CDB lends $580 million to Phases 1 and 2 of 560 MW Sunon Asogli Power Plant Project (Linked to Project ID#30146 and ID#1866)

On June 13, 2007, Shenzhen Energy Group Company Ltd and the China African Development Fund (CADF) created a special purpose vehicle and joint venture called Sunon Asogli Power (Ghana) Limited [深能安所固电力(加纳)有限公司]. China Development Bank (CDB) subsequently issued a series of loans (including medium-term, long-term, and working capital loans) between 2008 and 2017 worth $580 million to Sunon Asogli Power (Ghana) Limited in order to support the first phase and second phase of the 560MW Sunon Asogli Power Plant Project. The borrowing terms of these loans are unknown. However, it is known that some of these CDB loans were backed by partial repayment guarantees from Shenzhen Energy Group Company Ltd and collateralized against Shenzhen Energy Group Company Ltd’s 60% equity stake in Sunon Asogli Power (Ghana) Limited. The purpose of the Sunon Asogli Power Plant Project was to construct a natural gas-fired thermal power plant — with a total installed capacity of 580 MW — in the Kpone neighborhood of the port city of Tema (exact locational coordinates: 5.680278, 0.047222). The first phase of the project involved the installation of 200 MW of power generation capacity and the second phase of the project involved the installation of 360 MW of power generation capacity. The total cost of the project was approximately $800 million. It was implemented as an independent power project (IPP) and financed according to a debt-to-equity ratio of approximately 80:20. China Gezhouba Group Corporation (CGGC) was the EPC contractor responsible for project implementation. A phase 1 groundbreaking (sod-cutting) ceremony took place on April 18, 2008. Phase 1 was completed in June 2009, but the 200 MW power plant did not begin commercial operations until October 2010 (due to delays in natural gas supply from the West African Gas Pipeline Authority to Ghana). On September 2, 2014, CGGC officially started test piling for the project’s second phase. The pile foundation component of the project’s second phase consisted of 900 to 1,000 bored concrete piles with a diameter of 800mm. The 1st sub-phase (180 MW) of the project’s second phase was officially commissioned and inaugurated in April 2016 and the 2nd sub-phase (180 MW) was officially commissioned and inaugurated in July 2016. The second phase of the Sunon Asogli Power Plant (also known as the Kpone Thermal Power Station II) was put into commercial operation in January 2017.

Additional details

1. Shenzhen Energy Group Company Ltd holds a 60% ownership stake and CADF holds a 40% ownership stake in Sunon Asogli Power (Ghana) Limited [深能安所固电力(加纳)有限公司]. 2. The Chinese project title is 加纳安所固燃气电厂项目 or 加纳燃气循环发电项目. 3. For most, and perhaps all, of the CDB loans, Shenzhen Energy Group Company Ltd issued corporate guarantees worth 60% of the face values of the loans (i.e. corporate guarantees that were proportional to Shenzhen Energy Group Company Ltd’s 60% ownership stake in Sunon Asogli Power (Ghana) Limited. 4. Various sources refer to a $100 million CDB loan in 2008 with a 10-year maturity (backed by a partial repayment guarantee from Shenzhen Energy Group Company Ltd), a $284,083,200 CDB loan in 2015 [backed by a partial repayment guarantee from Shenzhen Energy Group Company Ltd and collateralized against Shenzhen Energy Group Company Ltd’s 60% equity stake in Sunon Asogli Power (Ghana) Limited, and a $50 million CDB working capital loan in 2017 [backed by a partial repayment guarantee from Shenzhen Energy Group Company Ltd and collateralized against Shenzhen Energy Group Company Ltd’s 60% equity stake in Sunon Asogli Power (Ghana) Limited]. CDB’s 2020 annual report refers to $358 million of lending for Phase 2 of the 560MW Sunon Asogli Power Plant Project. 5. Phase 2 of the 560MW Sunon Asogli Power Plant Project is also known as the Kpone Thermal Power Station II Project. 6. China-Africa Development Fund made a $79.89 million equity contribution to the project. 7. Build-up of excess capacity charges guaranteed by the Government of Ghana lead to enormous fiscal challenges and threaten the viability of the country’s power sector as a whole. The Public Utilities Regulatory Commission (PURC), which oversees tariff-setting methodology, excludes capacity charges and financing costs from its tariff calculations, adding to the shortfall. In 2018, excess generation capacity contracted under take-or-pay power purchase agreements (PPAs) cost the Government of Ghana $320 million in capacity charges, estimated to increase to $620 million annually with the addition of new plants in 2019. These unused supply charges are one of the most significant sources of financial strain on the country’s power sector. Cumulative net sector debt was $2,748 billion in 2018, with 30% payable to the private sector. This sum is equivalent to 33% of the Government of Ghana’s 2018 tax revenue, highlighting the scale of the financial burden. The Government of Ghana was forced to issue two series of bonds totaling GHS 5.66 billion in 2017 and 2018 to pay 50% of legacy debt owed to several energy sector actors, including various banks, VRA, ECG, and the Northern Electricity Distribution Company (NEDCo). Then, in 2020, the Government of Ghana settled another utility legacy debt — involving Sunon Asogli Power (Ghana) Limited — worth $203 million. According to Sunon Asogli Power (Ghana) Limited, the settlement of the debt helped improve the credit ratings of the various organizations within the energy sector seeking for credit facilities from both domestic and international banks. “It has further reduced the indebtedness of government, Electricity Company of Ghana Limited (ECG), Volta River Authority (VRA), Ghana National Gas Company Limited (GNGC) and Sunon Asogli Power (Ghana) Limited making their books much better. We will continue to collaborate with all the parties within the energy sector and the Government of Ghana in meeting the electric power needs,” Sunon Asogli Power (Ghana) Limited added in a statement

Number of official sources

14

Number of total sources

26