China Eximbank provides $608 million loan for 1250 MW Merowe Hydroelectric Power Plant Project (Linked to Record ID#695, #56927, #56959)

China Eximbank provides $608 million loan for 1250 MW Merowe Hydroelectric Power Plant Project In October 2002, a joint venture called CCMD Corporation, which is between China International Water and Electric Corporation (CWE) and China Water Resources and Hydropower Engineering Corporation (CWHEC or Sinohydro), applied to China Eximbank for a loan guarantee before bidding on the 1250 MW Merowe Hydroelectric Power Plant Project in Sudan.

On May 20, 2003, this Chinese consortium ended up winning three different contracts for this project: (1) a $600 million (EUR 550 million) contract signed on June 7, 2003 for construction of the dam; (2) a $60 million contract signed on December 23, 2003 for auxiliary projects related to the metal frame and hydraulic mechanics; and (3) a $400 million contract signed on December 23, 2003 for construction of substations and transmission lines. (Note: A $381.5 million loan for this project component is captured via Record ID#695).

On December 23, 2003, China Eximbank and the Government of Sudan signed three different loan agreements worth a total of $519 million in order to partially finance the first two contracts: (1) a $400 million loan; (2) a $65 million loan; and (3) a $54 million loan.

China Eximbank later increased its total lending for the 1250 MW Merowe Hydroelectric Power Plant Project to $608 million (as captured via Record ID#178). The total project cost is unclear but estimates range from $1 billion to $3 billion. Therefore, several other entities served as co-financiers.

The 1250 MW Merowe Hydroelectric Power Plant Project was co-financed with: (1) $250 million from Arab Fund for Social and Economic Development (and possibly an additional $211 million) (2) $150 million from the Kuwait Development Fund (and possibly an additional $50 million) (3) $150 million from the Abu Dhabi Foundation (4) $200 million from the Saudi Fund for Development (5) $15 million from the Government of Qatar (6) $106 million from the Government of Oman (7) $575 million from the Government of Sudan The 1250 MW Merowe Hydroelectric Power Plant Project involved the construction of a 9.7-kilometer-long and 65-meter-high dam with a total installed capacity of 1250 MW and a storage capacity at 12.4 billion cubic meters.

It is located near Merowe Town in northern Sudan, about 350 kilometers (220 mi) north of the capital Khartoum.

The project had 8 main components: (1) Dam: This component included the construction of concrete and embankment sections of the dam on the Nile River channel. The dam crest was to be 9.7 km long and 10 m wide, and its height 60 m above river bed.

The dam was also to include the appurtenant structures such as spillway, water intakes and sediment sluices, as well as a hydropower station. (2) Preparatory Works: This component included the construction of housing facilities for construction supervision and operations personnel, the construction of 27 km access roads from Karima to the dam site, and a loading platform and storage areas at the nearby railway station. (3) Civil Works: This component included excavation, fill, drilling and grouting works, and concrete works for the dam and its appurtenant structures.

It also included all civil works for the hydropower station, as well as all necessary instrumentation and monitoring equipment for the operation of the dam. (4) Mechanical Works: This component included the supply and installation of gates, pipes and related mechanical equipment for the dam and its appurtenant structures. (5) Hydro-Mechanical Works: This component included the supply and installation of gates, penstocks, cranes and related hydro-mechanical equipment necessary for the control of water, and operation and maintenance of the dam and its appurtenant structures. (6) Electromechanical and Electrical Works for the Power Station: This component included the furnishing and installation of ten turbines, each rated at 125 MW, and ten 150 MVA generators.

It also included the construction of 500 and 220 kV switchyards, and the supply of the necessary transformers and bus bars, as well as control, protection and monitoring systems. (7) Transmission Lines: This component included the construction of 500 and 220 kV overhead lines having a total length of 1700 km, as well as seven sub-stations. (8) Consultancy Services: This component included the consultancy services required to review the conceptual design, prepare the detailed design, and construction supervision.

The project owner was Sudan’s Ministry of Irrigation and Water Resources’ Merowe Dam Implementation Unit.

The contractors responsible for implementation included China International Water and Electric Corporation (CWE), Sinohydro, Harbin Power Engineering Company (HPEC), and Alstom, a French company.

The originally anticipated project commencement and completion dates were July 30, 2005 and July 30, 2008, respectively.

The project began construction on July 8, 2003, and the first two generators were officially connected to the national grid on March 3, 2009. However, it was not until April 8, 2010 that the tenth unit of the Merowe dam was officially connected to the grid. However; issues with silt and debris accumulation threaten the long-term life of the dam.

By 2020, the dam had lost 1.7% of its holding capacity. According to a 2015 book (entitled "Water, Civilisation and Power in Sudan") by Harry Verhoeven, Dr.

Sabir Mohamed Hassan (the Governor of the Central Bank of Sudan) has "described one of the reasons for prioritising Merowe as 'the government needed something big to show to the people'.

It was no coincidence that Omar Al-Bashir campaigned for the Sudanese presidency in April 2010 with a picture of himself in front of the Merowe Dam, the symbol of civilisation delivered by Al-Ingaz, as his main electoral poster." The project was awarded the Luban Prize, a master prize in the PRC for development projects.

However, it was also plagued by controversy.

The project participants were required to prepare or contract an environmental impact assessment (EIA) in accordance with specific guidelines that address three major topics: (1) Social issues -- consequences of people resettlement from future flooded area; and (2) Archeological issues -- resulting from destruction or submerging important archeological sites or places of high cultural value; and (3) Environmental issues -- effect of large scale hydrological alteration of the natural river system with major impacts on the environment and water quality.

In April 2002, Lahmeyer International prepared the EIA report for the Merowe Dam Project. The report focused on complex resettlement issues involving about 7500 families.

Among the environmental impacts it discussed were the hydrological changes, the erosion of the river bed and its banks, greenhouse gas emissions, and changes in the aquatic ecosystem.

The 150 page report was far from meeting European or international standards, such as the guidelines of the World Commission on Dams.

No serious attempt was made to use the vast scientific knowledge base on environmental effects of large dams, although four decades of research on the Aswan High Dam (Lake Nasser in Egypt, Lake Nubia in Sudan) had revealed a dramatic sediment accumulation in the upper part of the reservoir, problematic water quality issues and detrimental downstream effects such as river bed erosion or water level fluctuations.

An estimated 60,000 civilians were ultimately displaced during the construction of the dam.

Sudanese civilians protested the project’s execution from the start, and in a confrontation with authorities in April 2006, five people from a displaced community were killed.

There are also some indications that the loans that were issued for the construction of the Merowe Hydroelectric Power Plant may have underperformed vis-a-vis lender expectations.

According to Sudan’s Finance Minister Ali Mahmood Abdel-Rasool, China Eximbank suspended its financing for 11 projects in Sudan following the secession of South Sudan in July 2011, which triggered a major loss of oil revenue (a key source of collateral for China Eximbank loans).

Ali Mahmood Abdel-Rasool said at the time that the Government of Sudan had previously pledged oil revenues (worth 120,000 barrels per day) to China Eximbank as a source of collateral.

Then, on February 18, 2012, the Chinese Government announced that it had agreed to reschedule the outstanding debt obligations of the Government of Sudan by extending loan repayment periods by 5-years (as captured via Record ID#30421).

According to the External Debt Unit of the Central Bank of Sudan, the Government of Sudan's total arrears to Chinese creditors amounted to $3.864 billion ($2.608 billion in principal, $1.129 billion in interest, and $127 million in penalty interest) as of March 31, 2022.