Bank of China contributes to $95.3 million loan for Phase 2 of Rural Electrification in 5 Regions Project (Linked to Project ID#52991 and ID#73197)

On December 29, 2015, Ghana's Parliament approved a $90,472,385 term loan facility agreement with the Industrial and Commercial Bank of China (ICBC) for Phase 1 of the Rural Electrification in 5 Regions Project. The loan agreement was countersigned by the lender and borrower on June 28, 2016. The loan, which is captured via Project ID#52991, carries the following borrowing terms: a 15.5 year maturity, a 4 year grace period, an interest rate of 6-month LIBOR plus a margin of 0.5%, a 2% default (penalty) interest rate, a commitment fee of 1%, and a management (upfront) fee of 1.5%. The final maturity date of the loan is December 28, 2031. China Export & Credit Insurance Corporation (Sinosure) provided buyer’s credit insurance for this loan, and when the upfront (lump sum) premium was reduced from its original estimate of $8,022,385 (as approved by Ghana’s Parliament on December 29, 2015) to $5,682,722.24, the face value of the loan was reduced to $88,132,722.24 (from its original value of $90,472,385) through a June 30, 2017 addendum to the June 28, 2016 facility agreement. The proceeds of the loan were to be used by the borrower to partially finance a commercial (EPC) contract with China International Water and Electric Corporation (CWE), which was signed on April 11, 2016. The loan’s (principal) amount outstanding was GHS 235,660,000 ($42,082,142) as of December 31, 2020 and GHS 432,600,000 ($83,192,307) as of December 31, 2021. Then, on August 12, 2020, the Government of Ghana and the Bank of China and ICBC signed a $95,375,020.36 loan agreement to finance Phase 2 of the Self-Help Electrification Project (SHEP) in 5 Regions. ICBC's contribution is captured via Project ID#73197 and BOC's contribution via Project ID#92023. The loan carries the following (estimated) borrowing) terms: a 15 maturity, a 4 year grace period, an interest rate of 6-month LIBOR plus a margin of 1.95%, a 0.5% commitment fee, and a 1.5% upfront (management) fee. The face value ($95,375,020.36) of this loan is inclusive of an estimated, upfront Sinosure insurance premium of $7,825,020.36. The loan’s (principal) amount outstanding was GHS 79,880,000 ($14,264,285) as of December 31, 2020 and GHS 442,900,000 ($85,173,076) as of December 31, 2021. The purpose of the Rural Electrification Project in 5 Regions is to supply electrical materials and equipment for the electrification of 1,033 communities in the Ashanti, Brong Ahafo, Eastern, Volta, and Western Regions. It is being implemented in two phases and China International Water and Electric Corporation (CWE) is the contractor responsible for implementation of both phases. Phase 1 sought to connect 495 communities in 15 districts within the Ashanti Region, Eastern Region, Western Region, and Volta Region to the national electricity grid. This phase is now complete and it succeeded in connecting 507 communities to the national electricity grid. Phase 2 seeks to connect 582 communities in the Brong Ahafo Region, Ashanti Region, Eastern Region, Western Region, and Volta Region to the national electricity grid. There are some indications that the BOC/ICBC loan for Phase 2 of the Rural Electrification in 5 Regions Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans.

Additional details

1. The face value of the loan and the identities of the creditors who jointly issued it on August 12, 2020 are drawn from the Ghanaian Ministry of Finance's Annual Public Debt Report for the 2020 Financial Year (accessible via https://mofep.gov.gh/sites/default/files/reports/economic/2020-Annual-Public-Debt-Report.pdf). 2. The Chinese Loans to Africa (CLA) Database, which was first created by SAIS-CARI and is now managed by the Global Development Policy Center at Boston University, records the loan commitment year as 2019. 3. For the time being, AidData assumes equal financial contributions ($47,687,510.20) by the two Chinese banks that contributed to the $95.3 million loan for Phase 2 of this project (ICBC's contribution is captured in project ID#73197 and BOC's in project ID #92023). 4. AidData has estimated the borrowing terms of the loan based on those that were reported to Ghana’s Parliament in November 2019 (see https://www.dropbox.com/s/ubxvu9bdqjaej02/SUPPLY%20AND%20ERECTION%20OF%20ELECTRICAL%20MATERIALS%20AND%20EOUIPMENT%20FOR%20THE%20ELECTRIFICATION%20OF%20582%20COMMUNITIES%20IN%20THE%20ASHANTI%2C%20BRONG%20AHAFO.%20EASTERN%2C%20VOLTA%20AND%20WESTERN%20REGIONS%20%28PHASE%202%20OF%20THE%20INITIAL%201%C2%AB033%20COMMUNITIESL.pdf?dl=0). 5. AidData has estimated the all-in interest rate by adding 1.95% to the average 6-month LIBOR rate in August 2020 (0.313%). 6. This project is also known as the Phase 2 of the Rural Electrification Program in 5 Regions, Phase 2 of the Self-Help Electrification Project (SHEP) in 5 Regions, Self-Help Electrification Programme in Five Regions in Ghana - Phase II Project, and the Supply and Erection of Electrical Materials and Equipment for the Electrification of 582 Communities in the Ashanti, Brong Ahafo, Eastern, Volta, and Western Regions (Phase 2 of the Initial 1,033 Communities). 7. The Bank of China and ICBC loan agreement can be accessed in its entirety via https://www.dropbox.com/s/y2857ysg3ck82xc/ICBC%20and%20Bank%20of%20China%20USD%2095.3%20million%20loan%20agreement%20for%20Phase%202%20of%20Rural%20Electrification%20in%205%20Regions%20Project.pdf?dl=0“ Add these sources: https://mofep.gov.gh/sites/default/files/reports/economic/2020-Annual-Public-Debt-Report.pdf and https://www.cabri-sbo.org/uploads/bia/Ghana_2021_Formulation_External_BudgetFramework_BudgetMin_CEN-SADECOWAS_English.pdf and http://ir.parliament.gh/bitstream/handle/123456789/1442/1033%20COMMUNITIES.pdf?sequence=1&isAllowed=y and https://www.dropbox.com/s/ubxvu9bdqjaej02/SUPPLY%20AND%20ERECTION%20OF%20ELECTRICAL%20MATERIALS%20AND%20EOUIPMENT%20FOR%20THE%20ELECTRIFICATION%20OF%20582%20COMMUNITIES%20IN%20THE%20ASHANTI%2C%20BRONG%20AHAFO.%20EASTERN%2C%20VOLTA%20AND%20WESTERN%20REGIONS%20%28PHASE%202%20OF%20THE%20INITIAL%201%C2%AB033%20COMMUNITIESL.pdf?dl=0 and https://www.dropbox.com/s/y2857ysg3ck82xc/ICBC%20and%20Bank%20of%20China%20USD%2095.3%20million%20loan%20agreement%20for%20Phase%202%20of%20Rural%20Electrification%20in%205%20Regions%20Project.pdf?dl=0 8. The (principal) amounts outstanding are drawn from the Ghanaian Ministry of Finance’s Annual Public Debt Reports. These amounts are reported in GHS by the Ministry of Finance. AidData has estimated the USD amounts by applying the average GHS-to-USD exchange rate in 2020 (5.6-to-1) and the average GHS-to-USD exchange rate in 2021 (5.2-to-1).

Number of official sources

7

Number of total sources

8