China Eximbank provides $32 million preferential buyer's credit for Wattay International Airport Upgrading Project

Project narrative

In 2011, China Eximbank and the Government of Laos signed a preferential buyer’s credit (PBC) agreement worth approximately $32.028 million for the Wattay International Airport Upgrading Project. The PBC's estimated borrowing terms included a 19.7202-year maturity, a 6.5761-year grace period, and a 2.0394% interest rate. The proceeds of the PBC were to be used by the borrower to partially finance a $37.68 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 July 13, 2011. The project involved an expansion of the existing apron and runway at the Wattay International Airport, which is located 3 km outside the city of Vientiane. It also involved improvements to the navigation lights system and drainage systems as well as the construction of nearby roads and an office building for the Civil Aviation Authority and Directorate of Airport Management. The project was meant to be completed in advance of the 9th ASEM Summit. CAMCE was the EPC contractor responsible for implementation. Construction started in December 2011 and ended on May 21, 2012. A completion ceremony was held on October 9, 2012. A project warranty period expired and a final acceptance certificate (FAC) was issued on November 11, 2013. China Eximbank conducted an on-site project inspection on March 22, 2014. 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.