China Eximbank provides RMB 573 million government concessional loan for Dongmarkkhai Water Supply Expansion Project

Project narrative

On August 5, 2013, China Eximbank and the Government of Laos signed an RMB 573 million ($88 million) government concessional loan (GCL) agreement for the Dongmarkkhai Water Supply Expansion Project. The loan’s estimated borrowing terms included a 19.5233-year maturity, a 6.416-year grace period, and a 2.164% interest rate. The proceeds of the GCL were to be used by the borrower to finance a commercial (EPC) contract between the Ministry of Public Works and Transport (MPWT) of Laos and China Yunnan Construction Engineering Group Co., Ltd. The purpose of this project was to expand and reconstruct the Dongmarkkhai Water Supply System, which is located 10 km north of the capital city of Vientiane in the village of Dongmarkkhai (Dong Mark Khai, ດົງໝາກຄາຍ) within Xaythany District. The project involved 4 components: (1) New intake at Nam Gum River; (2) Raw water transmission pipelines (2 lines each 18.9 km, DN 1000, reinforced plastic mortar pipes (RPMP); (3) Water treatment plant with the capacity of 100,000 m3 /day; and (4) a clear water transmission pipelines (19.5 km, DN 1200 – DN 500, DCIP) 5) SCADA system. The raw water source is Nam Gum River. Raw water is pumped up to the water treatment plant through double raw water transmission pipes with a diameter of 1000 mm. The total length of each raw water transmission main is 18.8 km each, and the pipe materials are of DCIP for 8.6 km and Reinforced Plastic Mortar Pipe (RPMP) for 10.3 km. China Yunnan Construction Engineering Group Co., Ltd. was the EPC contractor responsible for implementation. Construction started on March 1, 2013 and ended on December 27, 2015. 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.