ICBC agrees in principle to provide EUR 162.4 million loan for Power Supply to Industrial Parks and Grid Upgrade and Power Transmission Extension Project

Project narrative

In January 2020, the Parliament of Uganda request to approved an EUR 162,445,674.70 ($178,276,661.70) loan from the Industrial and Commercial Bank of China (ICBC) for the Power Supply to Industrial Parks and Grid Upgrade and Power Transmission Extension Project. The borrower was expected to use the proceeds of the loan to finance 80% of the cost of the $223 million commercial contract between Uganda Electricity Transmission Company (UETCL) and China CAMC Engineering Company Limited (CAMCE), which was signed on October 15, 2019. The purpose of this project is to procure, design, supply, install and connect 7 substations, two of them in Kapeeka, and one each in Sukulu, Mbale, Wobulenzi, Nakasongola and Kaweweta Industrial Parks. The project also involves the construction of Wobulenzi-Kapeeka (220Kv) and Kapeeka-Kaweweta-Nakasongola (132Kv) high-voltage transmission lines. The project has been plagued by delays and controversy. In June 2020, Matia Kasaija, the Minister of Finance of Uganda, filed a formal request with parliament to change the funder from ICBC to China Eximbank. The minister noted that ICBC was facing challenges mobilizing financing, and that China Eximbank had agreed to finance the project instead with the same terms. Parliament agreed to amend the agreement on June 30. Despite this, expected disbursements for the loan from ICBC were recorded in the Ugandan Ministry of Finance's 2021, 2022, and 2024 Reports on the Public Debt. In 2021, China CAMC Engineering Co. Ltd. faced sanctions from key international financial institutions. A search with the World Bank procurement and projects website shows that the company was debarred after the Asian Development Bank issued sanctions for having ‘violated ADB’s integrity principles and guidelines’. The ban runs until October 2026. According to the World Bank website, the sanctions are imposed on entities found to have participated in coercive, collusive, corrupt, fraudulent or obstructive practices under the World Bank’s sanctions system or adopted under the Agreement for Mutual Enforcement of Debarment Decisions. This means China CAMC Engineering Co. Ltd. cannot participate in World Bank-financed contracts until 2026. In a March 15, 2022 letter to Finance Minister Matia Kasaija and Energy and Mineral Development Minister Ruth Nnankabira, President Museveni questioned ‘why hasn’t the contractor started work for more than two years? Why would you accept such a critical government project to be delayed this long?’ He also expressed his displeasure over the delayed works, noting that ‘I am made to understand that the project cost was inflated. [China Energy International Group Company Limited] (another Chinese company) is offering to do the same project with the same, or better specifications, discounted by more than 40 million dollars (Shs145b). This is not acceptable. How do government officials connive with contractors to inflate prices?’ In May 2022, the president directed for the contract with CAMCE to be cancelled. As of December 2024, no additional project updates were available.