The Theun Hinboun hydro project in Laos is either cursed or blessed – three times the deal has financed, twice it has been hit by regional and global financial crises and both times it has come through intact.

Sponsored by Electricite du Laos (60%), Statkraft (20%) and GMS Power (20%), Theun Hinboun is the first significant Laos project financing to be closed without political risk insurance – primarily because the Laos government is the biggest stakeholder and earner from the plant and is therefore unlikely to do anything to detract from its own income stream.

The project was first multi-currency financed in 1996 via around $84 million of ECA/multilateral dollar denominated debt and Bt2.8 billion from Thai banks. The project was then hit by the Asian financial crisis and the subsequent devaluation of the Thai baht against dollar-based project costs, and lack of local liquidity meant THPC could only draw around 60% of the baht debt and had to raise a further $10 million in sub-debt to replace some of that facility.

In 2002 the project was refinanced via a $152 million locally denominated facility that both replaced pricey construction loans and enabled the sponsors to reduce equity – a deal that went off without crisis.

But in 2008, just as the Lehman Brothers bankruptcy sparked global financial market meltdown, Theun Hinboun was back again trying to sign new debt and a refinancing with a cross-collateralised deal from the existing project for an expansion of the plant from 210MW to 500MW.
As the credit crisis spiralled, several of the mandated lenders – Calyon, ING, Fortis and BTMU – pulled out and the facility had to be quickly restructured to get it signed. Having originally planned to split the debt 50:50 between dollars and Thai baht, the withdrawal of the dollar lenders left the project heavily skewed towards local currency. The bulk of the debt is denominated in Thai baht, in the form of a Bt13.9 billion ($405 million) 16-year term loan provided by Bank of Ayudhya, Export-Import Bank of Thailand, Kasikorn Bank, Siam City Bank and Thanachart Bank, after those banks increased their commitments to make up the shortfall.

The sponsors intend to replace a portion of the baht facility with dollar loans when market conditions stabilise, returning to their original goal of a 50:50 split – as Project Finance goes to press negotiations are underway for new lenders. To offset the currency imbalance, THPC also agreed to implement a currency hedging program post financial close for both baht and dollars.

The $187.5 million dollar loan was provided by ANZ, BNP Paribas, KBC and Thai Exim priced at 300bp over Libor for years one to four, with the margin dropping to 275bp thereafter and fees ranging from 100bp to 200bp. Pricing had to be flexed since the deal first came to market in March 2008, when margins averaged 155bp over Libor.

In addition to financing the expansion, the new debt replaces the outstanding debt from the project's two previous financings in 2002 and 1996, worth around $50 million. That outstanding debt was repaid on 7 November 2008, removing any conflict over lenders' security interests.

The deal is backed by a 25-year power purchase agreement signed with the Electricity Generating Authority of Thailand (EGAT), which runs until 2024 and accounts for 440MW of generation. The remaining 60MW output goes to Electricite de Laos.

Laos relies heavily on the dollar rather than the country's own, less liquid kip, and the power purchase agreement requires EGAT to pay for the project's output in a combination of offshore dollars and baht, providing a degree of natural hedge against currency fluctuations and lender security.

Although an expansion of an existing project, Theun Hinboun still raised some technical issues. Theun Hinboun takes water from the Theun river and diverts it down a headrace tunnel to a hydroelectric power plant, before releasing it into the Nam Hai, a tributary of the Hinboun river. The two rivers are divided by a narrow ridge, while the Theun river sits more than 200m higher, making the site ideal for hydro power.
The 2008 expansion involves the construction and installation of a dam and reservoir on the nearby Gnouang River, a new tunnel to divert water to the power plant, and additional turbines to increase the existing generating capacity.

Although the expansion project was likely from first build in 1996 – the existing 210MW Theun Hinboun hydro plant had been designed to meet the development constraints of the time by only using 25% of the average water flow available – the importance of the cashflows from the existing plant to the expansion financing meant lenders focusing heavily on the hydrology and the impact both the expansion and the upstream Nam Theun 2 plant might have.

Theun Hinboun Power Company
Status: Financial close 7 November 2008
Description: $607.5 million hydro expansion project financing
Sponsors: Electricite de Laos, GMS Power, Statkraft
Financial advisor and lead arrangers:
BNP Paribas, Kasikorn Bank
US Dollar Lenders:
ANZ, BNP Paribas, KBC Bank, Thai ExIm Bank
Thai Baht lenders: Bank of Ayudhya, Kasikorn Bank, Siam City Bank, Thanachart Bank, Thai ExIm Bank, Bangkok Bank
Legal counsel to sponsors: Latham & Watkins
Legal counsel to lenders: Allen & Overy
EPC contractors: CMC, VA Tech, Loxley, RCR