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The Ethiopian Electric Power Corporation (EEPCo),
the state-owned monopoly, is getting close to
finalizing a deal with an international investment
bank to obtain a 400 mln dollar loans, sources
disclosed to Fortune.
JP Morgan Chase, an investment bank headquartered in
New York, will be lending the company the money at a
six per cent interest rate - an amount observers say
is on the high side - to be paid back over 10 years.
According to Bloomberg, the average 10-year lending
rate to AAA-rated companies in the US is currently
5.63pc.
EEPCo is seeking the
loan to finance the construction of a hydroelectric
dam project, known as Gibe III, which will be
constructed in the Oromia Regional State and have a
generating capacity of 1870mw of power. At a
projected cost of 1.73 bln dollars, the investment
is the largest ever of its kind in Ethiopia. Once
completed, the dam is expected to help EEPCo cover
40pc of its target to generate a total of 4,000mw of
electrical power by 2010, enough to provide coverage
to about half the country.
In the past, EEPCo has relied on construction firms
to provide financing for capital-intensive projects.
For example, EEPCo in July 2006 tapped Italy's
Salini Construction to bring in financiers for the
Gilbel Gibe II project, a dam with 425mw of
capacity. Salini, which was a partner in the
construction of the dam, secured loans from the
African Development Bank (AfDB) and the European
Investment Bank (EIB), as well as the Italian and
Ethiopian governments, to pay for its own costs and
services.
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Executives from Salini introduced bankers from JP
Morgan Chase to the Ethiopian government, which
initially asked the New York bank to funnel the loan
through the state-owned Commercial Bank of Ethiopia
(CBE), sources disclosed. JP Morgan Chase, however,
insisted the federal government provide a guarantee
on the loan, a request the government has been
reluctant to accept due to recommendations from the
World Bank and IMF against it.
According to reliable sources, the discussions
between the two parties has been going on for the
past six months until a breakthrough came when
Finance and Economic Development Minister Sufian
Ahmed finally convinced officials of the IMF and the
World Bank in October 2007, at the annual joint
summit of the two organizations held in Washington
D.C., to concede his government's need to furnish
the guarantee.
The two sides are expected to sign the loan
agreement in two weeks, sources disclosed. If
successful, it will be the first infrastructure
project JP Morgan Chase has financed in Ethiopia.
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