Narrative
Full Description
Project narrative
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 Record ID#45047) carried the following borrowing terms: a 13-year maturity, a 4-year grace period, 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 (CBE), the country’s largest state-owned financial institution. As a source of collateral, the borrower was required to maintain a minimum cash balance in a debt service reserve account (DSRA) at the CBE. The cash balance of the DSRA (escrow account) was $284,368,041 as of June 30, 2011, $308,914,767 as of June 30, 2012, $300,000,000 as of June 30, 2016, $300,000,000 as of June 30, 2017, $300,000,000 (ETB 8,260,410,000) as of June 30, 2018, $300,000,000 as of June 30, 2019, ETB 10,599,600,000 as of June 30, 2020, ETB 8,058,726,059 as of June 30, 2021, ETB 10,722,750,953 as of June 30, 2022, and ETB 9,832,603,839 as of June 30, 2023. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. China Eximbank, CBE, and the Government of Ethiopia signed a subsidiary buyer’s credit loan worth approximately ETB 99,364,756 ($10,781,996.21) for the BM-1 230kV Bedele-Metu Power Transmission Project on March 4, 2008. The loan's first and last scheduled principal payment dates were December 31, 2011 and March 31, 2021, respectively. Its first and last scheduled interest payment dates were July 1, 2009 and March 31, 2021, respectively. The borrower was expected to use the proceeds of the loan to finance approximately 85% of the cost of an ETB 115,000,771.67 ($12.5 million) commercial contract between the Ethiopian Electric Power Corporation (EEPCo) — an Ethiopian state-owned enterprise — and China CAMC Engineering Co. Ltd. (CAMCE), which was signed in August 2007. According to the Government of Ethiopia’s AMP, the ETB 99,364,756 loan achieved a 29% disbursement rate, with China Eximbank making 2 loan disbursements (worth ETB 29,231440) between 2010 and 2011: an ETB 20,063,073 disbursement on April 8, 2010, and an ETB 9,168,367 disbursement on July 7, 2011. The project involved the acquisition and installation of equipment — including transformers, outgoing line bays, and transformers bays — for the Bedele substation to Metu substation. CAMCE was the general EPC contractor responsible for project implementation. According to the Government of Ethiopia’s Aid Management Platform (AMP), the project reached completion. However, its precise implementation start and end dates are unknown. Its originally scheduled project completion date was October 1, 2009.
Staff comments
1. AidData has estimated the loan's all-in interest rate -- at the time it was issued -- by adding 2.5% (the midpoint between a 2% and 3% margin) to average 6-month LIBOR in March 2008 (2.67980%). 2. This buyer's credit loan from China Eximbank is not included in the database of Chinese loan commitments that SAIS-CARI released in 2020 and re-released in 2021. Nor is it included it in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 3. The AMP system identification number for the M-1 230kV Bedele-Metu Power Transmission Project is 8714327100843. 4. 1 Ethiopian Birr (ETB) was equal to 0.11 United States Dollars (USD) in June 2008, which implies that the ETB 99,364,756 loan commitment recorded in the AMP was worth USD 10,930,123.16 at that time that it was contracted. 5. The Chinese project title is BM-1输电线路项目. 6. For the time being, AidData uses the date of the first loan disbursement as a proxy for the project implementation start date. 7. According to CBE's financial statements for the year ending on June 30, 2012 (https://www.combanketh.et/cbeapi/uploads/2011_12_2037357399.pdf), 'CBE is the administrator of the total loan of USD 499,222,780, granted by EXIM Bank of China to the Ethiopian Electric Power Corporation (EEPCO) and Muger Cement Enterprise (MCE). The said loans are repayable by EEPCO and MCE to CBE in Birr over a period of ten years.' 8. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20776009 and the corresponding project name in DMFAS is ‘BEDELE-METU I SUBSTATION EQUIP’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0 9. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 2% in DMFAS (see https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0), which suggests the possibility of a debt rescheduling involving an interest rate reduction. This issue warrants further investigation. 10. One source indicates that the commercial contract was signed in February 2008 (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf). This issue warrants further investigation.