Completed Development AidData Chinese Aid

China Eximbank provides $315 million loan for 360MW Kariba North Bank Hydropower Plant Expansion Project

$315M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Kariba North Bank Extension Power Corporation Limited (KNBEPCL)
Country	Zambia
Start Date	Oct 01, 2008
End Date	May 20, 2033
Duration	8,997 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`354`

Grant Description

China Eximbank provides $315 million loan for 360MW Kariba North Bank Hydropower Plant Expansion Project In October 2008, China Eximbank and Kariba North Bank Extension Power Corporation Limited (KNBEPCL) — a special purpose vehicle and wholly-owned subsidiary of Zambia Electricity Supply Corporation (ZESCO) Limited, a state-owned power company in Zambia — signed a $315 million loan agreement for the 360MW Kariba North Bank Hydropower Plant Expansion Project.

KNBEPCL is a project company and a wholly owned subsidiary of ZESCO Limited, Zambia’s state-owned power company.

📋 Loan / Grant Terms

💰 Loan Amountto KNBEPCL carried the following borrowing terms: a 15 year maturity an interest rate of LIBOR plus 200 basis points

📅 Maturity15 years

As a source of collateral, some of the future receivables of Copperbelt Energy Corporation and Chambeshi Mining Company were formally assigned (under power offtake agreements that they signed with KNBEPCL).

The cash proceeds from electricity sales under the offtake agreements were deposited in a lender-accessible escrow account.

The lender was granted a formal security interest in the escrow account, which had a cash balance of at least $82 million in 2022.

The proceeds of the loan were used to be used by the borrower to finance a $243 million commercial (EPC) contract between Sinohydro and ZESCO Limited, which was signed on November 19, 2007. Development Bank of South Africa also provided a $105 million loan for the same project.

The principal amount outstanding under the China Eximbank loan was $268 million as of December 31, 2015, $240.9 million as of December 31, 2016, $214.2 million as of December 31, 2017, $214.2 million as of December 31, 2018, $160.62 million as of December 31, 2019, $133.848 million as of December 31, 2020, $120,464,052 as of June 30, 2021, and $100,002,768 (inclusive of $6,308,506 in interest arrears) as of June 30, 2022.

The project involved a 2 x 180MW expansion of the power generation capacity of the Kariba North hydroelectric power station through the installation of two new generators.

The 1.08GW Kariba North hydroelectric power station is located on the bank of Zambezi River at Kariba in the southern province of Zambia.

It includes the Kariba North Bank (KNB) (720MW) power plant and the Kariba North Bank Extension (KNBE) (360MW) power plant.

The KNB power plant was developed between 1969 and 1976 as part of the Central African Power Corporation’s (CAPC) development program.

The KNBE power plant consists of two 180MW vertical-shaft Francis turbines with a rated discharge 227.6m3/s operating at a head of 89m for each single unit. It has two intake chambers for water at an elevation of 458m. The underground powerhouse is 24m wide and 51m in length.

The power generated is transmitted through a 130 km long, 330kV transmission line from the KNBE power plant to the existing Kafue west substation.

The power generated from KNBE is purchased by ZESCO Limited under a 20-year long-term power purchase agreement (PPA), which was approved by Zambia’s Energy Regulation Board (ERB) in April 2011. Sinohydro and Yellow River Co., Ltd. were the contractors responsible for implementation. Construction began on November 5, 2008.

However, the project encountered a number of problems and delays. In 2009, a fire broke out in one of the generators. Then, in November 2011, it was reported that project completion had been delayed a year due to 'financial constraints'. The project was ultimately completed on July 31, 2014. An official completion ceremony took place on August 27, 2014.

To support the implementation of the project, Sinohydro formulated and Environmental Assurance Plan, formed a leading group on environmental protection, and made environmental emergency plans -- including an Anti-flood Emergency Plan, a Water Pollution Emergency Plan, and a Forest Fire Emergency Plan.

It has also hired local environmental specialists to regularly hold training sessions on environmental laws, regulations and policies. Steps were taken to reduce the pollutant discharge during construction.

The project used water wagons, water pumps and other equipment to spray down the dust and used water drills for excavation to reduce dust pollution and related damages.

It either used low-noise equipment such as power generators and air compressors or installed silencers on them and provided earplugs for constructors to prevent noise-induced occupation injury.

With respect to the disposal of wastes, solid metals were recycled and sent to local recycling stations, scrapped wood was used as canteen fuel, qualified stones were used as raw materials for concrete, and wastewater was discharged after sedimentation and filtering.

As a result, all solid wastes were disposed of safely and 80% of them were recycled and reused, effectively reducing the impact on surrounding environment.

Between 2014 and 2022, the power plant has generated 6620 GWh of electricity and created $527 million in economic and social benefits.

Since completion, the project -- along with the original power station -- has met 54% of Zambia’s power demand and become the country’s main power provider. It has also generate approximately 8,000 local jobs and 85% of its staff are local hires.

📋 Staff Comments

The Chinese project title is 赞比亚卡里巴北岸水电站扩机工程 or 卡里巴北岸电站2X180MW or 在赞比亚卡里巴北岸水电站扩机项目 or 赞比亚卡里巴北岸水电站扩机工程.
For loan and debt rescheduling records with variable interest rates, AidData calculates the all-in interest rate at T0 based on the reference rate (such as LIBOR or EURIBOR) on the loan start date, plus any known margin. Please see the methodology for additional details.
Some sources suggest the the loan agreement was signed in November 2009 rather than October 2008. This issue warrants further investigation.
The project won China’s Luban Award for overseas construction project in 2016-2017.
In early December 2024, Bloomberg News reported that KNBEPCL ‘erroneously’ made an $82 million debt service payment to China Eximbank with revenues from electricity sales that had been deposited in an escrow account. A controversy soon arose about whether the payment was appropriate and consistent with the debt treatment agreement that the Government of Zambia reaching with the Official Creditor Committee (OCC) in June 2023. Zambia's Ministry of Finance and National Planning responded by publishing a public statement on Twitter (https://x.com/mofnpzambia/status/1867915073773072756/photo/1) on December 14, 2024, which clarified that '[f]ollowing an approval by the ZESCO Board in December 2022, the [borrower] transferred US $82 million, the amount that had accumulated in the [escrow] account that secured the financing, as a principal prepayment to China Exim Bank. This payment allowed [the borrower] to close off outstanding obligations under the facility and save on future interest rate costs. The above-referenced payment was made prior to the Government of Zambia reaching debt treatment agreement with the Official Creditor Committee (OCC), which was achieved in June 2023 and reflected in the Memorandum of Understanding (MoU) of October 14, 2023. [...] In accordance with the terms of the MoU, the payment by [the borrower] should benefit the agreed debt treatment, and this is the subject of ongoing discussions with the [OCC]. The discussions are technical in nature, and there should be no suggestions that this debt was not lawfully owed or that the payment was made other than in good faith.' Around the time of the December 14, 2024 public statement, Zambia’s Secretary to the Treasury Felix Nkulukusa ‘proposed that the [$82 million] payment count [as an advance on the interest accumulating on [KNBEPCL] debt to [China Eximbank] since 2023.’

📚 Sources & References

http://www.abndigital.com/page/news/top-business-stories/492300-Zimbabwe-China-in-400-mln-power-plant-deal, http://www.steelguru.com/metals_news/ZESCO_to_complete_constructing_new_Kariba_North_Hydro_power_station/221298.html
FACTBOX-Hu's Africa tour - the deals, http://af.reuters.com/article/investingNews/idAFJOE52607W20090307
China firm to spend $400 mln on Zambia power project, http://www.chinafrica.asia/tag/kariba-north-bank/
Banda Launches $400 Million Kariba Power Project, http://www.cwbeleven.com/news/News_View.asp?NewsID=118, http://bulawayo24.com/index-id-news-sc-national-byo-16304-article-zimbabwes+plans+to+expand+kariba+power+plant+hit+snag.html, http://clairemchapman.wordpress.com/2011/08/31/north-kariba-hydro-power-station-zambia/, http://www.marketresearch.com/Business-Monitor-International-v304/Zambia-Power-Q2-7357901/, http://www.lusakatimes.com/2011/11/26/zambia-seeks-upgrade-kariba-north-bank-power-plant/
DBSA provides $105m for Zambia hydropower expansion, http://www.fpcg.com/2011/06/17/kariba-north-bank/, http://www.crossover.tractebel-engineering-gdfsuez.com/crossover3/kariba-north-kafue-hv-transmission/#1
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THE PAYMENT OF US$82 MILLION BY ZESCO WAS MADE PRIOR TO THE ZAMBIAN GOVERNMENT (GRZ) REACHING DEBT TREATMENT AGREEMENT WITH THE OFFICIAL CREDITOR COMMITTEE (OCC) Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.