Debt Relief

How the Three Gorges project was funded

May 1, 2006

Where did the money come from to build the dam? For a start, all of China’s power consumers were forced to pay in advance for Three Gorges electricity, even though many will never use it.

How the Three Gorges project was funded

The Three Gorges project is costing about US$25 billion to build, according to the official figure. All of China’s power consumers were forced to pay in advance for Three Gorges electricity, even though many will never use it. The project was funded as follows:
1. Tax on power consumers throughout the country
(US$5.05 billion had been collected as of June 2003)
Year Per kWh electricity use
1992 0.0036
1994 0.0048
1996 0.0085
2. Revenue from Gezhouba dam
The project drew on revenues and income tax credits from the state-owned Gezhouba dam. (Amount n/a)
3. Revenue from Three Gorges electricity sales
The project began generating electricity in 2003. At full capacity, the dam is expected to generate 87.4 TWh annually and collect US$2.54 billion a year from consumers at an average selling price of 3.0 US cents per kilowatt-hour. The government has stated this revenue will be used to repay its bank loans within six years. However, the Three Gorges Corporation has also stated that revenue from Three Gorges will be used to finance the construction of more dams on the upper Yangtze (Jinsha) River.
4. State-financed loans
The project received a US$3.6-billion loan over 10 years from the State Development Bank in 1996. China Construction Bank has also provided US$0.88 billion in soft loans.
5. Corporate bonds
A total of US$2.3 billion was raised through six domestic bond issues between 1997 and 2003.
6. Stock issues
On Nov. 18, 2003, the project was listed on the Shanghai Stock Exchange as China Yangtze Power Company with the stated aim of raising US$1.2 billion. How much capital has actually been raised is not verifiable.
7. Mandated donations
Money was collected from governments and state enterprises in 21 provinces and metropolitan areas to relocate more than one million people. These mandatory donations are estimated to have exceeded US$5.47 billion.
8. Export credit
No fewer than six taxpayer-backed export credit agencies have provided funding for the Three Gorges project.
Banco Nacional de Desenvolvimento Economico e Social (BNDES)  
$202-million loan to finance the purchase of turbine-generator sets from GEC-Alsthom consortium
Export Development Corporation 
$23.5-million loan to the People’s Construction Bank of China for Fuller-F.L. Smitdth Canada‘s contract (1994) $25-million loan to finance AGRA Monenco‘s contract (1995)

$153-million loan to finance GE Canada‘s contract (1997)

Banque Nationale de Paris (and Banque de Paris et des Pays Bas, Midland Bank SASociZtZ GZnZrale
$94.815-million loan to finance GEC-Alsthom contract (1997) See SWEDEN
Kreditanstalt fYr Wiederaufbau (KfW) (and commercial banks Deutsche Genossenschaftsbank, Dresdner Bank and Commerzbank) Hermes Kreditversicherungs AG

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