China Eximbank provides $1.161 billion buyer’s credit loan for 480MW Nam Ngum 3 Hydropower Project

Project narrative

On October 28, 2009, Nam Ngum 3 Power Company Limited — a special purpose vehicle and joint venture between Ratchaburi Holding (25% ownership stake), GMS Lao Company Limited (27% ownership stake), Marubeni Corporation (25% ownership stake), and Lao Holding State Enterprise (23% ownership stake) — was established to develop and implement the 480MW Nam Ngum 3 Hydropower Project (or “NG3”) as an independent power project (IPP). Then, Nam Ngum 3 Power Company Limited entered into a tariff MOU with the Electricity Generating Authority of Thailand (EGAT) on the 480MW Nam Ngum 3 Hydropower Project. Then, in 2013/2014, Électricité du Laos (EDL) — the state corporation of Laos that owns and operates the country's electricity generation, electricity transmission and electricity distribution assets — acquired full ownership of the NG3 from Nam Ngum 3 Power Company Limited. On July 28, 2014, in Beijing, China Eximbank and EDL signed a buyer’s credit financing framework agreement for the NG3 Project. According to the framework agreement, China Eximbank agreed to provide a buyer’s credit loan (BCL) worth up to $1.2 billion to EDL to facilitate its acquisition of equipment from Sinohydro Corporation Ltd. and support its implementation of the NG3 Project. Then, on March 17, 2015, China Eximbank and EDL signed a $1.161 billion BCL agreement for the 480MW Nam Ngum 3 Hydropower Project. The borrowing terms of the loan included an 18-year maturity an interest rate of LIBOR plus an unspecified margin. The loan was collateralized against a mortgage over the project assets, including project revenue accounts. It is also known that the proceeds of the loan were to be used by the borrower to partially finance a $1.29 billion commercial (EPC) contract with Sinohydro Corporation Ltd. The purpose of the NG3 project was to construct a 210 meter-high concrete face rockfill dam (CFRD) with a total capacity of 480 MW (3x160 MW) on the Ngum River in Xaysomboune Province, about 130 km north of Vientiane. The project is located in the upstream of Nam Ngum 1 (NN1) and Nam Ngum 2 (NN2), and in the downstream of Nam Ngum 4(NN4) and Nam Ngum 5 (NN5). Sinohydro Corporation Ltd. is the EPC responsible for implementation. Construction officially began on November 11, 2015. However, the project subsequently experienced significant implementation delays. Also of August 2022, the project had achieved a 79.8% completion. The project's originally expected completion date was in 2022. There are some indications that the China Eximbank loan for the 480MW Nam Ngum 3 Hydropower Project financially underperformed vis-a-vis the original expectations of the lender. In 2017, the World Bank was informed that EDL would sell a 80 percent equity stake in Nam Ngum 3 Power Project (“NG3”) to a Lao private company called Chaleun Sekong Group Company Limited (CSG). EDL and CSE, an affiliate company of CSG, then entered into an Agreement for the Sale and Purchase of the Share Capital of Nam Ngum 3 Power Company Limited on July, 26, 2019, which included the right of EGAT International Company Limited (EGATi) to purchase the shares of Nam Ngum 3 Power Company Limited under the Share Purchase Agreement upon approval from Thai Government. EGATI is the international investment arm of Electricity Generating Authority of Thailand (EGAT). EDL reportedly divested its ownership in NG3 and NG4 (as captured via Record ID#63452) in order to reduce its indebtedness. These divestments were expected to provide substantial financial relief to EDL as its NG3 and NG4 project debts amounted over $1 billion by 2017. However, as of 2017, the project debt for NG3—mostly from China Eximbank—was still pending a transfer from EDL to the project company (Nam Ngum 3 Power Company Limited).