Ethiopian Electric Power (EEP), the state-owned power producer, anticipates that the Koysha Hydroelectric Dam, one of its massive projects, will receive a non-concessional loan based on the government’s most recent exceptional green light.
Unlike other comparable renewable energy projects, the project being built on the transboundary Omo River in the South West Ethiopia region has had difficulty obtaining concessional loans. The other project, the Grand Ethiopian Renaissance Dam, is being built on the Abay (Blue Nile) River a short distance from the Sudanese border and is entirely financed by local resources.
The administration recently said in a conversation with foreign partners, “Despite sustained efforts, we have not been able to secure concessional financing to finalize this project, which is critical for our medium-term growth and poverty-reduction strategy.” In order to carry out the Koysha project, the government was compelled to obtain local funding when it decided to halt taking out commercial loans.
Nevertheless, despite the government’s repeated pledge to halt all concessional funding, special measures have been made to associate a fund with the completion of the 2,160 MW installed capacity project. Ashebir Balcha, CEO of EEP, reports that at the conclusion of the previous fiscal year, the project’s achievement rate was 67%. “However, more funding is needed for the remaining work at the site,” he told Capital.
It is anticipated that the project will require more than $950 million. According to the CEO, the government has made the decision to get a commercial credit in order to complete the project, which started in 2016. In order to obtain the commercial credit, the Ministry of Finance is now working, and “we hope the process will end very soon.”
The government of Ethiopia reaffirmed its unwavering resolve to suspend non-concessional loans in light of the most recent macroeconomic reform that the country is carrying out with the assistance of foreign partners. According to the agreement the government reached with foreign partners, “an exception is applied for new non-concessional external debt contracted or guaranteed by the government for the Koysha dam project, which is capped at USD 950 million over the duration of the program (it is about four years)”.
According to the government, in order to prevent contractual penalties for delays, possible termination, and total construction cost rises, finding external finance and starting work again are essential. One of the main partners in implementing the economic reform, the International Monetary Fund (IMF), announced that the authorities had asked for one exception from the zero-limit on new non-concessional borrowing in order to finish the Koysha Hydroelectric Dam project, for which concessional financing is not available.
The Italian export credit guarantee agency (SACE) provided non-concessional financing for the project, which was initially financed by loans totaling about 340 million euros from three banks. There have been delays despite the project being 67% completed due to a lack of outside funding. According to the IMF, the authorities have failed to get concessional loans, and the anticipated gap is $879 million. The IMF estimates that it will take an extra three to six years to complete.
A 6,500 million cubic meter reservoir with a crest length of 990 meters and a height of 180 meters is part of the roller-compacted concrete (RCC) gravity dam project, which is situated approximately 370 kilometers southwest of Addis Ababa.
