Allen & Overy has advised Crédit Agricole Corporate and Investment Bank and Sumitomo Mitsui Banking Corporation on the refinancing of the 150 MW Houay Ho cross-border hydropower project located in the Lao People’s Democratic Republic.
This is the first refinancing of its type in Laos since the refinancing of the Theun-Hinboun Power Company in 2008 (on which Allen & Overy also advised the Lenders). It is also the first time that a Lao project funded by Thai lenders has been wholly refinanced in USD by international lenders. As cross-border hydropower markets continue to evolve across the Greater Mekong Sub-region, this successful refinancing demonstrates the lasting international appeal of Lao projects and also the quality of the underlying asset, which is operated by Houay Ho Power Co., Ltd as a joint venture between Glow Company Limited, Houay Ho Thai Company Limited and EdL-Generation Public Company.
The project, which is among the first independent power producers in Laos, commenced commercial operations in 1999 and distributes the majority of its generating capacity to the Electricity Generating Authority of Thailand under a long-term take-or-pay power purchase agreement with the remainder being sold to Electricité du Laos. The original project financing was completed in 2002 with a consortium of Thai banks providing all of the USD and THB debt.
The current refinancing reached financial close on 28 January 2015 and marks the addition of a further major Lao hydro power project to the string of large ground-breaking projects already advised on by Allen & Overy in Laos, including THPC (and its refinancings and extensions), Nam Theun 2, Nam Ngum 3, Xe Pian Xe Namnoy and Nam Ngiep 1.
Commenting, Allen & Overy partner Stephen Jaggs said: “While originally financed solely by Thai banks, there are several factors which make the project particularly attractive to regional and global lending markets. In addition to its solid track record of power production, the project has an attractive risk profile due to its combination of public buy-in (on the part of the state owned EdL-Generation Public Company) and access to the market-leading technical expertise and good governance practices of Glow Company Limited, a member of the GDF Suez group. Unusually, the power purchase agreement between the borrower and the Electricity Generating Authority of Thailand is governed by English law, creating a further international nexus which is not found in similar projects.”
“The structure of this refinancing called for precise timing and the successful resolution of currency conversion issues, in order to ensure a smooth transition to the new lenders (who also acted as swap providers on the transaction). In particular, mechanics needed to be put in place to repay the existing Thai lenders from the USD drawdown, in respect of both the THB and USD portions of the original loan. This project is another example of Allen & Overy’s ability to assist leading participants in the energy sector – on both the lender and the sponsor side – in achieving market “firsts” across the Greater Mekong Sub-region.”
Stephen Jaggs and Sarah Wilson (Senior Associate) led the Allen & Overy team from Bangkok with support from lawyers Vorasaree Wangwittaya, Monsicha Pongrujikorn, Isabelle Whitehead and Vitita Subhawat.
Other law firms advising on the project include DFDL (in Laos) as lenders’ Lao counsel; Hunton & Williams as sponsors’ deal counsel; and Lao Premier (in Laos) as sponsors’ Lao counsel.
