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ICBC provides $550 million buyer’s credit loan for Omo Kuraz 5 Sugar Plant Project
| Funder | Industrial and Commercial Bank of China (ICBC) |
|---|---|
| Recipient Organization | Ethiopian Sugar Corporation (ESC) |
| Country | Ethiopia |
| Start Date | Jul 23, 2015 |
| End Date | Oct 24, 2029 |
| Duration | 5,207 days |
| Number of Grantees | 1 |
| Roles | Recipient |
| Data Source | AidData Chinese Aid |
| Grant ID | 58616 |
Grant Description
ICBC provides $550 million buyer’s credit loan for Omo Kuraz 5 Sugar Plant Project On July 23, 2015, the Industrial and Commercial Bank of China (ICBC) and the Ethiopian Sugar Corporation (ESC) — an Ethiopian state-owned enterprise — signed a $550,000,000 (ETB 11,262,597,025) export buyer’s credit (loan) agreement for the Omo Kuraz 5 Project.
The Government of Ethiopia issued a sovereign guarantee for this loan.
The loan's first scheduled first scheduled interest payment date was December 20, 2016.
The borrower was expected to use the proceeds of the loan to finance 85% of the total cost of a $647 million commercial contract between Jianglian Heavy Industry Co., Ltd. and the ESC, which was signed on August 13, 2013.
After the debt rescheduling agreement was finalized, the loan's first and last scheduled principal payment dates were reset to December 31, 2019 and June 20, 2030, respectively. Its last scheduled interest payment date was reset to June 20, 2028.
According to the Government of Ethiopia’s Aid Management Platform (AMP), the $550 million loan achieved an 88% disbursement rate, with ICBC making 9 loan disbursements (worth ETB 9,961,853,894) between 2016 and 2018: an ETB 2,448,261,038 disbursement on May 31, 2016, an ETB 298,977,218 disbursement on April 30, 2017, an ETB 692,625,989 disbursement on September 18, 2018, an ETB 75,043,474 disbursement on November 23, 2018, an ETB 27,682,313 disbursement on November 23, 2018, an ETB 34,611,272 disbursement on November 23, 2018, an ETB 778,810,201 disbursement on November 23, 2018, an ETB 280,385,250 disbursement on November 23, 2018, and an ETB 5,325,457,140 disbursement on November 23, 2018.
The Omo Kuraz Sugar Project consists of five sugar plants (Omo Kuraz 1, Omo Kuraz 2, Omo Kuraz 3, Omo Kuraz 4, and Omo Kuraz 5). The Omo Kuraz 5 Sugar Plant Project involves the construction of the fifth factory in the Omo-Kuraz Sugar Project. This factory is located in Awi Zone’s Jawi District of Amhara region.
Upon completion, the facility is expected to produce 242,000 tons of sugar and 20 million 827 liters ethanol a year at full capacity.
As part of the project, extensive irrigation infrastructure is also being constructed on Omo River in order to enable 100,000 hectares of land to be covered with sugarcane. Jiangxi Jianglian International Engineering Co. Ltd (JJIEC), a subsidiary of Jianglian Heavy Industry, is the contractor responsible for project implementation.
According to the ESC, the project is being undertaken in two phases. Phase 1 construction activities commenced in November 2016.
To date, 30,000 hectares of land at the project site have been irrigated, of which 16,0000 hectares are covered with sugarcane. However, this project has also become a source of scandal and controversy.
On July 25, 2017, Yuan Jialin, the JJIEC head of the Omo Kuraz 5 Project, was detained in relation to an alleged act of corruption: paying a $30 million bribe (‘commission’) for Ethiopian Ministry of Finance officials to illegally grant a contract to JJIEC.
Yuan Jialin, wrote a letter to Ethiopian Prime Minister Abiy Ahmed on May 29, 2018, requesting his personal intervention. In his letter, he indicated that he had been denied bail for nearly a year.
He also wrote that “JJIEC […] operates on the highest standard and uses fair and competitive system of procurement and carefully controls projects at hand to be free from corruptive and fraudulent activities." Jialin also argued in the letter that it was difficult to commit corruption in a strictly monitored purchase process.
He claimed that there has not been any evidence to substantiate the charges brought against him.
He also noted that, while JJIEC recruited a lawyer to investigate the alleged corruption, he was subjected to an inappropriate search which resulted in physical and psychological damages to him. He also asserted that the documentary evidence presented to substantiate the charges against him were counterfeit.
He also warned that the ‘dire situation’ of the Omo Kuraz 5 project might hamper the bilateral relations between the Ethiopian Government and JJIEC, and requested that Prime Minister Abiy Ahmed establish a neutral and separate body to see his case and give him a speedy trial.
There are indications that the ICBC loan for the Omo Kuraz 5 Sugar Plant Project financially underperformed vis-a-vis the original expectations of the lender.
According to the Government of Ethiopia’s Aid Management Platform, as of September 2019, ICBC suspended about $67 million worth of loan disbursements for the Omo Kuraz 5 Sugar Plant Project 'due to [the] cross-default situation of the country.' Then, after considerable delay, the G20 Common Framework (CF) creditor committee for Ethiopia convened in September 2021, with the French Government and the Chinese Government serving as co-chairs.
The CF debt rescheduling talks were still ongoing in mid-2023. As of September 2024, ICBC was still withholding loan disbursements for the Omo Kuraz 5 Sugar Plant Project.
Staff Comments
- A 2017 SAIS-CARI report indicates that the ICBC loan was for $700 million, but official source materials are consistent in reporting the face value of the loan as $550 million.
- This project is also known as the Omo Kuraz 5 Sugar Factory Project. The Chinese project title is OMO KURAZ 5糖厂项目.
- 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.
- The borrowing terms of the loan are not identified in database of Chinese loan commitments that SAIS-CARI released in 2020 and re-released in 2021. They are drawn from the Ethiopian Ministry of Finance's Public Sector Debt Statistical Bulletin No. 18 (2011/12 - 2015/16). See https://www.dropbox.com/scl/fi/wxj1ore200dxz8yggcypt/Rev.Public-Sector-Debt-Statistical-Bulltien-No.-18-2011-12-2015-16.pdf?rlkey=oq2w8nfkbah4n1r98ycpg7t23&dl=05. The system identification number for the ICBC loan in the Government of Ethiopia’s Aid Management Platform (AMP) is 87143359107659. The AMP identifies the value this loan commitment as ETB 11,262,597,025. 1 Ethiopian Birr (ETB) was equal to 0.047 United States Dollars (USD) in July 2015 (at the time that the loan agreement was signed).
- The signatories of the July 23, 2015 agreement, which is also known as the ‘Investment and Financing Development Cooperation Agreement’, were ICBC CEO Jiang Jianqing and Ethiopian Ministry of Finance Sufian Ahmed Beker.
- The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20901000 and the corresponding project name in DMFAS is ‘OMO 5 SUGER FACTORY’. 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=08. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 8.70% 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=09. The year in which the debt rescheduling agreement between ICBC and ESC was finalized is unknown. AidData assumes for the time being that the agreement was finalized in 2019 for two reasons. First, according to the MOFED’s Annual Public Sector Debt Portfolio Analysis for the Year 2021/22 No. 23, “[t]he ratio of [the present value] of external debt to export in 2021, 2020 and 2019 was improved compared to […] 2017 […] as result of […] some of the SOE’s external debt profiling [efforts] with the Chinese creditors.” Second, according to interview evidence collected by Dr. Valeria Lauria from the Director of the Debt Management Directorate within Ethiopia's Ministry of Finance and Economic Development, Ethiopian SOEs signed a series of debt rescheduling/reprofiling agreements with Chinese creditors in 2019 (see https://www.dropbox.com/scl/fi/ms0l443p3e8yjcmgdmvxo/Query-re-Table-8-in-Beltways-of-Agency.pdf?rlkey=deu8279epfyebzkxmrhqlwew1&dl=0 and https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf).
Sources & References
- Challenges of and opportunities from the commodity price slump
- Omo Kuraz Sugar Factory 5
- ICBC Signs General Cooperation Agreement with Ethiopia
- 中国工商银行与埃塞签署投融资整体开发合作协议
- Company Introduction
- 工行与埃塞俄比亚签署整体合作协议
- Ethiopian China-Backed Sugar-Export Push Hits Cash
- Design Snags
- Chinese corruption suspect petitions PM’s intervention
- Ethiopia secures Chinese funding for sugar project
- Annual Public Sector Debt Portfolio Report For the Year 2017/18 No.19
- Ethiopia: Gov't Secures U.S.700 Million Loan for Kuraz V
- JLianco subsidiary's USD 647m Ethiopia sugar project procures Schneider Electric equipment
- The Vice President of Ethiopian National Sugar Company visited Jianglian Group for inspection
- 江联国际埃塞OMO5糖厂项目的风险管理与应对
- 江西单笔融资额最大的“走出去”项目在非洲启动
- Sugar Factory General Contracting Project
- Annual Public Sector Debt Portfolio Report For the Year 2017/18
- Chinese Loans to Africa Database
- Omo Kuraz No. 5 Sugar Factory
- Omo Kuraz 5 Sugar Factory
- Chinese corruption suspect petitions PM’s intervention
- Addis Standard, የቻይና መንግስት በኢትዮጵያ የሙስና ቫይረስ ኤክስፖርት ያደርጋል (የኢትዮጵያ ኢኮኖሚክስ ማህበር ሚሊዮን ዘአማኑኤል )
- Public Sector Debt Statistical Bulletin
- China Loans to Africa
- MOFED Loan-Level Data on Borrowing Terms and Loan Performance September 2024_PUBLIC
- ANNUAL PUBLIC SECTOR DEBT PORTFOLIO ANALYSIS FOR THE YEAR 2020/21
- Query re Table 8 in Beltways of Agency
- List of Ethiopia- China Cooperation Major Projects from Ethiopia's Ministry of Finance September 2024
- Beltways of Agency: Drivers
- Modalities and Outcomes of Chinese Engagement in Ethiopian Infrastructure Investments 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.
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Ethiopian Sugar Corporation (ESC)
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