Narrative
Full Description
Project narrative
In November 2014, China Eximbank and the Government of Laos signed a loan agreement for the Nong Dern-Seno-Phin Transmission Line Expansion Project. The loan’s estimated borrowing terms included a 23.0095-year maturity, a 6.2144-year grace period, and a 2% interest rate. The borrower was expected to use the loan proceeds to finance a $54 million EPC contract between China-East Resources Import & Export Company (CERIECO) and EDL-GEN, which was signed in May 2014. The purpose of this project was to construct a 42.8 km, 115kv transmission line between the Nong Dern Substation and a newly constructed Seno Substation and to construct a 108.2 km, 115kv transmission line between the between the Seno Substation and the newly built Phin Substation. The ultimate purpose of the project was to ensure that there is an adequate supply of electricity in the central part of the country and especially to the Savan-Seno Special Economic Zone (SEZ). CERIECO was the EPC contractor responsible for implementation. The project commenced in 2015 and it was completed in December 2015. A project completion certificate was issued by the project owner (EDL-GEN) in September 2016. The transmission lines and substations officially went into use on January 9, 2017. There are some indications that the China Eximbank loan for the Nong Dern-Seno-Phin Transmission Line Expansion Project may have financially underperformed vis-a-vis the original expectations of the lender. According to a report published by the World Bank in April 2022, ‘[t]he energy sector, mostly represented by Électricité du Laos (EDL), accounted for over 30 percent of total PPG debt in 2021. […] EDL’s debt service obligations [were] still unsustainable [at the time], with future debt service accounting for about two fifths of EDL’s total operating revenue.’ Additionally, 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.
Staff comments
1. This project is also known (or transliterated) as the Nong Dern-Seno-Pin Transmission Line Expansion Project, the 115kV Ban Met(Seno)-M. Phin Power Transmission Line Project, the 115kV Nongdeun-Ban Met (Seno) Power Transmission Line Project, the Nong Deun-Seno-Meuang Phine 115kV Transmission Project, or the Mengpin Power Transmission & Distribution Project. The Chinese project title is 老挝孟聘输变电项目 or 老挝诺顿-色诺-孟平115kV输变电项目. 2. The China Eximbank loan that supported this project is not included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020. 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 Electricite Du Laos. 4. The face value of the loan is unknown. For the time being, AidData assumes that it is equivalent to 85% of the value of the $54 million EPC contract. 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 23.0095 years in 2014. AidData estimates the maturity of the China Eximbank loan that supported the Nong Dern-Seno-Phin Transmission Line Expansion Project by using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=0 6. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 6.2144 years in 2014. AidData estimates the grace period of the China Eximbank loan that supported the Nong Dern-Seno-Phin Transmission Line Expansion Project by using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=0 7. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 2% in 2014. AidData estimates the interest rate of the China Eximbank loan that supported the Nong Dern-Seno-Phin Transmission Line Expansion Project by using this figure. See https://www.dropbox.com/scl/fi/uno1hf2pjg3nfz78h72c6/Private-and-Official-Sector-PRC-Borrowings-and-Borrowing-Terms-of-Lao-PDR-September-2024.xlsx?rlkey=s7eas067aykllu1lik074l5x5&dl=0