China Eximbank provides $300 million preferential buyer’s credit for 160MW Grand Poubara Hydroelectric Dam Construction Project (Linked to Record ID#85)

China Eximbank provides $300 million preferential buyer’s credit for 160MW Grand Poubara Hydroelectric Dam Construction Project On May 24, 2008, China Eximbank and the Government of Gabon signed an RMB-denominated government concessional loan (GCL) agreement worth $70 million for the 160MW Grand Poubara Hydroelectric Dam Construction Project.

The agreement was signed by Gabonese Finance Minister Paul Toungui and China's ambassador Hxue Jinwei.

Also, on May 24, 2008, China Eximbank and the Government of Gabon also signed a USD-denominated preferential buyer’s credit (PBC) agreement worth $300 million for the 160MW Grand Poubara Hydroelectric Dam Construction Project. The borrowing terms of the PBC are unknown.

The proceeds from the GCL and the PBC were used to finance approximately $370 million of a $398 million Engineering, Procurement, and Construction (EPC) contract with Sinohydro. The Government of Gabon covered the remaining $28 million cost of the EPC contract. The Government of Gabon also issued sovereign guarantees for the two loans from China Eximbank.

Record ID#85 captures the GCL, while Record ID#73173 captures the PBC.

The project involved the construction of a dam on the Ogooué river with 4 Francis turbines capable of generating 160 MW. The dam was built in part to generate power for an iron ore mine in Belinga (see Record ID#630).

The project also involved the construction of two power transmission lines: a 15 km line from the dam site to Franceville, the country's third largest city, and another line from the dam site to Moanda (the largest manganese mining region in Gabon and in the world).

The dam is located 15 km outside of Franceville in the province of Haut-Ogooué, more than 700 km southwest of Libreville, an area where the Compagnie minière de l’Ogooué’s (COMILOG) main manganese mine is located. Sinohydro was the contractor responsible for implementation.

Construction officially began on November 15, 2008, and it was originally anticipated that the construction process will be completed in 54 months (May 15, 2013). The dam was impounded on April 30, 2013. Then, the four power generating units went into operation on August 5, 2013. The dam, water diversion system and other civil works passed final inspection by the project owner on July 22, 2014.

The power generator set and auxiliary equipment also passed final inspection by the project owner on August 9, 2014, effectively marking the completion of the project.

There are some indications that the China Eximbank loans for the 160MW Grand Poubara Hydroelectric Dam Construction Project may have financially underperformed vis-a-vis the original expectations of the lender.

In mid-2014, a decline in international oil prices generated sharp reductions in Gabon’s oil exports and fiscal revenues. The country’s rising fiscal deficit led to the accumulation of arrears to external creditors.

By 2017, the stock of the Government of Gabon’s external arrears stood at $115 million, including arrears to China, Canada, Germany, Spain, France, Israel, and South Korea. All of these arrears were successfully cleared by 2020. However, the Government of Gabon accumulated $3 million of additional arrears to Chinese creditors in 2020.

By the end of May 2021, ‘the stock of [the Government of] Gabon’s external arrears stood at CFAF 98.03 billion (US$182.1 million), including CFAF 23.8 billion (US$44.2 million) vis-à-vis multilaterals and CFAF 21.05 billion (US$39.1 million) vis-à-vis government agencies and private creditors insured with companies from Paris Club member countries and from China [ICBC and China Construction Bank] CFAF 1.3 billion (US$2.42 million).

The Government's strategy for the clearance of existing external arrears consists of focusing primarily on multilateral debt, bilateral debt, insured commercial commitments and seeking agreements with other creditors prior to the IMF Board meeting. Accordingly, we will clear the arrears vis-à-vis the multilaterals.

We will also clear bilateral and commercial-insured arrears as follows: (i) Austria CFAF 6.83 billion (US$12.69 million); (ii) France CFAF 11.9 billion (US$22.11 million); (iii) Israel CFAF 2.23 billion (US$4.13 million); and Spain CFAF 0.09 billion (US$0.17 million).

Regarding the other commercial arrears vis-à-cis AFREXIMBANK (CFAF 7.52 billion or US$13.97 million, and commercial non-insured vis-à-vis France CFAF 0.7 billion (US$1.24 million), Austria CFAF 8.71 billion (US$16.18 million), and Morocco CFAF 1.01 billion (US$1.87 million), we contacted these creditors individually to obtain from them the non-objection agreement.

The same communication was made with China to which our bilateral payment arrears are about CFAF 34.01 billion (US$63.17 million).’ Then, in 2022, the IMF reported that the Government of Gabon’s external arrears to Chinese creditors stood at $23.9 million as of December 2021 and $1 million in June 2022.

On April 3, 2024, Gabon’s Ambassador to China transmitted a letter (reference number: 000115/AMBAGAB-RPC/24) to the transitional authorities in Gabon, urging them to consider a debt settlement mechanism whereby the Government of Gabon would repay its outstanding debts to China Eximbank by depositing the cash proceeds from the sale of 1 or 2 oil cargoes (worth $150 million per cargo) each year to UNIPEC in a China Eximbank-controlled escrow account.