China Eximbank provides RMB 337 million government concessional loan for 15MW Mekin Hydropower Project

Project narrative

On November 5, 2009, the Chinese Government and the Government of Cameroon signed a preferential loan framework agreement for the 15MW Mekin Hydropower Project. Then, on January 7, 2010, China Eximbank and the Ministry of Economy, Planning and Regional Development of the Republic of Cameroon signed a government concessional loan (GCL) loan agreement [CHINA EXIMBANK GCL NO. (2009) 45 TOTAL NO. (295) LOAN SERIAL NO. 1290003052009110688] worth RMB 337 million for the 15MW Mekin Hydropower Project. The GCL carries the following borrowing terms: a 20-year maturity, a 4 year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.30% management fee, and a 0.30% commitment fee. The borrower was expected to use the proceeds of the loan to finance a commercial (EPC) contract [ID# 000478/MINEE/CAB] between the Government of Cameroon's Ministry of Energy and Water Resources and China National Electric Equipment Corporation (CNEEC), which was signed on March 16, 2009. As of December 31, 2020, the loan (GCL) had achieved a 98.4% disbursement rate and its outstanding amount was equivalent to CFA 16.1 billion. The project involved the construction of a rockfill dam, a 105-million cubic meters reservoir, a 15 MW power plant (with three, 5MW power generators), a 6.3/110KV interconnection substation in Mekin, a 110/30KV interconnection substation at Ndjom Yekombo, and a 110/30kV high-voltage transmission line from Mekin to Ndjom Yekombo (connected to the southern power grid). The dam and power plant are located in arrondissement of Meyomessala and electricity is evacuated to the eight districts of the Dja and Lobo Division, South Region. China National Electric Equipment Corporation was the EPC contractor responsible for project implementation. The Cameroonian Government also established a state-owned company -- called Hydro Mekin (or Hydromekin) -- to oversee implementation of the project. Project implementation commenced November 2011 and it was completed on December 23, 2015. However, after the facility was powered up in June 2019, it experienced technical difficulties. According to the HydroMekin website, the plant has been distributing electricity to Sanmelima and Meyomessala since May 14, 2021. However, various Cameroon media reports claim that the power plant experienced technical difficulties continued until 2022. The 2022 Minister's Statement from the Ministry of Water and Energy does mention that the plant faced technical issues, but doesn't clarify for how long or to what extent the plant remained functioning during that time. The Minister's Statement does claim that from June 13, 2022 to July 20, 2022, performance tests of the plant were successfully completed establishing a transited capacity of approximately 12MW on 17 July 2022. The energy produced is now injected into the Southern Interconnected Grid-- benefiting three cities, namely Mbalmayo, Sanmelima, and Meyomessala. There are some indications that the China Eximbank loan for the 15MW Mekin Hydropower Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’