Ethiopia lands Chinese loan approval for mega Gilgel Gibe III hydro-power project

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A Chinese loan has been secured for Ethiopia’s biggest Hydropower project, Gilgel Gibe III, after years of pressure from foreign environmentalists blocked access to funding from international financial institutions.

Chinese government has approved a 500 million dollar loan to cover the project’s electro and hydro mechanical costs.

Gibe, which is to have a 1.8MW power generating capacity, is expected to cost Ethiopia some 1.7 billion euros. A colossal sum for the poor east African country to shoulder alone. In 2006, it requested a loan from European Investment Bank (EIB), African Development Bank (AfDB) and Italian Government in 2006.

Environmental activist groups have however expressed misgivings over the project and insisted that it would adversely impact the livelihood of the surrounding communities in both Ethiopia and Kenya.

The militants embarked on dissuasive strategies including lobbying to put pressure on international financial institutions prevent funding for the project. According to them the dam will minimize the volume of water that flows into Lake Turkana from the Omo river.

This financial challenge prompted Ethiopia to shift its focus from Western finance sources. China has agreed to provide the loan (500 million dollars) on a long term basis.

The agreement reached between Ethiopia and China will see the former offer Gibe’s electro and hydro mechanical works to China.

In line with this agreement, Ethiopian Electric Power Corporation (EEPCo) is expected to sign a deal Wednesday evening with Dongfang Electric Machinery Corporation ltd, a Chinese state owned company.

Dongfang Electric Machinery Corporation ltd takes over Gibe’s electro and hydro mechanical work from Salini Construction an Italian Company appointed in 2006 to handle the engineering procurement contract of the project.

The Chinese loan could also see Ethiopia reject AfDB’s loan approval, according to government sources.

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