China Eximbank provides $55 million preferential buyer’s credit for Phase 1 of Load Dispatch Center Project

Project narrative

In 2009, China Eximbank and Électricité du Laos (EDL) — a Lao state-owned power company — signed a $55 million preferential buyer’s credit (PBC) agreement for Phase 1 of the Load Dispatch Center Project. The loan’s estimated borrowing terms included a 22.2696-year maturity, a 6.975-year grace period, and a 2.3143% interest rate. The borrower was expected to use the proceeds of the loan to partially finance a commercial (EPC) contract with Alcatel-Lucent Shanghai Bell. The purpose of the project was to develop the National Load Dispatch Center (LDC) to improve operational efficiency of the Lao power grid and facilitate its integration with other GMS power systems. It involved the laying of fiber optic cable to link the LDC to 16 power stations. Alcatel-Lucent Shanghai Bell was the EPC contractor responsible for implementation. A formal groundbreaking ceremony took place on November 28, 2009. Then, on September 11, 2013, a project completion ceremony was held. 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.