A China company will become the new operator of a power grid in Laos as the country relinquishes majority control in the face of setbacks and looming debt defaults, sources with information of the takeover said.
The electric-grid shareholding agreement was approved by government-run Electricite du Laos (EDL) and China Southern Power Grid Co. and is expected to further tie Laos with China, the country's biggest lender, China's state-run Xinhua News Agency reported.
The agreement was made at a time when detractors allege China is applying "debt trap" tactics to gain leverage in financially troubled countries - settling debts accrued under China's Belt and Road infrastructure program.
A new entity will be established under the directive of Laos authorities but will rely on the expertise of China Southern in the management, operation and construction of the electric installation.
Sources said Laos would give majority control of the new Electricite du Laos Transmission Co. Ltd. to the China group.
Another source said the deal would give the Laos power grid "better bargaining power" with regional states as it potentially brings in profit.
China's consular office in Laos said the government would oversee operations in the electricity infrastructure. It didn't disclose specifics on shareholding except to say Laos could reacquire stock during the course of the operation.
Power exports are critical to Laos's development and the new EDL is considering spending around $2 billion in the domestic power installation as well as international connections.
Meanwhile, U.S. credit-rating agency Fitch Ratings Inc. said Laos had asked local creditors to help the government settle its external debts over the next few months and that authorities were projected to "rollover" a significant portion of the $200 million in bank loans due this month.
Meanwhile, Laos' economy could bounce back if the continuing international health emergency ends next year. Its recovery would be the result of increased infrastructure projects, more precious-metals exports and enhanced tourism, Fitch said.
