A Chinese state-owned company is suing the national power utility of Laos for $555 million in unpaid fees from a hydropower project, according to an arbitration filing reviewed by Reuters.
The case has been filed in Singapore against Electricite du Laos (EdL) by a unit of Power Construction Corp of China (PowerChina). It stems from electricity generated by the $2.7-billion Nam Ou River Cascade Hydropower project since it began producing power in 2021.
The power project, operated by the PowerChina subsidiary Nam Ou Power, has a generating capacity of 1.27 gigawatts (GW) from its seven cascades along 350 kilometres of river.
Nam Ou is one of the largest power ventures in Laos, accounting for 7% of the 18 GW of hydropower capacity in the landlocked country of 8 million people.
EdL has yet to respond to the filing, according to a source familiar with the case, who said that it was the first instance of international arbitration by a Chinese state-run entity against a Lao government-run firm. The person declined to be identified as the matter is not public.
The details of the case are being reported for the first time.
The project is part of China’s Belt and Road Initiative to build trade and transport links across Asia and beyond. Western critics have said significant investments by China in countries struggling to repay loans have helped it gain a strategic advantage, a claim that Beijing rejects.
PowerChina, EdL and lawyers for Nam Ou did not immediately respond to requests seeking comment. China’s foreign ministry, energy regulator and commerce ministries also did not respond to requests for comment.
Investing in hydropower
Laos has spent heavily on hydroelectric projects, many financed by neighbouring China, with the aim of becoming the “battery of Southeast Asia” by exporting electricity to neighbouring countries.
Those projects, along with a Chinese-built high-speed railway, have contributed to a severe debt crunch in the impoverished one-party state.
In its filing last month with the Singapore International Arbitration Centre, PowerChina said that EdL owed it $486.3 million in dues plus interest estimated at $65.8 million. The claims are associated with monthly invoices made between January 2020 and December 2024.
The total is equivalent to about 4% of the gross domestic product of Laos.
EdL ceded majority control of its transmission unit to state-owned China Southern Power Grid Co in 2020, as mounting debt amid the Covid-19 pandemic strained public finances and pushed Laos to the brink of a sovereign default.
Nam Ou, in the same filing, also claimed damages of $3 million for EdL predominantly paying its fees using the Lao kip currency, while the agreement had stipulated that 85% of the payments be made with US dollars.
Laos has struggled with hyperinflation and fast-depleting foreign exchange reserves ever since the pandemic, with the value of the kip plunging nearly three-fifths over the last five years.
