Completed Mixed AidData Chinese Aid

China Eximbank provides $162.35 million preferential buyer's credit for 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project

$162.35M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Laos
Country	Lao People's Democratic Republic
Start Date	Aug 01, 2016
End Date	Jun 23, 2029
Duration	4,709 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`63448`

Grant Description

China Eximbank provides $162.35 million preferential buyer's credit for 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project In August 2016, China Eximbank and the Government of Laos signed a preferential buyer's credit (PBC) agreement worth approximately $162.35 million for the 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project.

📋 Loan / Grant Terms

📅 Maturity18.1764 years

⏳ Grace Period5.05 years

💹 Interest Rate3.1298%

The borrower was to expected use the proceeds of the loan to partially finance a $191 million commercial (EPC) contract between China National Heavy Machinery Corporation (CHMC) and Électricité du Laos (EDL), which was signed on July 28, 2014.

The purpose of the project was to construct 1 new substation, extend two existing substations, and construct a a 90-kilometer dual-circuit transmission line from Hinheup (Hin Heup) substation to Nabong substation via Nam Ngum 1 Substation.

The project sought to evacuate power from the Nam Ngum 1 Hydropower Station Extension and other new-built hydropower stations in the northern part of Laos. It also sought to stabilize the power supply in the capital city of Vientiane. CHMC was the EPC contractor responsible for implementation. Construction began in November 2016 and was project completed and put into operation in May 2018.

The project was completed 18 months ahead of the schedule specified in the EPC contract. A formal project completion ceremony took place on July 4, 2018.

Then, on September 2, 2019, EDL issued a performance certificate to CHMC, which marked the end of the project warranty period.

There are some indications that the China Eximbank loan for the N230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project may have financially underperformed vis-a-vis the original expectations of the lender.

According to a report published by the World Bank in April 2022, ‘[t]he energy sector, mostly represented by Électricité du Laos (EDL), accounted for over 30 percent of total PPG debt in 2021. […] EDL’s debt service obligations [were] still unsustainable [at the time], with future debt service accounting for about two fifths of EDL’s total operating revenue.’ Additionally, 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.

📋 Staff Comments

This project is also known as the 230kV Hinheup-Nabong-Phonetong Project, the Hinheup-Nabong-Phonetong Electricity Transmission Lines and Substations Project, the Nabang-Nam Ngum-Xinhe Power Transmission Project, and the 230 kV Hinheup-Nam Ngum 1-Nabong Project.
The precise face value of the PBC is unknown. However, per China Eximbank’s policy of using PBCs to finance up to 85% of the cost of commercial (EPC) contracts, AidData assumes that the face value of the PBC for the 230kV Nabong-Nam Ngum 1-Hinheup Power Transmission Line Project is equivalent to 85% of $191 million.
The Chinese project title is 老挝230kV纳邦-南俄1-欣赫输变电项目 or 老挝230kV输变电项目.
The China Eximbank loan that supported this project is not included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020.
According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 18.1764-years in 2016. AidData estimates the maturity of the China Eximbank loan that supported the 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project by using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=06. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 5.05-years in 2016. AidData estimates the grace period of the China Eximbank loan that supported the 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Projectby using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=07. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 3.1298% in 2016. AidData estimates the interest rate of the China Eximbank loan that supported the 230kV Nabong-Nam Ngum 1-Hin Heup Power Transmission Line Project by using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=0

📚 Sources & References

SINOMACH TODAY
王其辉参赞出席老挝230kV纳邦-南俄1-欣赫输变电项目竣工典礼
老挝230kV纳邦-南俄1-欣赫输变电站建筑工程一切险
王其辉参赞出席老挝230kV纳邦-南俄1-欣赫输变电项目竣工典礼
中国重机获老挝230kV输变电项目履约证书
中国重机老挝230kV输变电项目获老挝能矿部表彰
国机集团安全生产检查团赴公司老挝项目现场检查指导工作
Development Partners' Assistance Matrix for the GMS Economic Cooperation Program: Ongoing and Proposed Projects (as of 2014)
Project for the Improvement of the Governance Mechanism for Sustainable Power Development Planning Final Report
CHMC Signs the EPC Contract of the Laos 230 KV Power Transmission Project
CHMC Received Letter of Praise from EDL-GEN
China Overseas Development Finance Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.

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Government of Laos

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