NORINCO provides $108.4 million supplier’s credit for 76MW Xeset 2 Hydropower Plant Project

In 2004, China North Industries Group Corporation Limited (NORINCO or 中国北方工业集团有限公司) and Électricité du Laos (EDL) — the state corporation of Laos that owns and operates the country's electricity generation, electricity transmission and electricity distribution assets — signed a $108.4 million supplier’s credit agreement for the 76MW Xeset 2 Hydropower Plant Project. The borrowing terms of the supplier’s credit were as follows: 15-year maturity period, 4-year grace period, 5.66% interest rate, and 6.59% insurance premium. The borrower was to use the proceeds from the supplier’s credit to finance 80% of the $135.5 million cost of a commercial (EPC) contract between NORINCO and EDL, which was signed in 2004a. In order to finance its supplier’s credit agreement with the Government of Laos, NORINCO secured an export seller’s credit from China Eximbank. The purpose of the project was to construct a 76MW hydropower plant along the Xeset River. The project was a run-of-river scheme with a gross head of 271 meters and an installed capacity of 76MW. The surface powerhouse was to be equipped with two Francis type turbines with an installed capacity of38 MW each. Both the generators and the turbines were manufactured by Dongfang and the generators had a designed operation lifetime of 30 years. The power plant was expected to generate an average annual production of 309,000 MWh. The project site is located on the upper Xeset River about 10 km above the Xeset 1 head pond (river distances). The Xeset II head pond collects the flow from both the Xeset and the Houay Tapoung diversion which then enters the head pond on the bank of the Xeset. The project consisted of a concrete overflow dam (114 m long x 23 m high) with an intake structure and two radial flushing gates. The head pond has an active volume of 800,000 m³ which is to be used for daily peaking. The intake is situated on the right bank of head pond and leads to a 1.5 km long open canal with a gated intake, trash rack and trash rack cleaner, a 6.8 km long headrace tunnel with a 19.67 m2 to 26.30 m2 cross section, a 1.49 km long steel penstock, a surface powerhouse and a 200 m long tailrace. A vertical surface venting surge tank is located just upstream of the steel penstock. The combined catchment area for the Xeset II Hydropower Project is 392 km². The powerhouse discharge is 33.7m³/s. The powerhouse is designed to drain to the Xeset 1 head pond via a 200 m long tailrace. Access to the powerhouse and associated switchyard was to be linked to both the 115kV transmission line to Paksong and connect to Xeset 1 switch yard by a 115 kV line. The Xeset II powerhouses were to be connected via a 37 km long double-circuit 115kV transmission line from the switch yard of Xeset II to Paksong. This was to be linked to the southern supply area at Chiengxai (Ban Jianjxay) Substation. The linkage was designed to increase reliability and guaranteed electricity supply to the southern Lao and the EGAT Grid System in Thailand. A 3.1 km long 115kV transmission line was also to link the switch yards between Xeset II and Xeset 1. The Chiengxai substation was to be be connected to Bangyo substation which is in turn connected to the EGAT Grid. The precise locational coordinates of the Xeset II powerhouse are 15°29'15.67"N and 106°16'58.87"E. The precise locational coordinates of the Xeset II head pond are 15°24'14.86"N and 106°16'48.20"E. NORINCO was the EPC contractor responsible for implementation. Norconsult (Norway) was responsible for construction supervision. In 1999, an initial project feasibility study was undertaken by Norconsult. Then, in October 2003, a project design report was submitted to EDL. EDL invited consultants from Norway to review the project design report in January 2004. Then, the project feasibility study was updated in April 2004 and an environmental and social impact assessment (ESIA) was undertaken in June 2004. The project design report was finalized in September 2005. Then, an equipment supply contract was signed on October 17, 2005. Construction began on November 13, 2005 and the project ended on August 7, 2009. The power plant achieved its commercial operations date (COD) on September 9, 2009. A project completion and handover ceremony was held on October 9, 2009.

Additional details

1. This project is also known as the Xeset II Hydropower Project. 2. The Chinese project title is 色塞2水电站项目. 3. Total interest payments over the lifetime of the supplier’s credit amounted to $9,216,581. Therefore, using a simple formula [(Principal Loan Amount x Interest Rate x Time (Number of Years of Loan Term) = Interest], AidData back-calculated the interest rate as 5.66%. 4. One source suggests that the value of the EPC contract was $117,841,733 rather than $135.5 million. This issue merits further investigation.

Number of official sources

9

Number of total sources

18