Completed Mixed AidData Chinese Aid

China Eximbank provides preferential buyer’s credit for Nam Ngum 2 (NN2) 230/500kV Transmission Line Project

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Laos
Country	Lao People's Democratic Republic
Start Date	Jan 01, 2009
End Date	Mar 10, 2029
Duration	7,373 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`85326`

Grant Description

China Eximbank provides preferential buyer’s credit for Nam Ngum 2 (NN2) 230/500kV Transmission Line Project In 2009, China Eximbank signed a preferential buyer’s credit (PBC) agreement with the Government of Laos for the Nam Ngum 2 (NN2) 230/500kV Transmission Line Project.

📋 Loan / Grant Terms

📅 Maturity22.2696 years

⏳ Grace Period6.975 years

💹 Interest Rate2.3143%

The borrower was expected to use the loan proceeds to partially finance an EPC contract with China-East Resources Import & Export Co. (CERIECO), a subsidiary of China Machinery Engineering Corporation (CMEC).

The purpose of the project was to evacuate power from the Nam Ngum 2 (NN2) Hydroelectric Power Plant by constructing (i) a 69 km 230kV electricity transmission line, and (ii) a 27 km 500kV electricity transmission line from the Na Bong substation to the Lao–Thai border. CERIECO was the EPC contractor responsible for project implementation.

The project was completed in December 2009.

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 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.

Additionally, 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.’ In September 2020, a Chinese state-owned enterprise purchased a major public infrastructure asset in Laos—a large part of the country’s electricity transmission grid—from EDL as part of an apparent debt-for-equity swap.

China Southern Power Grid Co. and EDL established a joint venture known as Électricité du Laos Transmission Company Limited (EDLT).

China Southern Power Grid Co. purchased a 90% ownership stake in EDLT in exchange for a $600 million fee (equity infusion).

Then, in March 2021, EDLT signed a 25-year concession agreement, which made it responsible for management of the country’s high-voltage transmission network above 230 kilovolts.

Independent observers suggested at the time that EDL would likely use the $600 million upfront payment from China Southern Power Grid Co. to service its outstanding debts to Chinese creditors, although this has not been independently confirmed.

📋 Staff Comments

This project is also known as the Nam Ngum 2 Hydroelectric Power Project: Package 4B: 230/500kV Transmission Line Project. The Chinese project title is 老挝NN2 230KV/500KV输电线路项目 or 老挝Nam Ngum 2水电站配套高压230/500千伏输电项目.
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.
Nam Ngum 2 Power Company Limited (NN2) is a company registered in the Lao People's Democratic Republic ('Lao PDR') and which is awarded the concession for the development of the Nam Ngum 2 Hydroelectric Power Project from the Government of the Lao PDR. Nam Ngum 2 Hydroelectric Power Project ('NN2HPP') has an installed capacity of 615 MW achieved its Initial Operation Date ('IOD') on March 26, 2011, and thereafter the Commercial Operation Date ('COD') on January 1, 2013. NN2 is established by the joint venture between SouthEast Asia Energy Limited ('SEAN') holding 75 percent of the total share capital and EDL-Generation Public Company ('EDL-Gen') holding 25 percent of the total share capital. NN2HPP has generating capacity of 2,310 GWh per year. All the power generated is sold to Thailand via the Electricity Generating Authority of Thailand ('EGAT') pursuant to the Power Purchase Agreement ('PPA') for a period of 25-years from the COD which would result in the benefits of both Thailand and Lao PDR. See https://ckp.listedcompany.com/misc/debenture/prospectus/20210215-ckp-debenture-prospectus-nn2-012017-en.pdf4. 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 22.2696-years in 2009. AidData estimates the maturity of the China Eximbank loan that supported the Nam Ngum 2 (NN2) 230/500kV 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=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 6.975-years in 2009. AidData estimates the grace period of the China Eximbank loan that supported the Nam Ngum 2 (NN2) 230/500kV 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 interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 2.3143% in 2009. AidData estimates the interest rate of the China Eximbank loan that supported the Nam Ngum 2 (NN2) 230/500kV 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

传承与变革——新时代下的贸易业务探索
International Project
公司驻老挝干事处前去手机斗地主中国援建老挝建国阵…股分有限公司.
Nam Ngum 2 Dam Hydropower Info by Hobo Maps
China's Overseas Development Finance
Nam Ngum 2: Award-Winning Hydroelectric Power Plant in the remote forests of South East Asia
老挝国家电力局115kV巴色-孔巴坪输变电项目
Inheritance and Reform --- An Exploration into the Trade Business in the New Era
Lao People’s Democratic Republic: Na Bong–Udon Thani Power Transmission Project
Lao People's Democratic Republic: Nabong 500kV Substation and Transmission Facility Project 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.