Efforts Made to Maximize Lenders’ Returns Through Loan Period for Power Development Project
Lenders often underplay their influence in the successful outcome of power project development. An effective Lender’s Technical Advisor (LTA) plays an active role in allocating risks to parties best suited to handle and manage the risks.
During the development of the US$3.6 billion Hongsa Mine Mouth Project (Hongsa), Black & Veatch, serving as the LTA, played a key role in steering the project partners back to a more managed and successful project path.
Power finance deals are complex – none more so than Hongsa. It serves as a key element of Thai-Lao cooperation.
Project financing was required for the development of the 1,878 megawatt (MW) lignite-fired mine mouth power plant, comprising two separate power purchase agreement for each of the Electricity Generating Authority of Thailand and Electricité du Laos. In addition, two concessionary agreements were required to develop a lignite and limestone mine.
Also included in the financing were a 67 kilometres (km), 500 kilovolt (kV) overhead powerline to the Thai-Lao border, 5 km and 110 km of 115 kV double circuit powerlines to two Lao substations, two dams to serve as reservoirs for the plant’s water supply, as well as a variety of other supporting infrastructure to accommodate the development.
This was the first significant project delivered by primarily Chinese-led engineering, procurement and construction (EPC) contractors for each national electric company. Black & Veatch was hired as an LTA post-financial close and selection of EPC contractors. Taking advantage of loan disbursement milestones, Black & Veatch was able to steer contractors back to a more desired schedule and influence the selection of subcontractors on behalf of the lenders.
The project development was complete in 2016. Black & Veatch continues to advise the lenders on how to optimize returns over the life cycle of the power asset.