NORINCO provides $50 million loan — via EPCF arrangement — for Savanakhet Province Road Upgrading Project

Project narrative

In March 2018, China North Industries Group Corporation Limited (NORINCO) and the Lao Ministry of Public Works and Transport signed an $59.7805 million Engineering, Construction, Procurement, and Financing (EPCF) contract for the Savanakhet Province Road Upgrading Project. Under the terms of the contract, the Lao Ministry of Public Works and Transport was responsible for making a $9.78 million advance payment (counterpart contribution). The remainder of the contract value ($50.0805 million) was financed with a supplier’s credit from NORINCO. The supplier’s credit from NORINCO, which was backed by a sovereign guarantee from the Ministry of Finance of Laos, was originally scheduled for repayment between 2018 and 2019 (with two annual principal repayments of $2.5 million being made between 2018 and 2019 and ten annual principal repayments of $4.5 million being made between 2020 and 2029). The borrower met its repayment obligations in 2018 and 2019 but failed to honor its repayment obligations in 2020 (due to the COVID-19 pandemic). At the time, NORINCO assessed the default probability rate to be 3.41% and the loss given default rate to be 62.30%. The purpose of the project was to upgrade an 88.2 km road — known as Road No. 2.6313 — that has been built between Thapangthong district in Savannakhet province and Toumlan district in Saravan province. Road No. 2.6313 links Road No. 13 South (in Xebangnuan village, Thapangthong district) to the NR1G highway in Toumlan district, and provides a short route for travel in the area. The road was to be surfaced with asphalt over a width of 7 meters, increasing to 9 meters over a 3 km section in the central Thapangthong district. The project scope included engineering of the road (with a designed speed of 80 kilometers per hour) and 19 concrete bridges, as well as installation of traffic signals and protective fences. It also included the construction of the Sesalalong Agriculture Technical Training Centre in Thapangthong district. Upon completion, the road was expected to make travel between Savannakhet and other regions easier and promote the development of local production, tourism, and business. NORINCO was the EPC contractor responsible for implementation. Construction began on October 1, 2017, and was originally scheduled for completion on October 1, 2020. However, the project’s completion date was extended when work was suspended from April 1, 2020, to May 3, 2020, due to the COVID-19 pandemic. A project completion ceremony took place on February 5, 2021.