China Eximbank provides RMB 350 million government concessional loan for Xesalalong Irrigation Project

China Eximbank provides RMB 350 million government concessional loan for Xesalalong Irrigation Project In 2012, China Eximbank and the Government of Laos signed an RMB 350 million ($50.2 million) government concessional loan (GCL) agreement for the Xesalalong Irrigation Project.

The borrower was expected to use the proceeds of the loan to finance a commercial contract with China Gezhouba Group International Engineering Company Ltd (CGGC).

The project involved the construction of Xesalalong and Xekeu irrigation systems (measuring 51 km in length) in Thapangthong district within Savannakhet Province.

More specifically, it involved the construction of a water reservoir, dam, water intake structure, flood spillway, diversion canal and buildings along a canal system, among other things. The water retaining dam is 21 meters high and 1,812 meters long, with water reservoir of 7513 cubic meters.

Upon completion, the 51 km long irrigation system was designed to meet the water supply needs of 2000 hectares of farmlands as well as the drinking water needs of people and livestock in 18 local villages.

The Xekeu irrigation system involved the construction of reservoirs, dams, water intake buildings, spillways, diversion channels and canal systems.

The maximum dam height was about 16 meters, the top of the dam is 5 meters wide, and the dam It is 1135 meters long, with a total storage capacity of 6.61 million cubic meters, an adjusted storage capacity of 2.32 million cubic meters, and a designed irrigation area of ​​250 hectares. CGGC was the EPC contractor responsible for implementation.

The project commenced on March 15, 2012 and Vice President of Laos Boungnang Vorachith conducted an on-site project inspection on December 10, 2012. The project was completed on August 30, 2014. The Xekeu irrigation system subproject was undertaken from January 2013 to May 30, 2014. A completion and handover ceremony for the project as a whole took place on May 16, 2015.

Upon completion of the project, the Xesalalong and Xekeu irrigation systems were reportedly capable of delivering water to 2,000 hectares of rice fields in 11 villages in Thapangthong district.

There are multiple indications that the China Eximbank loan for this project may have financially underperformed vis-a-vis the original expectations of the lender. In 2020, the Laotian authorities urgently sought debt relief from China Eximbank.

At that time, the gross reserves of the Bank of Laos stood at only 1.5 months of import cover and credit rating agencies warned of a high default probability.

In 2020, China Eximbank also agreed to reprofile multiple loan agreements that it had previously signed with the Government of Laos (as captured via Record ID#96464).

These debt service payment deferrals lasted for approximately 4-years (2020 and 2023) and provided approximately $1.892 billion of cash flow relief ($1.422 billion in deferred principal payments and $470 million in deferred interest payments). Deferred principal and interest repayments in 2020 were worth $202 million.

Deferred principal and interest payments were worth $426 million in 2021. Deferred principal and interest payments were worth $594 million in 2022. Deferred principal and interest payments were worth $670 million in 2023.