Narrative
Full Description
Project narrative
On May 18, 2009, China Southern Power Grid Co., Ltd and Electricite du Laos (EDL) signed a $10.55 million commercial (EPC) contract for the Xayaburi Rural Electrification Project. China Eximbank subsequently issued a government concessional loan (GCL) to the Government of Laos to finance the EPC contract. The loan’s estimated borrowing terms included a 22.2696-year maturity, a 6.975-year grace period, and a 2.3143% interest rate. The purpose of the project was to build 4 new 22-kV transmission lines measuring 323 kilometers in length, 400-volt transmission lines measuring 86 kilometers in length, and substation capacity of 4330 kVA within Xayaburi Province. China Southern Power Grid Co., Ltd was the EPC contractor responsible for implementation. The project was fully operational as of February 21, 2013. It reportedly benefited 51,000 people and 8,000 households in 69 villages within Xayaburi Province. 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.
Staff comments
1. The Chinese project title is 老挝沙耶武里省农村电气化项目. 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. Per China Eximbank's policy of allowing borrowers to use GCLs to finance the full cost of EPC contracts, AidData assumes the face value of the GCL was $10.55 million. The GCL was almost certainly denominated in RMB, but AidData was not able to identify the face value of the GCL or the EPC contract in RMB. This issue merits further investigation. 4. 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 22.2696 years in 2009. AidData estimates the maturity of the China Eximbank loan that supported the Xayaburi Rural Electrification 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 5. 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 6.975 years in 2009. AidData estimates the grace period of the China Eximbank loan that supported the Xayaburi Rural Electrification 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 interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Laos was 2.3143% in 2009. AidData estimates the interest rate of the China Eximbank loan that supported the Xayaburi Rural Electrification 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