FUNDING ARRANGEMENTS

The funding arrangements described below are related to Government of Lao PDR (GOL) equity funding arrangements for its investment participation in Nam Theun 2 Hydropower Project.
The GOL equity providers are lenders (ADB, EIB) and donors (AFD and IDA). The Ministry of Finance (MOF), representing the GOL on-lend the fund to LHSE for financing its 25% equity in Nam Theun 2 Power Company Limited (NTPC). When NTPC generates revenue from electricity sales, NTPC shall share the profits to LHSE and other shareholders as well. LHSE shall use this income (dividend) to cover the costs of operation and maintenance of LHSE and to pay for loans and taxes to MOF/GOL. Certain portion of profits LHSE is entitled to reserve as Cumulative Fund in accordance with Lao Laws. As Borrower, the MOF shall repay the loans to ADB and EIB in accordance with Agreements.
The Royalty and Tax payments from NTPC shall be made directly to MOF/GOL, while the personal income tax shall be paid to local authorities.
The GOL/LHSE base equity requirement is 87.5 millions USD.
The loans and grants provided by the GOL Equity providers are dominated in USD. Lao Holding State Enterprise (LHSE) has been nominated by the Government of Lao PDR (GOL) to be a shareholder in Nam Theun 2 power Company Limited (NTPC).
LHSE is a 25% Equity shareholder in NTPC. The Base-Equity contribution requirement in the Nam Theun 2 Hydropower Project is USD 87.5 million, based on Project’s Equity to Debt Ratio of 28/72. The total Project Costs USD 1250 million consist of USD 350 million Equity and USD 900 million Debt financing.

LHSE is responsible and liable for its own Equity financing. LHSE has been obtaining Equity fund from 5 sources: International Development Association(IDA). Asian Development Bank (ADB). European Investment (EIB), Agent Francais pour Developments (AFD) and GOL.
The GOL Equity providers require the GOL to adopt and implement poverty alleviation programmes, environmental programmes and social and economic development programmes in a manner that is appropriate to their respective institutional guidelines. The involvement of these multilateral agencies is a highly positive endorsement of their perception of the Project and the safeguards that have been built into the contractual framework of the Project.
The provision of the loans and grants from these institutions include certain terms and conditions that will restrict the use of the funds with all the GOL Equity providers providing finance only for costs that are eligible for funding by their institution. For example, in the case of any World Bank NTSEP Grants, the Grants can only be used for pre-agreed social and environmental costs. For other institutions, the loans would have to meet their funding requirements on issues such as procurement policy, eligibility of goods and services, minimum drawdown amounts, etc. It is therefore the case that the fund from the GOL Equity providers will carry certain restrictions and will not be available for purposes other than those specified.
As the base component of the GOL Equity will be tied to specific eligible costs, and will not be available to fund non-specified costs, it means that the four Shareholders will not contribute their equity pro-rata at each drawdown. This means that on some occasions, the GOL may not be required to provide any contribution and on other occasions, the GOL may provide the bulk of the equity contribution from the Shareholders.
As the facilities from the GOL Equity providers are tied to specific costs, and are non-accelerable, the GOL is open to having its equity more front-ended, subject to meeting all GOL Equity Loan restrictions and agreements with the other Shareholders.

Hongsa Minemouth Power Project
LHSE holds 20% in Hongsa Power Company Limited (HPC) and 25% in Phu Fai Mining Company Limited (PFMC). The total project cost is USD 3,710 Million consists of USD 2,782.5 Million of Debt and USD 927,5 Million of Equity based on Project’s Equity and Debt Ratio 75/25.
The Base-Equity contribution requirement in this project by LHSE is USD 185. The source of fund are from Thai Banks (Krung Thai Bank PCL (KTB) and Government Savings Bank of Thailand (GSB)) in the total amount of USD 220 Million which comes from KTB USD 150 Million and USD 70 Million from GSB.
On 31 May 2011, LHSE signed the Subsidairy Loan Agreement with the GoL represented by the Ministry of Finance in connection with the Facilities Agreement with Krung Thai Bank Pcl (KTB) and the Govenrment Savings Bank (in corporated in Thailand). The GoL has agreed to on-lend the equivalent of USD 150 Million under the KTB Facilities Agreement and THB 2,380 Million under the GSB Facilities Agreement.

Xepian-Xenamnoy Hydropower Project
LHSE holds 24% in Xepian-Xenamnoy Power Company Limited (PNPC). The total project cost of this project is USD 1,020 Million consists of USD 714 Million of Debt and USD 306 Million of equity based on Project’s Debt and Equity Ratio 70/30. The Base-equity requirement by LHSE is USD 73.44 Million.
On 27 October 2015, LHSE signed the Subsidiary Loan Agreement with the GoL in connection with the Export-Import bank of Korea (Government Agency for the EDCF). GoL has agreed to on-lend up to an amount of USD 80,800,000 and another source of fund is from the Facility Agreement between MOF and KTB in the amount of USD 100.640. The loan from EDCF is the best condition ever for LHSE with the low Interest Rate at 0.025% per annum.

Nam Ngiep 1 Hydropower Project
LHSE holds 25% In the Nam Ngiep 1 Power Company Limited (NNP1PC). The total project cost is USD 906 million consists of USD 643.30 Million of Debt and USD 262.76 Million of Equity. The Base-equity requirement by LHSE is USD 65.69 Million. The Project’s Debt and Equity Ratio 71/29.

In the year 2014, LHSE signed the Subsidairy Loan Agreement with the GOL in connection with the Loan Agreement with Japan Bank for International Cooperation (JBIC), Export-Import Bank of Thailand and Bangkok Bank PCL in the amount as of USD 103.5 Million.