PowerChina Unit Sues Laos Utility, Claims $555 Million in Unpaid Dues

A unit of China's state-owned Power Construction Corp of China (PowerChina) has filed a lawsuit against Laos' utility Electricite du Laos (EdL) in Singapore, claiming $555 million in unpaid dues from a hydropower project. The claim stems from electricity generated by the $2.73 billion Nam Ou River Cascade Hydropower project, operated by PowerChina's unit Nam Ou Power, with a capacity of 1.27 gigawatts (GW) from its seven cascades along 350 km (217 miles) of river in Laos.

The lawsuit, filed last month with the Singapore International Arbitration Centre, alleges that EdL owes Nam Ou Power $486.27 million in dues plus interest estimated at $65.79 million. The claims are associated with monthly invoices made between January 2020 and December 2024, totaling about 4% of Laos' gross domestic product (GDP). Nam Ou Power also claimed damages of $3.02 million for EdL predominantly paying its dues using the Lao kip currency, while the agreement had stipulated that 85% of the payments be made with the U.S. dollar.

Laos has been grappling with hyperinflation and fast-depleting foreign exchange reserves since the pandemic, with the value of the Lao kip plunging nearly three-fifths over the last five years. The lawsuit comes at a time when Laos is already facing a severe debt crisis, with its total public debt reaching $13.8 billion, or 108% of its GDP, in 2023. About $10.5 billion of this debt is owed to China, with the details of the loans remaining opaque.

The lawsuit is the first instance of international arbitration by a Chinese state-run entity against a Lao government-run firm, indicating that the economic relationship between the two countries may not be as harmonious as previously thought. The dispute could potentially strain the relationship between China and Laos, as it raises questions about the sustainability of Laos' debt and the terms of the BRI projects.

In conclusion, the lawsuit filed by PowerChina against EdL highlights the financial challenges faced by Laos and the potential long-term implications of the Belt and Road Initiative on the relationship between China and Laos. As Laos continues to grapple with its debt crisis, it is crucial for the government to address its debt management issues more effectively and seek international support to manage its debt burden.