China Eximbank provides $39 million preferential buyer’s credit for Northern Province Rural Electrification Project

Project narrative

In 2010, China Eximbank and the Government of Laos signed a $39,094,086 preferential buyer’s credit (PBC) agreement for the Northern Province Rural Electrification Project. The loan’s estimated borrowing terms included a 20.0281-year maturity, a 7.2533-year grace period, and a 2.0702% interest rate. The borrower was expected to use the proceeds of the loan to finance 95% of the cost of a $41,151,670 commercial (EPC) contract between China Gezhouba Group Company Limited (CGGC) and Electricite du Laos (EDL), which was signed on August 12, 2009. The purpose of the project was to construct a 1,030 km, 22kV power transmission line and a 246 km, 400V low-voltage power transmission line in seven provinces in northern Laos. Upon completion, the project is expected to benefit 30,000 households in 229 villages across the seven northern provinces. CGGC was the EPC contractor responsible for project implementation. Construction commenced on or around July 24, 2010. Then, on April 15, 2012, Prime Minister Thongsing and CGGC staff representatives attended a ceremony marking the launch of power supply. The project was officially completed on May 30, 2012. 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.