China Eximbank provides $21.25 million preferential buyer’s credit for Vientiane Flood Drainage Channel and Pump Station Project

Project narrative

In 2012, China Eximbank and the Government of Laos signed a preferential buyer’s credit (PBC) agreement worth approximately $21.25 million for the Vientiane Flood Drainage Channel and Pump Station Project. The loan’s estimated borrowing terms included a 20.2082-year maturity, a 6.3382-year grace period, and a 2.3636% interest rate. The purpose of the project was to construct flood drainage channels (measuring 2.3 km in length and 23 meters in width) — including footpaths on both sides — and a pump station (equipped with five 4.5 m3/s pumps in five villages within Sisattanak district: Kaoyord, Phiavat, Thatkhao, Beungkayong and Vat Nark. The ultimate purpose of the project was to allow for a better outflow of water from the city of Vientiane; the pumps that were to be installed were capable of handling at least 21.5 cubic meters per second, or an average of 77,400 cubic meters per hour. The project was also designed to support the 9th ASEM Summit in Laos by increasing the flood control capacity of Don Chan Island—the major activity area of the Summit — during rainy season. China CAMC Engineering Co Ltd. was the EPC contractor responsible for implementation. The project’s implementation start date is unknown. However, it is known that Prime Minister Thongsing Thammavong conducted an on-site project inspection on July 27, 2012 and Vice Prime Minister Thongloun Sisoulith conducted an on-site project inspection on August 5, 2012. The project was officially completed and handed over to the local authorities on March 21, 2013. Deputy Minister of Planning and Investment Khamlien Pholsena, Deputy Minister of Public Works and Transport Lattanamany Khounnivong, Vice Mayor of Vientiane Mr. Keophilavanh Aphaylath, President of CAMCE Luo Yan attended the project handover ceremony. 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.