Project Finance Comparative Guide

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1 Legal framework

1.1 Beyond general commercial and contract laws, what other specific laws and regulations govern project finance transactions in your jurisdiction?

The following laws and regulations generally apply to project finance transactions in Ethiopia:

• the FDRE Constitution 1995;
• the Public-Private Partnership Proclamation (1076/2018);
• the Public-Private Partnership (Amendment) Proclamation (1263/2023);
• the Investment Proclamation (1180/2020);
• the National Bank of Ethiopia Establishment Proclamation (1359/2025);
• the Banking Business Proclamation (1360/2024);
• the Commercial Registration and Licensing Proclamation (980/2016), as amended;
• the Energy Proclamation (810/2013);
• the Energy (Amendment) Proclamation (1085/2018);
• the Mining Operations Proclamation (678/2010);
• the Mining Operations (Amendment) Proclamation (816/2013);
• the Environmental and Social Impact Assessment Proclamation (1317/2025);
• the Environmental Pollution Control Proclamation (300/2002);
• the Expropriation of Land Holding for Public Purpose Payment of Compensation and Resettlement Proclamation (1161/2019);
• the Expropriation of Land Holding for Public Purpose Payment of Compensation and Resettlement (Amendment) Proclamation (1336/2024);
• the Rural Land Administration and Use Proclamation (1324/2024);
• the Lease Holding of Urban Lands Proclamation (721/2011);
• the Movable Property Security Rights Proclamation (1147/2019);
• the Income Tax Proclamation (976/2016);
• the Income Tax (Amendment) Proclamation (1395/2025);
• the Stamp Duty Proclamation (110/1998);
• the Arbitration and Conciliation, Working Procedure Proclamation (1237/2021);
• the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Ratification Proclamation (1184/2020);
• the Commercial Registration and Licensing Regulation (392/2016), as amended;
• the Energy Regulation (447/2019);
• the Investment Regulation (474/2021);
• the Investment Incentives Regulation (517/2022), as amended;
• the Expropriation and Valuation, Compensation and Resettlement Regulation (472/2020);
• the Ministry of Finance Directive to Implement Investment Incentives (1064/2025);
• the Public-Private Partnership Directive (55/2018);
• the National Bank of Ethiopia, Foreign Exchange Directive (01/2024);
• directives of the Petroleum and Energy Authority;
• directives of the Ethiopian Investment Commission;
• directives of the Ministry of Trade and Regional Integration; and
• directives of regional states on land.

1.2 Do any bilateral and/or multilateral international instruments have particular relevance for project finance transactions in your jurisdiction?

Ethiopia has concluded a number of bilateral investment treaties (BITs), which grant foreign investors protections such as:

• fair and equitable treatment;
• safeguards against expropriation;
• free transfer of funds; and
• access to international arbitration forums.

Ethiopia has BITs with more than 30 countries (eg, China, Germany, India, South Africa, Russia, Malayasia, United Arab Emirates, France).

Ethiopia has also concluded a number of double taxation agreements (DTAs) which:

• generally, grant contracting parties various tax exemptions and privileges; and
• may have bearing on project finance transactions in Ethiopia.

DTAs provide a framework that delineates which country holds the taxing rights over particular types of income, such as:

• dividends;
• interest;
• royalties; and
• income from employment.

Ethiopia has signed DTAs with several countries (eg, Belgium, Canada, China, France, India, Italy and the United Kingdom).

Ethiopia is also a member of the Multilateral Investment Guarantee Agency (MIGA), enabling investors to access political risk insurance and credit enhancement tools that are often critical in structuring bankable project finance deals.

Ethiopia recently became a member of the Africa Finance Corporation, a multilateral finance institution which provides financing for infrastructure and natural resource projects.

Ethiopia is also a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ensuring that arbitral awards issued abroad are generally enforceable in Ethiopia.

1.3 Beyond normal governmental institutions, are there regulatory bodies that play a particular role in project finance in your jurisdiction? What powers do they have?

The federal agencies that have a particular role to play in project finance transactions in Ethiopia are:

• the Ministry of Finance, which has the power to grant sovereign guarantees to project companies in public-private partnership (PPP) transactions;
• the PPP Directorate-General, which has the power to procure and support project finance transactions; and
• the National Bank of Ethiopia, which has the power to grant foreign currency convertibility guarantees.

1.4 What is the government's general approach to project finance in your jurisdiction? Is PFI/PPP a preferred model in your jurisdiction?

Historically, Ethiopia's infrastructure projects have been financed through government budgets and external loans. Over time, it became clear that public funding alone could not meet the country's growing demand for essential public services. To address this gap, the government introduced a PPP Policy in 2017 aimed at mobilising private capital for infrastructure development. This policy was followed by the creation of a comprehensive legal, regulatory and institutional framework, including:

• dedicated PPP legislation; and
• the establishment of a PPP Unit within the Ministry of Finance to oversee project development and procurement.

Since 2019, a number of infrastructure projects have been structured under the PPP model. However, progress has been slow as many projects struggled with bankability challenges, particularly due to the government's reluctance to extend sovereign guarantees for project finance transactions. This barrier was partially addressed in 2023, when a new directive was passed allowing eligible PPP projects to benefit from foreign currency convertibility guarantees. Today, PPPs are being pursued across a wide range of sectors, including:

• renewable energy;
• healthcare;
• roads;
• housing; and
• logistics.

2 Project finance market

2.1 How mature is the project finance market in your jurisdiction?

The project finance market in Ethiopia is still in its early stages of development. While there is growing interest from international investors, the market remains relatively new, with limited precedent and structured financing experience. Currently, there are multiple PPP projects in the pipeline and some of these projects have reached commercial close.

2.2 On what types of project and in which industries is project finance typically utilised?

In Ethiopia, project finance transactions have thus far been tested in the renewable energy and mining sectors, where projects agreements and lender engagements have reached an advanced stage. However, none thus far has reached financial close. This is expected to change in the near term and more projects should be procured in other sectors, including:

• aviation;
• transport;
• logistics;
• healthcare; and
• affordable housing.

2.3 What significant project financings have commenced or concluded in your jurisdiction over the last 12 months?

In the past 12 months, two significant projects have commenced project financing negotiations in Ethiopia:

• In September 2025, KEFI – a gold and copper exploration and development company focused on the Arabian-Nubian Shield and which is developing the Tulu Kapi Gold Project in Ethiopia – reported that it has secured:
• • a $240 million debt financing from the Africa Finance Corporation and the Eastern and Southern Africa Trade and Development Bank as the lead co-lenders of the project; and
  • $100 million equity financing.
• The company further announced that the project financing packages have been executed by the government and are awaiting lenders' approval. The financing is expected to cover:
• • plant and infrastructure construction;
  • provision of power;
  • new roads; and
  • long-term mining capability.
• On 17 August 2024, the Ministry of Finance and Ethiopian Electric Power signed a landmark project agreement with AMEA Power LLC to develop a $640 million, 300-megawatt wind power project in Ethiopia. The project is expected to be project financed through a combination of debt and equity, and negotiations with potential lenders are currently underway.

3 Finance structures

3.1 What project financing structures are most commonly used in your jurisdiction?

Project finance transactions have been tested in the renewable (PPP) and mining sectors. PPP transactions may be structured in one or a combination of the following structures:

• the design, construction, financing, maintenance or operation of new infrastructure facilities;
• the rehabilitation, modernisation, financing, expansion, maintenance or operation of existing infrastructure facilities; and
• the administration, management, operation or maintenance of both new and existing facilities.

Further, project financing transactions in infrastructure – particularly through loans from international development finance institutions, multilateral lenders and export credit agencies – have been utilised. Most sizable project financings rely on external debt sourced from:

• institutions such as:
• • the World Bank Group;
  • the African Development Bank; and
  • the Trade and Development Bank; and
• other bilateral or multilateral partners.

3.2 What are the advantages and disadvantages of these different types of structures?

PPPs offer significant benefits for Ethiopia as the country is seeking to scale infrastructure and public services quickly. By bringing in private sector financing, expertise and technical capacity, PPPs enable the government to leverage skills and efficiencies that the public sector may lack. PPPs allow risks (eg, construction risk, operation risk, financing risk) to be shared, shifting certain burdens to the private party where appropriate. Because governments usually offer support – through guarantees, regulatory frameworks, land or other inputs – projects can be derisked, which helps governments to attract the large private investment needed.

However, PPPs are complex and slow to complete. Detailed feasibility studies, negotiation of contracts and risk allocations and financing arrangements take time. In Ethiopia, projects have faced weak technical or financial capacity of the public sector, bureaucratic delays and bankability issues to reach financial close. One example is the International Finance Corporation-supported Scaling Solar PPP Project, which aimed to deliver 250 megawatts of solar power to the national grid. Despite extensive negotiations and years of effort, the project failed to materialise, underscoring the difficulties of translating PPP ambitions into bankable and operational projects.

3.3 What other factors should parties bear in mind when deciding on a project financing structure?

When structuring project finance transactions in Ethiopia, parties must carefully evaluate:

• the proposed project structure;
• the applicable legal and regulatory framework; and
• country-specific risks.

Bankability concerns – particularly those relating to offtaker risk, currency volatility and political risk – must be considered, with appropriate mitigation measures embedded into the financing arrangements. Regulatory approvals key to project financing – such as the National Bank of Ethiopia, which regulates foreign loans, debt-to-equity ratios, eligibility for foreign currency guarantees and the operation of offshore accounts – must be factored into the transaction. Where lenders require sovereign guarantees – whether to backstop offtaker obligations or to cover other exposures – such guarantees must be approved by the Ministry of Finance. Equally important are issues surrounding land acquisition, resettlement, environmental and social compliance, which may be subject to differing regional laws. These considerations are critical to ensuring both the bankability and long-term sustainability of projects in the Ethiopian context.

4 Industry players and ownership requirements

4.1 Who are the key players in project financings in your jurisdiction? Do any restrictions apply in this regard (eg, foreign ownership)?

The key players in the public sector are as follows:

• Ministry of Finance: The primary government counterpart for the procurement of PPP projects and the issuance of sovereign guarantees. Within the ministry:
• • the Public-Private Partnership Directorate General oversees project identification, tendering, negotiation and monitoring of PPPs; and
  • the PPP Board – chaired by the minister of finance and composed of senior government officials – approves project pipelines, procurement processes and final contracts for PPP projects.
• National Bank of Ethiopia:
• • Regulates banking and financial institutions;
  • Approves external loan and convertibility guarantee registrations; and
    Enforces foreign exchange regulations.
• Ethiopian Investment Commission: Oversees:
• • foreign investment approvals;
  • licensing; and
  • incentive administration.
• Ethiopian Investment Holdings: The sovereign wealth fund – acts as co-investor and derisking partner in large-scale projects.
• Sectoral regulators (eg, the Ministry of Mines and the Petroleum and Energy Authority): Oversee:
• • the licensing of projects; and
  • the approval of project documents.
• Regional governments and city administrations: Play a critical role in:
• • land acquisition;
  • leasehold administration; and
  • providing right-of-way for infrastructure projects.

The key players in the private sector are as follows:

• the project sponsor, which can be a single company or a consortium of companies that typically participates in project negotiations and provides equity financing for the project:
• the project company, which is an entity incorporated in Ethiopia that will:
• • own, operate and maintain the project; and
  • securitise the project assets;
• the lenders, including local, international commercial banks and development finance institutions;
• the facility agent, which administers the facility; and
• the security agent, typically a local bank and the nominee of the lender, which is responsible for the administration of the collateral in secured transactions.

Foreign ownership restrictions may apply depending on the sector of investment. The Investment Regulation prohibits or restricts certain sectors for foreigners. Example of such sectors include:

• the transmission and distribution of energy;
• international air transport services; and
• logistics.

However, for those sectors where there are no restrictions (eg, energy generation and mining), 100% foreign ownership of the project is permitted.

4.2 What role does the state play in project financings in your jurisdiction?

The state plays a central role in project financings, as both regulator and contracting counterparty. In PPP projects, state-owned enterprises are the key public sector counterparts to the project and financing agreements.

Additionally, the state, represented by the Ministry of Finance and the PPP Directorate General:

• regulates the procurement and implementation of PPP projects:
• ensures compliance with laws and regulations; and
• extends sovereign guarantees and investment incentives to eligible projects

Further, the state, represented by relevant regulatory authorities, ensures compliances with:

• land regulations;
• environmental and social obligations; and
• tax obligations.

4.3 Does your jurisdiction have nationalisation or expropriation laws in place? If so, what are the implications in the project finance context?

Yes, Ethiopia has laws in place to regulate nationalisation and expropriation. Expropriation of land is carried out in accordance with:

• the Constitution; and
• the Expropriation of Landholdings for Public Purposes and Payment of Compensation Proclamation (1161/2019), as amended.

The federal or state government may expropriate land or other property for public purposes, subject to the payment of compensation. Further, the Investment Proclamation explicitly protects foreign and domestic investors against expropriation or nationalisation, except:

• where required for public interest; and
• against payment of adequate compensation.

Therefore, to the extent that any project requires the expropriation of land and resettlement, it will be carried out in accordance with the federal and local expropriation laws. Such procedures must be thought out during project design and structuring of the relevant stakeholders must be engaged.

5 Regulatory and documentary requirements

5.1 What regulatory approvals are typically required for project financings in your jurisdiction? How are these typically obtained and what fees are payable?

Depending on the project structure, project finance transactions will be subject to various approvals from different regulatory agencies. These include the following, among others:

• For projects structured as PPPs, whether tendered or directly procured, the project must:
• • go through the formal procurement process; and
  • obtain approval from the PPP Board at different stages of the project development.
• The PPP Board must approve:
• • the inclusion of the project in the pipeline of projects, pre-feasibility and feasibility studies; and
  • the final procurement and award of the project.
• These approvals from the PPP Board are typically obtained by the PPP Directorate General. No regulatory fees are involved.
• In addition, sector-specific approvals from the relevant regulator will be required. For example, in the energy sector, project agreements must be approved by the sector regulator, the Petroleum and Energy Authority (PEA). The project company and the offtaker will typically submit the project agreement jointly and seek the approval from the regulator. In addition, the approval of the PEA may be required if the security package involves the securitisation of the licence issued by the regulator. There are no fees involved.
• All foreign equity investments, foreign or external debt financing must be registered by the National Bank of Ethiopia (NBE). Foreign loans that are not approved and registered by the NBE run the risk of forex denial for debt servicing. The application for foreign loan approval will be made by the project company by presenting the required documentations to the NBE. No fees are involved.
• Any foreign currency convertibility guarantee or the opening and operation of offshore accounts is subject to the NBE's approval.
• Generally, investment projects will require environmental and social impact assessment approval from the Environmental Protection Authority or the relevant regional authority.
• Under the Civil Code and the Movable Properties Security Rights Proclamation, documents that create security over immovables and movables must be registered to have a legal effect. 1% Stamp duty will apply on the security deeds upon signing and registration.

5.2 What licences are typically required for project financings in your jurisdiction? How are these typically obtained and what fees are payable?

A single licence is not applicable for project financing transaction. Various licences will be required depending on the structure of the project and the investment sector:

• For PPP projects, the establishment of a special purpose project company is mandatory in Ethiopia, which gives rise to the licences required to operate and implement a project. Under the Investment Proclamation and Regulation, foreign investors must obtain an investment permit, a commercial registration certificate and a business licence to operate in Ethiopia. These permits are obtained from the Ethiopian Investment Commission using its online services. The current regulatory fees that apply are:
• • $125 total for investment permit issuance;
  • $50 for commercial registration; and
  • $100 for a business licence.
• Sectoral licences: Projects in regulated industries (eg, power, telecoms, mining, transport, banking) require licences from the relevant line ministry or regulatory authority. Project developers will be required to meet the licensing requirements and submit documentary evidence. Fees vary by sector.

5.3 What documentation is typically involved in a project financing in your jurisdiction?

In project finance transactions, the following documents are typically involved:

• project agreements (PPP agreements, power purchase agreements, implementation agreements and mining agreements), which define the rights, obligations, risk allocation, and performance standards between the government and the private party;
• financing agreements, including term sheets, direct facility and loan agreements;
• security agreements, including mortgage and pledge agreements, and bank (escrow) account agreements;
• land lease agreements;
• construction contracts (engineering, procurement and construction agreements), where applicable;
• operation and maintenance agreements (where applicable);
• corporate documents and shareholder and investment agreements;
• licences, permits, consents and certificates; and
• law firm legal opinions.

5.4 What registration or filing requirements apply for project financing documents to be valid and enforceable?

As stated in question 5.1, foreign loans must be registered with the NBE. Without such registration, the borrower may not legally access foreign exchange to service the debt. In addition to loan registration, any security agreements created over movable assets must be registered with the Collateral Registry. Registration is necessary for the security interest to be valid and enforceable against third parties. Failure to register may result in the lender losing priority over the secured asset in the event of borrower default or insolvency. For immovable properties, security must be registered with the appropriate land or property registry to achieve similar enforceability.

5.5 Is force majeure understood as a legal concept in your jurisdiction?

Yes. In Ethiopia, force majeure is a recognised legal concept and is expressly provided for under the 1960 Civil Code. While the Civil Code provides an illustrative list of events that may constitute a force majeure event, parties are generally at liberty to define the extent and applicability of force majeure events. In practice, force majeure is commonly incorporated into project finance agreements, PPP contracts and construction contracts, often expanding upon the statutory framework by specifying:

• the types of events that will be considered force majeure; and
• the procedures for notification and suspension of obligations.

6 Security/guarantees

6.1 What types of security interests and guarantees are available in your jurisdiction? Which are most commonly used and which are recommended (if different)? In particular, is the concept of a security trustee recognised (and if not, how are guarantees or security taken for multiple lenders)?

Under the Civil Code, the two major security interests are pledges and mortgages. Pledge can be created only on movable property which is capable of being sold separately by public auction. Mortgages are generally created over immovables, unless a special law provides otherwise. These two types of securities are the most commonly used in project transactions. The concept of security trustee does not exist in Ethiopia and there are no security trustee institutions comparable to those operating in advanced jurisdictions. Security is typically granted to creditors separately unless the creditors are joint creditors with undivided interest. However, there are no prohibitions in the law and local banks may act as agents and trustees in a financing arrangement where a loan contract expressly assigns an agent or trustee to act on behalf of the lenders for certain predetermined obligations, including the holding and enforcement of security.

6.2 What are the formal, documentary and procedural requirements for perfecting these different types of security interests?

Under the Civil Code, the perfection of pledge requires possession of the corporeal by the creditor. All pledge agreements must also be in writing. Further, under the Movable Security Right Proclamation, the securitisation of movable assets must be in writing and registered with the Collateral Registry. With respect to claims not established by title, the perfection of pledge is made by possession of the document of pledge which specifies the claim pledged and the amount of debt guaranteed. A pledge on intangible rights that are not claims and not established by title perfection is made by possession of the document of pledge. Security over shares in private limited companies or share companies must be documented in writing and registered in the shareholders' registry of the company.

Mortgages over immovable property must be made in writing and registered with the relevant regional or city land administration office where the immovable property is located. The contract of mortgage must also be notarised in order to be valid as between the parties, unless the creditor is a commercial bank, in which case notarisation is not needed by virtue of the Foreclosure Proclamation (639/2009).

6.3 Can security be taken over property, plant and equipment in your jurisdiction? If so, how?

Yes, security can be taken over movable assets, which may include machinery and equipment. To create such security, the lender and borrower must enter into a written agreement that clearly describes:

• the movable assets to be pledged;
• the obligations secured; and
• the rights of the lender in the event of default.

The security interest must then be registered with the Collateral Registry to be enforceable against third parties. Plant is considered immovable property as long as it is attached to land. However, it may be classified as movable property by anticipation where a legal transaction anticipates its separation. If the security interest is only over plant (and not the land/usufruct right), the secured creditor must take steps to separate and move the plant in order to enforce its rights.

6.4 Can security be taken over cash (including bank accounts generally) and receivables in your jurisdiction? If so, how? In particular what types of notice and control (if any) are required?

Yes, under the PPP Proclamation, a security interest may be created over proceeds and receivables owed to the private party. For non-PPP projects, there is no legal provision dealing with the granting and perfection of security interest over bank accounts in Ethiopia. However, this does not mean that the granting of security over bank deposits is prohibited. Parties may agree to create security over bank deposits by involving the bank itself. A party may instruct its bank to block its account for the benefit of a named creditor, with further authorisation to the bank to pay the amount blocked upon request for payment by the named creditor. Commercial banks have a level of flexibility to arrange security over their customer's accounts as long as they obtain the customer's endorsement or approval for any transaction.

6.5 Is it possible to take security over major licences (particularly in the extractive industry sector)?

Yes, under the Mining Operations Proclamation, it is possible to take security over mining licences. Such securitisation must be approved and registered by the Ministry of Mines.

6.6 What charges, fees and taxes (including notary and similar fees) arise from the perfection of a security interest or the taking of a guarantee?

Fees for the perfection of security interests are not uniform but vary depending on the type of security. In contrast, the perfection of guarantees does not generate any fees, unless incorporated into a notarial deed or another registrable instrument, in which case only notarial charges may apply. Importantly, Ethiopia does not impose special taxes or duties on the creation or perfection of security interests over movables or guarantees beyond administrative and registry-related charges. However, stamp duty at a rate of 1% of the value secured is payable on security deeds relating to immovable property.

6.7 What are the respective obligations and liabilities of the parties under security documents?

The obligations and liabilities vary depending on the terms of the financing agreements and the type of security. General obligations/liabilities include the following:

• Obligations of the grantor/borrower:
• • To fulfil the underlying debt or obligation that the security is intended to secure;
  • To maintain the pledged or mortgaged assets in good condition and not dispose of, encumber or transfer them without the consent of the secured party;
  • To notify the secured party of changes affecting the collateral, such as material damage, loss or liens by third parties, and to cooperate in perfecting or enforcing the security; and
  • To provide all information and documentation necessary for registration of the security interest with the Collateral Registry or relevant land registry.
• Obligations of the secured party/lender:
• • To respect the terms of the security agreement and enforce its rights only in accordance with those terms;
  • Typically, to ensures that the security is properly registered to protect its priority rights; and
  • To exercise its enforcement rights in good faith, avoiding abuse or unreasonable action against the debtor.

6.8 In the event of default, what options are available to enforce a security interest or guarantee? Is self-help available in your jurisdiction in connection with the enforcement of security or must enforcement action be pursued through the courts?

In Ethiopia, the enforcement of security interests and guarantees is primarily carried out through judicial supervision, with limited room for creditor self-help. Under the Movable Property Security Right Proclamation, a secured creditor is entitled, upon default, to enforce its rights either:

• by taking possession of the encumbered asset; or
• through sale, lease, licence or other disposal of the collateral.

Self-help enforcement is permitted where the security agreement expressly provides that the creditor is entitled to take possession of the collateral upon default or the debtor voluntarily surrenders the collateral; however, where the debtor resists, judicial intervention becomes necessary. For immovable properties, foreclosure proceedings must be initiated through the courts, as judicial sale is mandatory under the Civil Code. However, an exception applies in the case of banks registered in Ethiopia. Where a mortgagor and creditor bank have entered into an agreement authorising the bank to enforce without prior court approval, the bank may:

• sell the mortgaged property by auction, provided that it gives the debtor at least 30 days' prior notice; and
• transfer ownership of the property directly to the buyer following the auction.

6.9 What other considerations should be borne in mind when perfecting a security interest or taking the benefit of a guarantee in your jurisdiction?

Other considerations to be borne in mind when perfecting a security interest or taking benefit of a guarantee include the following:

• Ethiopian banks are prohibited from issuing loans against security of their own shares.
• Ethiopian banks are not allowed to enter into a loan or guarantee agreement with banks or other lenders abroad without the authorisation of the NBE.
• Any external loan guaranteed by the federal government of Ethiopia must be registered by the NBE.

6.10 What other protections are available to a lender to safeguard its position in connection with security or guarantees?

Under the Investment Proclamation and relevant NBE directives, external loans and their repayments are protected by law if the requisite approval and registration are obtained.

6.11 Are direct agreements with contractual counterparties well understood in your jurisdiction?

Direct agreements are recognised in Ethiopia, particularly in the context of PPP and mining transactions. The PPP Proclamation expressly recognises financing arrangements and step-in rights of financiers. However, noting the limited precedence in project finance transactions and the fact that no PPP project has so far reached financial close, these agreements are yet to be tested in practice.

7 Bankruptcy

7.1 How (if at all) do bankruptcy proceedings impact on the enforcement of security by a creditor?

Bankruptcy proceedings in Ethiopia significantly restrict a creditor's ability to enforce security independently. Once a bankruptcy proceeding is opened, an automatic stay is imposed on all enforcement actions, preventing both secured and unsecured creditors from pursuing individual remedies outside the collective bankruptcy framework. Although secured creditors retain their preferential rights, enforcement may occur only through the bankruptcy process under court supervision. The trustee in bankruptcy has the power to sell all assets, including encumbered assets, except where such an asset is already in the possession of a pledgee. Where a creditor is in possession of the encumbered asset, that creditor may realise the in rem security interest directly or entrust the trustee with the sale; if the proceeds exceed the secured claim, the surplus goes to the estate, while any shortfall may be claimed as unsecured debt. Importantly, if the trustee fails to take measures to sell encumbered assets within six months of the judgment opening bankruptcy proceedings, secured creditors – including those benefiting from ownership reservation contracts – are entitled to realise their in-rem security interests themselves.

7.2 In what circumstances can antecedent transactions be unwound for preference? What other similar measures apply in this regard?

Under the Commercial Code, certain acts performed by a debtor during the suspect period may be invalidated at the request of the trustee. Invalid acts include:

• transfers of assets or rights through gratuitous assignments, donations, cancellation or waiver of rights;
• transfers of assets or rights for a price that is manifestly undervalued;
• payments of debts that are not yet due, whether in cash or through assignment, set-off or otherwise;
• payments of debts due otherwise than in cash, set-off, negotiable instrument or transfer to a bank; and
• the creation of mortgages, pledges or other in rem security interests over the debtor's assets for debts contracted before such security was granted.

In addition, the court may invalidate any other acts carried out during the suspect period where:

• the creditor knew or should have known that the debtor was already in cessation of payments; and
• the act was detrimental to the estate or made in preference to other creditors.

The supervisor in reorganisation (or trustee in bankruptcy) bears the burden of proving the creditor's knowledge of the debtor's financial state. However, where the transaction was concluded with a related party, such knowledge is presumed.

8 Project contracts

8.1 Are project contracts in your jurisdiction typically governed by local law?

Yes, for PPP transactions, it is mandatory for the project agreements to be governed by Ethiopian law. However, parties are at liberty to determine the governing law for financing agreements and typically English law is preferred by lenders and sponsors.

8.2 What remedies are available to a project company for breach of the project contract?

Under the Civil Code, the available contractual remedies for breach of contracts are:

• specific performance;
• cancellation of the contract by one of the parties; and
• payment of damages.

Specific performance is not the rule, as it can only be provided if:

• it is of special interest to the party requiring it; and
• enforcement does not affect the personal liberty of the debtor.

Cancellation may also be one of the remedies for non-performance. A party to a contract may unilaterally cancel the contract:

• when impossibility of performance is provided in the contract;
• at the expiration of the term; or
• when one of the other parties to the contract refuses to fulfil its obligations under the contract. The party that fails to fulfil its obligations will be liable to pay damages notwithstanding that it is not at fault.

8.3 Are liquidated damages provisions in project contracts enforceable?

Yes, liquidated damage provisions are generally enforceable, provided that they:

• are not penal in nature; and
• are clearly stipulated in the contract.

Under the Civil Code, parties are permitted to agree in advance on damages for breach of contract. The principle with respect to the amount of damages to be paid in case of non-performance is that damages shall be equal to the damage which non-performance would normally have caused to the creditor in the eyes of a reasonable person. As exceptions to this rule:

• if the actual damage incurred was foreseeable, the actual damage must be paid; and
• when the debtor was informed by the creditor of the special circumstances owing to which the damage is greater, the amount of damage will be equal to the damage actually caused to the creditor.

However, the courts retain discretion to reduce such amounts if they are found to be disproportionately high compared to the actual loss suffered, ensuring that the clause is compensatory rather than punitive.

8.4 Are there any public policy considerations which need to be taken into account when assessing the enforceability of project contracts?

Yes, Ethiopian public policy considerations may influence the enforceability of project contracts. While the principle of freedom of contract is foundational under the Civil Code, this autonomy is subject to limitations imposed by:

• mandatory laws;
• public morals; and
• public order.

Contracts that contravene Ethiopian mandatory laws are deemed unenforceable. For instance, agreements that violate labour rights, environmental regulations or other statutory obligations are invalid. The Civil Code provides that parties cannot derogate from mandatory provisions through contractual agreements. Further, the Civil Code prohibits contracts that are contrary to public morals or public order, including agreements that may be deemed:

• unethical;
• illegal; or
• harmful to societal wellbeing.

For example, contracts that involve bribery, exploitation or other forms of misconduct are unenforceable.

9 Project risk

9.1 What risks typically arise in project financings in your jurisdiction and how are these best mitigated?

The following risks may be anticipated for PPP and project finance projects in Ethiopia.

• Payment risk: Refers to the risk of payment default by government offtakers – a particular concern in PPP projects where tariffs are highly subsidised and public utilities are often not financially viable. To mitigate this risk, project structures typically incorporate credit enhancement mechanisms and payment risk mitigation facilities, most commonly provided by development finance institutions.
• Macro-economic risks: The Birr, the country's official currency, has experienced significant depreciation following Ethiopia's recent foreign currency reform, which liberalised the foreign exchange system. Prior to the floating of the birr, the foreign exchange market was tightly regulated, characterised by persistent shortages and a rationing mechanism. Since 2024, the birr has continued to weaken. While most project financing transactions in Ethiopia are denominated in US dollars, the sustained depreciation of the birr increases the cost of project contracts in local currency terms, thereby further straining public sector budgets and the ability of state entities to meet payment obligations. Mitigation measures include:
• • securing foreign currency convertibility guarantees;
  • incorporating offtaker obligation guarantees; and
  • where possible, utilising credit enhancement facilities from development finance institutions to cushion currency-related risks.
• Political risk: Ethiopia has faced persistent security challenges in recent years, including regional instability and localised conflicts. These conditions have heightened the perception of country risk, making project financing more expensive and, in some cases, difficult to secure. To address these concerns, investors and lenders often rely on political risk insurance instruments, such as coverage provided by the World Bank's Multilateral Investment Guarantee Agency, which can help to derisk projects and enhance bankability.

9.2 How significant is political risk in project financings in your jurisdiction? How is this best mitigated?

As noted in question 9.1, political risk – both real and perceived – remains high in Ethiopia, though it is often location specific. Projects situated near the capital city and major industrial zones generally face lower exposure, while those in remote or conflict-affected regions encounter higher risk levels. Key risks include:

• civil unrest or armed conflict;
• regulatory uncertainty from regional authorities; and
• potential expropriation or interference with project land or permits.

These risks are commonly mitigated through:

• the direct involvement of the federal government in providing special protections to designated projects; and
• the use of political risk insurance instruments.

10 Insurance

10.1 What types of insurance arrangements are typically put in place for project financings in your jurisdiction?

Beyond the political risk insurance mentioned above, project financing transactions in the infrastructure sector will typically have in place the following:

• Construction risk insurance: This typically covers risks of physical loss or damage to the permanent and temporary works executed and in the course of execution of a project, including materials, plant, equipment and machinery. Such insurance may also cover loss of the revenue and/or increased cost of working following a delay in starting construction.
• Marine transit insurance: This covers physical loss or damage to materials, plant, equipment and machinery required for the construction of the project from the date of first shipment until completion of delivery of all marine cargo shipment to the work site.
• Third-party liability: This covers the legal liability of the parties to the project contract to pay damages, costs and expenses:
• • occurring during the period of insurance; and
  • arising from or in connection with the project.
• Operation and maintenance risk insurance: This covers property damage, business interruption and third-party liability during the operations stage of a project.

10.2 If local insurance is required, can local insurers assign offshore reinsurance contracts in your jurisdiction?

Yes, Ethiopian insurers may assign offshore reinsurance contracts; however, they must comply with the mandatory local cession requirements set by the NBE. Under these rules, insurers must cede at least 25% of each reinsurance treaty and 5% of each individual policy to the Ethiopian Reinsurance Company, the country's sole licensed reinsurer. Only after fulfilling these obligations may insurers place the remaining risk with offshore reinsurers. Such placements, however, are subject to prior approval by the NBE.

10.3 What other forms of insurance feature in the project finance market in your jurisdiction?

Ethiopian law requires all assets, liabilities and interests situated in Ethiopia to be insured with insurers licensed in Ethiopia. Where the property, life, rights, interests or potential liability devolving upon the insured and capable of being insured against is situated in Ethiopia, the same must be insured with a local insurer. Further, the law provides that, except with the written authorisation of NBE, no policy or contract of insurance or indemnity of any kind covering risks on persons or property located or situated in Ethiopia or undertakings to be performed in Ethiopia or insurance of goods to be imported into Ethiopia can be written with any person that is not licensed, regardless of where the policy or the contract may actually be written or signed. Currently, only local insurance companies can offer their services in Ethiopia; foreign insurance companies are not permitted to do so under the Investment Regulation. However, the prohibition on the issuance of insurance by foreign insurers does not apply to reinsurance. With respect to any risk placed with Ethiopian insurers, companies may reinsure any risks with a foreign reinsurer.

11 Tax

11.1 What taxes, royalties and similar charges are levied in the project finance context in your jurisdiction?

The taxes and charges levied in project finance context include the following:

• The project company will be subject to corporate income tax at a rate of 30% is payable on net profits, provided that the sector is not eligible for income tax holidays.
• Value-added tax (VAT) at a rate of 15% is payable on goods and services supplied for the purposes of the transaction.
• When a chargeable asset (immovables and shares) is disposed, capital gains tax at a rate of 15% will be charged.
• Stamp duty at a rate of 1% is payable on securities and guarantee instruments.
• Dividend tax (15%) and interest (10%) paid to non-residents will be charged.
• Customs and excise duties will apply to imported plant, equipment, and materials, unless exemptions are granted under investment incentives.
• Sector-specific royalties or fees may also apply in sectors such as mining.

11.2 Are any exemptions or incentives available to encourage project finance in your jurisdiction?

Yes, under the Investment Incentive Regulation, eligible investors are offered the following incentives:

• Tax holidays: Investors in new enterprises and expansion projects will receive income tax exemptions for varying periods, based on their sector, location and export performance. Investments in industrial parks receive specific exemption periods, with longer periods for parks outside Addis Ababa.
• Loss carry forward: An investor that has incurred loss within the period of income tax exemption will be allowed to carry forward such losses for half of the income tax exemption period after the expiry of such period.
• Duty-free imports: Investors may import capital goods, construction materials and spare parts for their investments free of duty. Duty-free periods vary depending on the investment sector, with indefinite duty-free imports for certain manufacturing and agricultural investments.
• Export-focused incentives: Investors that export products or services receive additional income tax exemptions.
• Foreign tax credit: Ethiopia allows a foreign tax credit on income generated from business activities abroad by a resident taxpayer. The income tax payable is offset against the foreign tax paid on that income. However, the foreign tax credit is limited to the amount of tax that would be applicable to that income in Ethiopia. The credit is allowed where it is supported by appropriate evidence, such as:
• • a tax declaration;
  • a withholding tax certificate; or
  • any other similar acceptable document.
• Double tax treaties: Additional incentives may available under the double tax treaties to which Ethiopia is a party.

11.3 What strategies might parties consider to mitigate their tax liabilities in the project finance context?

In Ethiopia, parties in project finance may adopt certain strategies to mitigate tax liabilities while remaining compliant with domestic law. These include the following:

• Projects in sectors or regions that qualify for investment incentives under the investment incentives framework should be structured accordingly.
• Investors should also maximise capital goods exemptions by ensuring that all imported machinery and equipment eligible under the incentives regime are properly documented and approved by:
• • the Ethiopian Investment Commission; and
  • the Customs Commission.
• It is prudent to check whether the investor's country of origin has entered into double taxation treaties or bilateral investment treaties with the Ethiopian government.
• Parties should also comply with thin capitalisation rules in related-party transactions and obtain appropriate local law advice.

12 Governing law and jurisdiction

12.1 What law typically governs project finance agreements in your jurisdiction? Do any specific requirements apply in this regard?

As noted in question 8.1, project agreements in PPP transactions must be governed by Ethiopian law. However, project finance agreements (direct agreements) need not be governed by Ethiopian law. In practice, international lenders prefer if the choice of governing law for project financed transactions is English law.

12.2 Is a choice of foreign law or jurisdiction valid and enforceable? In the case of a choice of foreign law of jurisdiction, will any provisions of local law have mandatory application? Are submission to jurisdiction provisions that operate in favour of one party only enforceable?

In the context of PPP projects, the PPP Proclamation provides that the project agreements must be governed by Ethiopian law. In other instances, while the parties are free to choose the laws they wish to govern their contract, the contract should not be contrary to Ethiopian public policy. The PPP Proclamation allows parties to choose the manner of dispute resolution in the project agreement. The parties are also free to choose the seat of the arbitration, including a foreign jurisdiction.

12.3 Are waivers of immunity enforceable in your jurisdiction?

Under Ethiopian law, only members of the Ethiopian government and judges in Ethiopian courts have immunity. Otherwise, there is no legal framework dealing with immunity or prohibiting waivers of immunity. Thus, any contractual waiver of immunity will be valid and enforceable.

12.4 Will foreign judgments or arbitral awards be enforced in your jurisdiction? If so, how?

Foreign arbitral awards are enforceable in Ethiopia under the New York Convention, to which Ethiopia is a party. Foreign arbitral awards may be refused only on narrowly defined grounds, such as:

• incapacity;
• invalidity of the arbitration agreement;
• breach of due process;
• excess of mandate; or
• conflict with Ethiopian public policy.

The enforcement of foreign judgments is subject to the 1965 Civil Procedure Code. A foreign judgment will be enforced by the Ethiopian courts without re-examination of the merits of the case, provided that:

• the execution of judgments of the Ethiopian courts is allowed in the country in which the judgment to be executed was issued (reciprocity);
• the judgment was issued by a court that was duly established and constituted;
• the condemned party was given the opportunity to appear and present its defence;
• the judgment to be enforced is final and enforceable; and
• execution of the judgment would not be contrary to public order or moral standards.

13 Foreign investment

13.1 What taxes and other charges are levied on foreign investors in the project finance context in your jurisdiction?

Foreign investors in Ethiopia are generally subject to taxes, including the following:

• corporate income tax (30%) on net profits (except where investors have been granted tax holidays);
• capital gains tax (15% on shares and 15% on immovable property);
• withholding taxes on dividends (15%), interest (10%), and royalties (15%);
• value-added tax (VAT) (15%) on the local supply of goods and services;
• reverse VAT (15%) on services purchases outside Ethiopia;
• tax on repatriated profits (15%) for non-resident entities with a permanent establishment;
• stamp duty on contracts, leases, bonds, share transfers and other legal instruments, with rates varying by instrument;
• import duties on plant, machinery and materials (0–35%) depending on the Harmonised System (HS) code, except for those capital goods exempted by the Investment Incentive Regulations;
• minimum alternative tax (2.5% of turnover or equivalent benchmarks); and
• social levy on imported goods (3%).

13.2 Are any incentives available to encourage foreign investment in the project finance context?

Yes. Please see question 11.2.

13.3 What restrictions and requirements apply with regard to the remission of foreign exchange? Are local companies permitted to maintain offshore bank accounts?

Under Ethiopia's investment regime and NBE directives, foreign investors may repatriate the following payments in convertible currency:

• profits and dividends accruing from investment;
• proceeds from the sale of liquidation of an enterprise;
• proceeds from the transfer of shares or ownership of an enterprise;
• return of investment if unable to start operations; and
• profits from portfolio investment in equity securities or debt securities

All incoming foreign currency into the country, whether through equity or debt, must be registered with the NBE to facilitate subsequent repatriation. Documentary requirements must be fulfilled when applying for the repatriation of funds for each category of payments listed above.

The opening and operation of offshore bank accounts in Ethiopia are permitted only in exceptional circumstances under the relevant NBE directive. This benefit is limited to strategic foreign investors engaged in sectors such as:

• PPPs;
• mining; and
• infrastructure.

Offshore accounts may be maintained solely for specified purposes, including:

• the servicing of external loans;
• payment of insurance and contractors;
• capital and investment expenditures; and
• ongoing maintenance and operational expenses.

To access this benefit, investors must obtain the prior approval of the NBE, which is a mandatory requirement.

13.4 What restrictions and requirements apply with regard to the import of plant and machinery?

Generally, there are no restrictions on importing plant and machinery for business and investment purposes. While Ethiopia offers customs duty exemptions for the import of capital goods – including plant and machinery – for eligible investors under its investment incentives regime, these exemptions are contingent upon meeting specific criteria and procedural requirements. Standard customs duty rates in Ethiopia range from 0–35%, depending on the HS code classification of the goods. The duties are calculated based on the cost, insurance and freight value at the point of importation.

13.5 What restrictions and requirements apply with regard to foreign workers and experts?

In Ethiopia, the employment of foreign workers and experts is governed by specific regulations intended to ensure that expatriate employment supports the development of the local workforce. Foreign nationals must obtain a work permit from either the Ethiopian Investment Commission (EIC) or the Ministry of Labour and Skills. Under the Investment Proclamation and related directives, foreign investors may employ expatriates in top management positions without restriction. For other positions, however, expatriate employment is allowed only where it has been determined that suitably qualified Ethiopians are not available in the market. Employers hiring foreign workers must commit to replacing them with local employees within a defined period. Generally, expatriates may not exceed 10% of the total Ethiopian workforce in a given company. This threshold may, however, be increased to 12% or waived entirely at the discretion of the regulator, particularly in sectors that require a larger number of foreign experts. In addition, investors must comply with localisation and knowledge-transfer obligations, which include:

• designing and implementing training programmes;
• preparing Ethiopian employees to assume expatriate roles; and
• submitting training schedules and progress reports to the EIC.

13.6 Is your jurisdiction party to bilateral investment and withholding tax treaties which might facilitate foreign investment?

Yes. Ethiopia has concluded several bilateral investment treaties (BITs), which grant foreign investors protections such as:

• fair and equitable treatment;
• safeguards against expropriation;
• free transfer of funds; and
• access to international arbitration forums.

Countries with BITs include:

• China;
• France;
• Germany;
• India;
• Malaysia;
• South Africa;
• Russia; and
• the United Arab Emirates.

Ethiopia has also concluded a number of double taxation avoidance treaties which grant contracting parties various tax exemptions and privileges. Ethiopia has signed double taxation agreements with several countries, including:

• Belgium;
• Canada;
• China;
• France;
• India;
• Italy; and
• the United Kingdom.

14 Environmental, social and ethical issues

14.1 What is the applicable environmental regime in your jurisdiction and what specific implications does this have for project financings?

Ethiopia's environmental regulatory framework is:

• governed by the Environmental and Social Impact Assessment Proclamation (1317/2025); and
• regulated by the Ethiopian Environmental Protection Agency (EPA) and regional environmental bureaux.

Projects falling under categories specified by law must obtain an environmental and social impact assessment (ESIA) clearance certificate from the EPA or the regional bureau before implementation. The ESIA process mandates meaningful public consultations, requiring project proponents to:

• engage with communities;
• collect feedback; and
• incorporate it into the final report.

Further, periodic audits are required to verify compliance with the approved ESIA, including assessments of:

• environmental management plans;
• energy and waste data; and
• staffing for environmental oversight.

ESIA clearance certificates are subject to mandatory annual renewals and environmental and social management plans must be updated and submitted every three years.

14.2 What is the applicable health and safety regime in your jurisdiction and what specific implications does this have for project financings?

The Labour Proclamation establishes obligations for employers to safeguard the health and safety of workers. Employers must take necessary measures to protect workers' health and safety, including:

• complying with occupational health and safety requirements;
• providing appropriate instruction and notification concerning workplace hazards;
• assigning safety officers and establishing occupational health and safety committees;
• supplying protective equipment and clothing;
• registering and reporting employment accidents and occupational diseases;
• arranging medical examinations for newly employed workers and those engaged in hazardous work;
• ensuring that the workplace does not pose health and safety threats; and
• implementing precautions to prevent physical, chemical, biological, ergonomic and psychological hazards.

It is important that parties consider the health and safety risk involved and the cost of compliance with health and safety standards in project financing.

14.3 What social and ethical issues should be borne in mind in the project finance context?

It is important to take account of social and ethical considerations when structuring and financing infrastructure projects. Foremost among these are matters relating to land acquisition, expropriation and compensation. These processes must be handled in strict compliance with local legislation and with due regard for the rights and livelihoods of affected communities. Experience has shown that insufficient attention to community participation can jeopardise project implementation. There have been cases where inadequate consultation and failure to secure the consent of local populations have led to:

• community resistance;
• refusal to release land; and
• ultimately, the termination of projects.

Such outcomes carry both social costs and significant financial implications for sponsors, lenders and government counterparts. Accordingly, it is critical that project development in Ethiopia incorporates robust stakeholder engagement, transparent compensation mechanisms and adherence to environmental and social safeguards from the outset. Early and meaningful participation of local communities not only mitigates the risk of disruption but also builds trust and enhances the long-term sustainability of projects.

15 Trends and predictions

15.1 How would you describe the current project finance landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The current project financing landscape in Ethiopia is evolving and this is expected to continue. In line with Ethiopia's Ten-Year Development Plan, the government is placing strong emphasis on private sector engagement in the economy, with a particular focus on infrastructure development. PPPs are expected to serve as the principal vehicle for mobilising private financing across priority sectors, including:

• energy and power;
• roads;
• airports;
• healthcare;
• logistics; and
• affordable housing.

To this end, the government has prepared a pipeline of projects intended to attract both domestic and international investment. In the near term, two flagship projects – the 300-megawatt Aysha Wind Power Project and the Tulu Kapi Gold Mining Project – are expected to reach financial close within the next 12 months. The successful completion of these milestones would represent a significant step forward for Ethiopia's project finance market and is anticipated to help unlock further financing opportunities in infrastructure. Looking ahead, the government is expected to:

• continue on its liberalisation trajectory, which began in 2018; and
• pursue additional policy and legislative reforms aimed at improving the business environment.

It is likely that there will be changes to financing and tax laws as well as new PPP regulations.

16 Tips and traps

16.1 What are your top tips for the smooth conclusion of a project financing in your jurisdiction and what potential sticking points would you highlight?

The smooth conclusion of a project financing in Ethiopia requires careful planning and early attention to the issues that most commonly delay financial close. Comprehensive technical, financial and legal due diligence should be undertaken to confirm both the viability and the affordability of the project. A clear roadmap should be developed for the environmental and social impact assessment process, land acquisition and compensation, sector-specific licences and regulatory approvals, with timelines built into the overall project schedule. These areas are often the source of delays if not proactively managed. On the financing side, the most persistent bankability challenges in Ethiopia relate to offtaker obligations and the availability of foreign currency. It is therefore critical to anticipate and plan for credit enhancement tools and sovereign guarantee structures into the financing package. Necessary approval periods must also be factored in. Further considerations include tax and incentives, where it is important to:

• confirm the scope of incentives available for the sector; and
• explore opportunities for additional concessions where justified.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.