Ethiopia has agreed to refund $6.5 million to investors in the U.S. after it illegally sold an unregistered Diaspora bond to American residents mostly of Ethiopian descent to finance the Grand Ethiopian Renaissance Dam, Bloomberg reported.
The United States Securities and Exchange Commission (SEC) said in June 8 that the Ethiopian Electric Power Corporation (EEPC) incorrectly sold the bond, which raised about $5.8 million from more than 3,100 people between 2011 and 2014.
The state-owned utility will pay $5,847,804 in disgorgement and $601,050.87 in prejudgment interest, according to an SEC administrative order.
“EEP did not register its bond offering with the commission, and there was no available exemption from the requirement that the offering be registered,” the SEC said.
U.S. residents bought the bonds in denominations of $5 to $10,000, for total investments per investor ranging from $50 to $1 million. Nearly two-thirds of the investors reported they were U.S. citizens.
The five-year bond carries an interest rate of LIBOR plus 1.25 percent, CFO reported.
Stephen L. Cohen, associate director of the SEC’s Division of Enforcement, said “Foreign governments are welcome to raise money in the U.S. capital markets so long as they comply with the federal securities laws, including registration provisions designed to ensure that investors receive important information about prospective investments.
“This settlement ensures that investors get all of their money back plus interest.”
EEP raised the bond to help the East African nation build the largest hydro-electric dam on the continent, which once completed will make the country an electricity exporter.
The Grand Ethiopian Renaissance Dam is expected to have the capacity to produce 6,000 megawatts of electricity — nearly four times Ethiopia’s present hydroelectric production capacity.
Ethiopia is one of Africa’s fastest growing economies with an average annual growth of over 10 percent.
The country has embarked massive infrastructure projects including power plants that would make a significant stride in terms of its ambitious plan to become a middle income country in 2025.