China Eximbank provides $63.2 million preferential buyer's credit for Luang Prabang International Airport Reconstruction Project

Project narrative

In 2008, China Eximbank and the Government of Laos signed a $63,213,231 preferential buyer’s credit (PBC) agreement for the Luang Prabang International Airport Reconstruction Project. The proceeds of the PBC were to be used by the borrower to partially finance a $86.42 million commercial (EPC) contract between the Ministry of Public Works and Transport of Laos and China CAMC Engineering Co Ltd. (CAMCE), which was signed on December 1, 2008. The borrowing terms of the PBC were as follows: a 20-year maturity, a 3% interest rate, a 0.5% commitment fee, and a 0.5% management fee. The project involved the construction of a 2900-meter runway, apron, terminal, approach road, car park, airport boundary, and a road and drainage system at the Luang Prabang International Airport, which is located 4 km from the center of the city of Luang Prabang. It also involved airport equipment procurement, installation and commissioning, the construction of two taxiways to access the aircraft hangar of the airport, and the rehabilitation of a hanger to be able to hold four Boeing 737s or ATR 320s. CAMCE was the EPC contractor responsible for implementation. A project commencement ceremony took place on May 29, 2010 and the originally expected length of the project implementation period was 52 months (per the terms of the EPC contract). However, the project was completed ahead of schedule. A project completion ceremony was held on June 1, 2013 and a final acceptance certificate (FAC) was issued on June 2, 2014. Luang Prabang Airport is now the 2nd largest airport in the country. The annual passenger flow of the airport has increased from 200,000 to 300,000 to 800,000-1 million passengers. 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.