Completed Mixed AidData Chinese Aid

China Eximbank provides $58.6 million buyer’s credit loan for Mugher Production Line of the Mugher Cement Expansion Project (Linked to Record ID#45047, ID#92136)

$58.68M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Commercial Bank of Ethiopia (CBE)
Country	Ethiopia
Start Date	Nov 04, 2008
End Date	Jan 22, 2027
Duration	6,653 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`725`

Grant Description

China Eximbank provides $58.6 million buyer’s credit loan for Mugher Production Line of the Mugher Cement Expansion Project In November 2006, China Eximbank and the Government of Ethiopia’s Ministry of Finance and Economic Development signed a $500 million buyer’s credit facility agreement (互惠贷款) — also known as a master loan framework agreement and a master facility agreement — for an unspecified set of development projects.

📋 Loan / Grant Terms

💰 Loan Amountfacility agreement (captured via Record ID#45047) carried the following borrowing terms: a 13-year maturity

📅 Maturity13 years

⏳ Grace Period4 years

All of the subsidiary loans were secured with (i.e., collateralized against) Ethiopia's export receipts to China, which at the time primarily consisted of sesame seed export receipts.

The buyer’s credit facility agreement also required that all Ethiopian exports (export receipts) to China to be overseen by the Commercial Bank of Ethiopia (CBE), the country’s largest state-owned financial institution.

As a source of collateral, the borrower was required to maintain a minimum cash balance in a debt service reserve account (DSRA) at the CBE.

The cash balance of the DSRA (escrow account) was $284,368,041 as of June 30, 2011, $308,914,767 as of June 30, 2012, $300,000,000 as of June 30, 2016, $300,000,000 as of June 30, 2017, $300,000,000 (ETB 8,260,410,000) as of June 30, 2018, $300,000,000 as of June 30, 2019, ETB 10,599,600,000 as of June 30, 2020, ETB 8,058,726,059 as of June 30, 2021, ETB 10,722,750,953 as of June 30, 2022, and ETB 9,832,603,839 as of June 30, 2023. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement.

China Eximbank and the Commercial Bank of Ethiopia signed a subsidiary buyer’s credit loan worth ETB 1,145,843,829 ($90,980,800) for the Mugher Production Line of the Mugher Cement Expansion Project on November 4, 2008. The loan's first and last scheduled principal payment dates were March 31, 2012 and March 31, 2022, respectively.

Its first and last scheduled interest payment dates were September 30, 2009 and September 30, 2021, respectively.

The Commercial Bank of Ethiopia then on-lent the proceeds of the loan to Mugher Cement Enterprise (an Ethiopian state-owned enterprise).

The ultimate borrower (Mugher Cement Enterprise) was expected to use the proceeds of the loan to finance approximately 64% of the cost of a $138 million commercial (EPC) contract that it signed with Sinoma International Engineering Co., Ltd. on December 6, 2006.

The Government of Ethiopia’s Industrial Development Fund directly funded the remainder (34%) of the commercial contract cost. 64.5% of the face value of the loan ($58,682,616 or ETB 739,357,683) was earmarked for the Mugher Production Line of the Mugher Cement Expansion Project (‘Lot 1’), and 35.5% of the face value of the loan ($32,298,184 or ETB 406,486,146) was earmarked for the Tatek Production Line of the Mugher Cement Expansion Project (‘Lot 2’).

Record ID#725 captures Lot 1 and Record ID#92136 captures Lot 2.

According to the Government of Ethiopia’s AMP, the ETB 739,357,683 ($58.695 million) loan for Lot 1 achieved an 18% disbursement rate, with China Eximbank making 2 loan disbursements (worth ETB 135,479,525) between 2009 and 2010: an ETB 130,927,573 disbursement on December 31, 2009, and an ETB 4,551,952 disbursement on March 31, 2010.

According to the Government of Ethiopia’s AMP, the ETB 406,486,146 ($32.305 million) loan for Lot 2 achieved a 31% disbursement rate, with China Eximbank making 3 loan disbursements (worth ETB 126,558,996) between 2009 and 2011: an ETB 30,000,000 disbursement on December 31, 2009, an ETB 12,804,711 disbursement on March 31, 2010, and an ETB 83,754,286 disbursement on April 8, 2011.

The purpose of Lot 1 was to install clinker production machinery installed at Mugher cement factory, which is located approximately 150 km west of Addis Ababa.

The purpose of Lot 2 was to construct a new cement factory 12 km west of the capital in the Tatek locality (near Tatek Military Camp).

Upon completion, it was envisaged that the two factories would have the capacity to crush 900,000 tons of clinker per year and 2.4 million tons of cement per year (a 150 percent increase over the baseline level of 900,000 tons of cement per year). Sinoma International Engineering Co., Ltd. was the general EPC contractor responsible for project implementation.

However, Chengdu Design & Research Institute of Building Materials Industry was also involved in the project (most likely as a subcontractor). Project implementation commenced in January 2008.

The project was originally scheduled to commence in mid-December 2006 and reach completion within 21 months (approximately October 15, 2008). However, the cement plant did not go into operation until February 27, 2011.

📋 Staff Comments

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 (For this record, the margin was taken as the midpoint between the margin range). Please see the methodology for additional details.
In the database of Chinese loan commitments that it released in 2020 and re-released in 2021, SAIS-CARI does not identify the borrowing terms of the loan that supported this project.
The AMP system identification number for the Tatek Production Line of the Mugher Cement Expansion Project is 8714327100831. The AMP system identification number for the Mugher Production Line of the Mugher Cement Expansion Project is 8714327100830.
One source suggests that the monetary value of the December 6, 2006 commercial (EPC) contract was $129.97 million rather than $138 million. This issue warrants further investigation.
According to CBE's financial statements for the year ending on June 30, 2012 (https://www.combanketh.et/cbeapi/uploads/2011_12_2037357399.pdf), 'CBE is the administrator of the total loan of USD 499,222,780, granted by EXIM Bank of China to the Ethiopian Electric Power Corporation (EEPCO) and Muger Cement Enterprise (MCE). The said loans are repayable by EEPCO and MCE to CBE in Birr over a period of ten years.' 6. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20776014 and the corresponding project name in DMFAS is ‘THIRD CEMENT EXPANTION’. 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=0 7. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 1.95% 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=0), which suggests the possibility of a debt rescheduling involving an interest rate reduction. This issue warrants further investigation.

📚 Sources & References

Ethiopia gets $208 mln China loan for power, cement, http://www.ertagov.com/erta/erta-news-archive/37-erta-tv-top-news-addis-ababa-ethiopia/879-china-eximbank-grants-500-million-loan-to-ethiopia.html, http://www.hydroworld.com/index/display/article-display/articles/hrhrw/News/China_bank_funds_Ethiopias_100-MW_Finchaa-Amarti-Neshe.html, http://ertagov.com/erta/erta-news-archive/38-erta-tv-hot-news-addis-ababa-ethiopia/1629-muger-cement-inaugurates-17-billion-birr-expansion-project.html
Ethiopian bank signs loan agreement with Chinese bank, http://nazret.com/blog/index.php/2011/08/17/china-has-lent-ethiopia-500-million?blog=15
Premier Back Home After Attending FOCAC Summit, http://www.ethiopiainvestor.com/index.php?view=article&catid=1%252525253Alatest-news&id=2289%252525253Afan-hydropower-project-starts-generating-power-&option=com_content, http://www.yikuo.com/news/2009-09-03/84_200993113003849133292.shtml
Building on Progress? Chinese Engagement in Ethiopia
An Overview of Chinese Agricultural and Rural Engagement in Ethiopia
Handbook of Land and Water Grabs in Africa: Foreign Direct Investment and Food and Water Security
Chinese Investors in Ethiopia: The Perfect Match?
An Overview of Chinese Agricultural and Rural Engagement in Ethiopia
FAN Hydropower Project Starts Generating Power
驻埃塞俄比亚大使解晓岩出席中国企业承建水电站项目启用仪式
Ethiopia gets $208 mln China loan for power, cement
Speech at the Inauguration Ceremony of the Finchaa-Amerti-Neshe (FAN) Hydropower Project
BU_PITCH_ENGLISH_2018.xlsx, http://global.factiva.com/aa/?ref=LBA0000020070925e39p001he&pp=1&fcpil=en&napc=S&sa_from=, http://global.factiva.com/aa/?ref=BBCAP00020070924e39o001xh&pp=1&fcpil=en&napc=S&sa_from=, http://global.factiva.com/aa/?ref=AFNWS00020061108e2b70001e&pp=1&fcpil=en&napc=S&sa_from=, http://www.internationalrivers.org/resources/china-overseas-dams-list-3611
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Development Assistance from the South: Comparative Analysis of Chinese and Indian to Ethiopia
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Speech at the Inaugural Ceremony of BBDA Power Transmission Line and Substation Project by H.E. Ambassador Gu Xiaojie
埃塞工程承包市场概览
Ethiopia’s cement shortage gets $130mn injection, 4 Cementing Development? Uneven Development in an Import-Substitution Industry
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Eastern Promises: New Data On Chinese Loans in Africa, 2000 to 2014
ETHIOPIA PROJECT
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CBE Annual Report 2011-2012
CBE Annual Report 2010-2011
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MOFED Loan-Level Data on Borrowing Terms and Loan Performance September 2024_OTHER_PUBLIC
Beltways of Agency: Drivers
Modalities and Outcomes of Chinese Engagement in Ethiopian Infrastructure Investments
CBE Annual Report 2017-2018
CBE Annual Report 2020-21
CBE Annual Report 2022-2023
CBE Annual Report 2016-2017 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.

All Grantees

Commercial Bank of Ethiopia (CBE)

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