursement (of the IDB loan) to the date of closure on August 2, 2019. This project falls within the framework of a greater overall effort by the Government of Ecuador (Plan Maestro de Electrificación (PME) 2013-2022) to expand the country's electrical system. The project consisted of several major components. The first, which used about 95% of the funding, was to increase both the capacity and reliability of the National Distribution System, by improving current or building new substations (79 total), 187.4 km of subtransmission lines, and 3,798.4 km of distribution lines; as well as other various projects to these ends. All of the funds from the CHC were spent on this portion of the project, with $49,975,701 spent on improvements to the sub-transmission network and $24,299 spent on inspection services for financed works. The second component was focused on contributing to the development of strategy to promote the migration from liquefied petroleum gas (LPG) to electricity in the residential sector. The third component was holding training courses for local electric distribution company personnel about operation and maintenance of the SND. These two components were exclusively financed by the IDB's ordinary capital and the Government of Ecuador. The Ministry of Electricity and Renewable Energy (Ministerio de Electricidad y Energía Renovable/MEER) was responsible for project implementation, and it worked with local electric distribution companies (EEDs) to complete the project. A complete list of twenty-one EEDs that received funds from the IDB ordinary capital and the China Co-Financing Fund loans to help complete the project can be found on page 9 of ‘EC-L1136 Estado Inversiones Acumuladas y Flujos de Efectivo al 30 Junio 2019’. Additionally, the National Electricity Council (Consejo Nacional de Electricidad/CONELEC) provided technical support.