Completed Mixed AidData Chinese Aid

China Eximbank provides $29.4 million preferential buyer’s credit for Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject (Linked to Record ID#63933)

$29.5M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Laos
Country	Lao People's Democratic Republic
Start Date	Apr 01, 2013
End Date	Mar 15, 2031
Duration	6,557 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`67621`

Grant Description

China Eximbank provides $29.4 million preferential buyer’s credit for Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject In 2013, China Eximbank and the Government of Laos signed a preferential buyer’s credit (PBC) agreement for the Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject.

📋 Loan / Grant Terms

📅 Maturity19.5233 years

⏳ Grace Period6.416 years

💹 Interest Rate2.164%

The proceeds of the loan were to be used by the borrower to finance 95% ($29.4975 million) of the cost of a $31.05 million commercial contract with China North Industries Group Corporation Limited (NORINCO) and Sinohydro Corporation Ltd. (Sinohydro), which was signed in April 2013.

This project — also known as Phase 1 of the Xebangfai-Xebanghieng Irrigation and Flood and Drought Management Scheme — involved the construction of an irrigation canal system, access roads, farm bridges, and other supporting works (measuring 101 km in length and covering 2800 hectares) in the irrigation area controlled by Nam Theun 2 Tailrace Outlet No.3.

The ultimate purpose of the project — located in Nhommalath District within Khammouane Province — was to utilize water discharged from outlet No. 3 of the Nam Theun 2 Hydroelectric Project, to improve the living conditions of the people inhabiting the irrigated areas, increase food production, and reduce flood damage.

NORINCO and Sinohydro were the EPC contractors responsible for implementation. Construction commenced on November 2, 2013 and ended on January 6, 2015.

At a project completion ceremony on February 5, 2015, then Deputy Prime Minister of Laos Somsavat Lengsavad struck a gong 12 times to ask for a constant flow of water 12 months a year and a good harvest every year.

Upon completion, the project reportedly benefited 1,300 farming households in nine villages by providing a stable source of irrigation water for 2,800 hectares of paddies and other cash crops.

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.

In 2023, an agreement was signed between the Laos Department of Forestry, Ministry of Agriculture and Forestry, and Nam Theun 2 Power Company for the conservation of Elephants and Swamp Cypress in the Nam Theun 2 area.

📋 Staff Comments

This project is also known as the Nam Theun 2 Sluice No.3 Irrigation Project and Phase 1 of the the NT2 Irrigation Project. The Chinese project title is 老挝甘蒙省灌溉项目 or Xebangfai河流域灌溉和防洪管理项目 or 老挝南腾灌溉项目 or 老挝南腾2水电站尾水3号闸门灌溉项目.
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.
China Eximbank also financed the Nam Theun 2 Tailrace Outlet No. 4 and Outlet No. 1 Irrigation Subproject (as captured via Record ID#63933).
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 19.5233-years in 2013. AidData estimates the maturity of the China Eximbank loan that supported the Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject 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=05. 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 6.416-years in 2013. AidData estimates the grace period of the China Eximbank loan that supported the Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject 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 interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 2.164% in 2013. AidData estimates the interest rate of the China Eximbank loan that supported the Nam Theun 2 (NT2) Tailrace Outlet No. 3 Irrigation Subproject 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

Lao PDR: Statement by the World Bank on recent developments around irrigation scheme utilizing water discharged from the Nam Theun 2 downstream channel
China Competes With West in Aid to Its Neighbors
Assessment and Prospect of China-Laos Development Cooperation, - Nam Theun Irrigation Project -
Nam Theun 2 Tailrace Outlet No.3 Irrigation Project.jpg
CHINA YUNNAN, - 老挝南腾灌溉项目 -, - 北方国际王一彤董事长一行访问老挝 -
北方国际合作股份有限公司 2015 年年度报告
老挝公司简介
驻老挝大使关华兵出席老挝甘蒙省灌溉项目竣工交接仪式
China's Overseas Development Finance
我优买资金支持的老挝南腾2水电站尾水3号闸门灌溉项目举行开工仪式, - Nam Theun Irrigation Project -
驻老挝大使关华兵出席甘蒙省灌溉项目开工仪式
驻老挝大使关华兵出席北方国际在老挝甘蒙省灌溉项目合同签约仪式
东南亚: 中国在老挝的重大投资项目清单（2018年更新）
COOPERATIVE BOUNTY (CHINA-LAOS)
Authorities Sign Funding Agreement to Support the Conservation of Asian Elephant 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.