The Loan Agreement was signed on behalf of the Lao Peoples Democratic Republic by His Excellency Mr. Somdy Doungdy, Minister of Finance while the Project Agreement was signed on behalf of Electricite du Laos by Mr. Savath Phoum Lavanh, Deputy Managing Director. Mr. Hesham Ibrahim Al-Waqayan, Deputy Director-General of Kuwait Fund for Arab Economic Development, signed both the Loan Agreement and the Project Agreement on behalf of Kuwait Fund.

The Project aims at meeting the demand for electrical energy in the northern provinces of Bokeo, Louang Parabang and Oudomxai in the Lao Peoples Democratic Republic until the year 2020. It will serve to supply electricity to about 70% of the population in these provinces as well as to small and medium-size industries in the area. It also aims at increasing the capacity of transmission and export of electrical energy to neighboring countries in the north.

The Project consists of the construction of 115 KV transmission line with the necessary connection bays to substations, the construction of a new substation at Namthong, the expansion of the substations at Louang Namtha and Namo and the construction of distribution networks of medium voltage (22 KV) and low voltage (0.4 KV) as well as all necessary equipment and works for the supply of electricity in the aforementioned provinces. The Project also includes the provision of the necessary consulting engineering services for its execution as well as the provision of institutional support.

The total costs of the project, including taxes and interest during construction, are estimated at U.S.$ 32.1 million, equivalent to about Kuwaiti Dinars 9.44 million, of which about U.S.$ 21.39 million, equivalent to about Kuwaiti Dinars 6.29 million and representing about 67% of total cost of the Project, are expected to be in foreign exchange. The Kuwait Fund loan will cover about 77.8% of the total costs of the Project, including all costs in foreign exchange part of the costs in local currency.

The loan is made for a term of 24 years, including a grace period of 4 years, and is to be amortized in 40 semi-annual installments, the first of which will be due on the first date on which interest or other charges on the loan shall be payable, according to the Loan Agreement, after the expiry of the aforementioned grace period. The loan bears interest at the rate of 2% per annum in addition to a service charge of 0.5% per annum to cover administrative costs and the expenses of implementing the Loan Agreement.

This loan will be the first loan made by the Kuwait Fund to the Lao Peoples Democratic Republic, but it is worthy of mention that Kuwait Fund already approved a technical assistance of an amount of Kuwaiti Dinars 100,000 for the preparation of the technical and economic feasibility studies for the rehabilitation and development of the irrigation system in Nabong Khaks region.