China Eximbank provides $600 million preferential buyer’s credit for 240MW Nam Ngum 4 Hydropower Plant Project (Linked to Record ID#105893)

Project narrative

On September 8, 2016, during Premier Li Keqiang's visit to Laos, China Eximbank and the Lao Ministry of Finance signed a $600 million preferential buyer’s credit (PBC) agreement for the 240MW Nam Ngum 4 (NG4) Hydropower Project (as captured via Record ID#63452). Électricité du Laos (EDL) — the state corporation of Laos that owns and operates the country's electricity generation, electricity transmission and electricity distribution assets — became the effective borrower of the loan. The loan’s estimated borrowing terms included a 18.1764-year maturity, a 5.05-year grace period, and a 3.1298% interest rate. The borrower was expected to use the loan proceeds to finance 85% of the cost of a $706 million EPC contract between EDL and China National Heavy Machinery Corporation (CHMC), which was signed in late 2015. Then, on June 23, 2017, the Shanghai Branch of MetroBank, Maybank, Bank SinoPac, E.SUN Commercial Bank of Taiwan, and Sinomach Finance Co., Ltd. (国机财务有限责任公司) signed a $100 million syndicated loan agreement with EDL for the 240MW Nam Ngum 4 Hydropower Plant Project (as captured via Record ID#105893). The borrowing terms of the loan are unknown. Nor is it known how the borrower was expected to use the loan proceeds. The purpose of the project is to construct the 240MW Nam Ngum 4 (南俄肆) hydropower plant with three 80MW turbines (power generation units) and a 74-meter high dam with water storage capacity of 107,400,000 cubic meters. The project also involves the construction of a 17 km tunnel. The project site is located approximately 10 km west of a proposed slaughterhouse site near the confluence on Nam Kho River and Nam Ngum River in Paek District and Xiangkhoang Province. Its precise locational coordinates are as follows: Latitude: 19°5'2.04" and Longitude: 102°52'46.56”. CHMC is the EPC contractor responsible for implementation. It appears to have hired VLV Xoumphonphakdy (a Lao company) as a subcontractor. Construction began on January 25, 2018. River closure occurred on October 15, 2019. Then, on February 15, 2021, a 200 ton bridge crane at the Nam Ngum 4 Hydropower Plant successfully completed a load test. As of May 2022, the project had achieved a 90% completion rate. Then, on February 1, 2024, dam impoundment took place. The concrete lining of the diversion tunnel took place on March 10, 2024. Power generation unit #1 began trial operations on July 6, 2014. Power generation unit #2 began trial operations on July 13, 2024. Power generation unit #3 began trial operations on July 28, 2024. The power plant's commissioning was originally scheduled for July 2024. 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.