Fuel Supply and Transportation Agreement
Under the FSTA the Guangxi provincial government agreed to supply fuel to the project
through its subsidiary, the Guangxi Construction and Fuel Corporation (GCFC). The project
sponsors have the right to reject coal that does not conform with specifications in the agree-
ment. The base price is fixed every year, but adjustments are made to the price of each deliv-
ery based on the quality of the coal, which must be within a defined range. The FSTA
specifies the mines that will supply the coal and is backed by a comfort letter from GCFC
assuring the sponsors of alternative coal supplies.
Lessons learned
Laibin’s high visibility as a pilot for future BOT projects helped in the often cumbersome
multi-agency government approval process. Multiple letters of support at the central govern-
ment level and the local need for power are helpful factors that reduce project risk at a time
when governments are reluctant to issue guarantees, although recent experiences in India and
Indonesia show that support letters and even guarantees can be unreliable.
(^1) Tiong, Robert L.K., Shou Qing Wang, S.K. Ting, and D. Ashley, ‘Risk Management Framework for BOT Power
Projects in China’, Journal of Project Finance,Winter 1999, p. 60.
(^2) This case study is based on various articles in the financial press, and on follow-up interviews with Robert L.K.
Tiong, Associate Professor of Civil Environmental Engineering, Nanyang Technological University, Singapore,
and Gary Wigmore, Partner of Milbank, Tweed, Hadley & McCloy.
(^3) Sherman, Robert T., Jr., ‘Power in the PRC’, Independent Energy,October 1994, p. 27.
(^4) Gibbons, Robin J., ‘Power Funding’, The China Business Review,November/December 1993.
(^5) Li Xiaolin, ‘FDI in China’, Independent Energy, July/August 1997, p. 24.
(^6) Starke, Kevin, ‘Gordon Wu, Hopewell Holdings, Ltd.’, Independent Energy, July/August 1995, p. 48.
(^7) Wang, S.Q. and L.K. Tiong, ‘Case Study of Government Initiatives for PRC’s BOT Power Plant Project’,
International Journal of Project Management 18, 2000, p. 70.
(^8) Ibid.
(^9) Orr, Deborah, ‘China’s New Rules’, Infrastructure Finance, December 1997/January 1997, p. 38.
(^10) Tiong, Robert L.K., Lin Qiao, Shou Qing Wang and Tsang-Sing Chan, ‘Critical Success Factors for Tendering BOT
Infrastructure Projects in China’, Journal of Structured and Project Finance, Spring 2002, p.50
(^11) Gailey, Colin, ‘The Power of Persuasion’, Asiamoney, London, October 1997, p. 16.
(^12) Ibid., p. 17.
(^13) Tiong, Robert L.K., Shou Qing Wang, S.K. Ting and D. Ashley, op. cit., p. 71.
(^14) Sayer, Rupert, ‘Waiting for Revolution’, Project and Trade Finance,July 1996, p. 36.
(^15) Gailey, Colin, ‘The Power of Persuasion’, Asiamoney, October 1997, p. 16.
POWER PLANT