Narrative
Full Description
Project narrative
CDB and Powerchina Resources Ltd. signed a Nam Ou River Project Financing Cooperation Agreement on April 20, 2011. Then, in November 2011, Powerchina Resources Ltd. and EDL-Generation Company Limited (EDL-Gen) created a joint venture and special purpose vehicle called the Nam Ou River Basin Hydropower Co., Ltd in order to finance, develop, implement, and operate Phase 1 of the Nam Ou Hydropower Project on a build-operate-transfer (BOT) basis. Powerchina Resources Ltd. holds an 85% ownership stake and EDL-Gen holds a 15% ownership stake in Nam Ou River Basin Hydropower Co., Ltd. The total cost of Phase 1 of the Nam Ou Hydropower Project was $1.035 billion and it was financed with a mix of debt and equity. On September 27, 2013, China Development Bank (CDB) and Nam Ou River Basin Hydropower Co., Ltd. signed a $660 million buyer’s credit loan (BCL) agreement for Phase 1 of the Nam Ou Hydropower Project (as captured via Record ID#63762). The loan agreement was modified through a supplementary agreement that was signed by the parties in November 2014. The loan carries a 16.18-year maturity (final maturity date: November 28, 2029). The borrower was expected to use the proceeds of the loan to finance a commercial contract with Power Construction Corporation of China (POWERCHINA), which was signed in June 2012. The borrower purchased buyer’s credit insurance from Sinosure and Powerchina Resources Ltd. provided a partial repayment guarantee. Powerchina Resources Ltd. also made a $375 million equity contribution (as captured via Record ID#63763). The purpose of the project was to construct three hydropower stations — the 120MW Nam Ou 2 hydropower station, 240MW Nam Ou 5 hydropower station, and 180MW Nam Ou 6 hydropower station — on the Nam Ou River in Luangprabang Province and Phongsaly Province. Under the terms of an October 2012 concession agreement with the Government of Laos, Powerchina Resources Ltd. agreed to transfer the project to the Government of Laos after 29 years of operation. Power Construction Corporation of China (POWERCHINA) was the contractor responsible for implementation. Construction began in October 2012. However, a formal groundbreaking ceremony did not take place until December 10, 2012. The project was subjected to an environmental and social impact assessment (ESIA), which laid the groundwork for the project company taking responsibility for the relocation of displaced villagers. An environmental management process featuring PDCA (plan-do-check-act) was established. Efforts were also undertaken to limit fishing to exert less impact on the fish species in the Nam Ou river. All power generation units were put into operation on May 12, 2016. The project achieved its commercial operations date (COD) on January 1, 2017. By the end of 2019, total cumulative power generation from the project amounted to 4.7 billion KWH, lighting tens of thousands of homes. After Phases 1 and 2 were complete and the power plant came into full operation in 2021, it reportedly became the backbone of Laos’ power grid by taking up 28% of the country’s 4538MW total power generation capacity. However, insufficient high voltage transmission lines to evacuate electricity from the power plant to domestic demand centers led to a significant ‘idle capacity’ problem. The $660 loan for the project’s first phase financially underperformed vis-a-vis the original expectation of the lender. In 2023, Nam Ou River Basin Hydropower Co., Ltd was unable to meet its principal and interest payment obligations to CDB due to the fact that Électricité du Laos (EDL) — the Laotian state-owned power utility — did not honor its power purchase obligations under a power purchase agreement (PPA). Powerchina Resources Ltd. was subsequently called upon by the lenders to honor its partial repayment guarantee to help Nam Ou River Basin Hydropower Co., Ltd avoid defaulting on its payment obligations. By June 2023, Powerchina Resources Ltd. had made payments to CDB worth $16.25 million.
Staff comments
1. This project is also known as the Nam Ou Phase I Hydropower Project, the 540MW Nam Ou 2, 5, 6 Cascade Project, and the Nam Ou River Cascade Hydropower Stations (Phase One) Project. The Chinese project title is 老挝南欧江一期工程2、5、6级水电站 or 老挝南乌江流域开发项目 or 老挝南欧江流域梯级水电开发第一期项目 or 老挝南乌江梯级水电站（一期项目). The Lao project title is ເຂື່ອນໄຟຟ້າ ນ້ຳອູ 2 and ເຂື່ອນໄຟຟ້າ ນ້ຳອູ 5 and ເຂື່ອນໄຟຟ້າ ນ້ຳອູ 6. 2. Some sources refer to an 1156 MW Nam Ou Hydropower Station Project or an 1156 Nam Ou River Basin Hydropower Project — worth $2 billion to $2.7 billion — with seven separate cascade power stations and a total installed capacity of 1,272 MW or 1,156 MW. However, these are references to the larger project that comprises the Phase I 540MW Nam Ou 2, 5, 6 Cascade Project (captured in Record ID#63762) and the Phase II 616MW Nam Ou 1, 3, 4, and 7 Cascade Project (captured in Record ID#67486). 3. Électricité du Laos (EDL) is the state corporation of Laos that owns and operates the country's electricity generation, electricity transmission and electricity distribution assets. The company also manages the import and export of electricity from the national electricity grid of the country. EDL-Generation Company Limited (EDL-Gen) was incorporated in 2010 and operates as a subsidiary of EDL. 4. CDB, China Eximbank, and China Construction Bank also financed Phase 2 of the Nam Ou Hydropower Project (as captured via Record ID#67486, #98809, and #73301).