Hydropower Developers’ Working Group Aims to Address Setbacks for Small Hydropower Projects in Lao PDR
In Lao PDR, few small hydropower developers have been able to secure loans from domestic banks. More than 150 small hydropower project agreements have been signed, yet many projects are still working to secure the necessary funding.
“Developers are faced with a lack of understanding of the possibilities of project financing for small hydropower projects by banks registered in Lao PDR,” said Robert Allen, chair of Lao PDR’s Hydropower Developers’ Working Group (HDWG). “Therefore, we are reaching out to these banks to seek clarification and better understand lending options.”
In a mid-December workshop and seminar for the Hydropower Developers’ Working Group, 15 banks registered in Lao PDR shared their experiences in financing hydropower and their challenges moving forward. Banks indicated their lack of technical expertise to review hydropower projects and limitations with funding. Participants sought to better understand the various types of lending for which their projects might qualify.
Banque Pour le Commerce Exterieur Lao (BCEL) and Maybank presented and shared their plans and experience with financing hydropower projects. While working group members openly shared their past experiences and concerns, bank representatives discussed ways to address current limitations and move forward.
“We would like to see more sustainable financing options available for the small hydropower developers in Lao PDR,” said Allen.
The HDWG has both small and large hydropower companies as members. Among the small hydropower group, mainly local Lao companies, access to finance for hydropower projects has been a key concern since the group’s commencement in February 2014.
Members have discussed the need to develop mechanisms that address financing and lending structures, which would be beneficial to small hydropower developers. It is currently difficult for small hydropower developers to secure loans with overseas financiers, namely those already supporting larger projects in Lao PDR, as they are unable to provide guarantees. Few Lao banks can finance Lao hydropower projects, as they are unable to support the project with sufficient financing. It is estimated that Lao banks could only lend a project approximately USD 2 million, a fraction of what the multi-million dollar projects require.
Working group members are equally concerned about commercial and credit risks associated with the off-taker in Lao PDR.
In addition to discussions with banks, the HDWG is working with the government to review its small hydro policy and tariff structure, both of which were further discussed in a February 2015 consultation.