Introduction
This dual case study (in this chapter and the next) is a comparison of Laibin B and Meizhou
Wan, the first two wholly foreign-owned power projects in China. Laibin B was intended to
provide a template for future build-operate-transfer (BOT) projects. Meizhou Wan was
financed without implied government support, completely outside the BOT framework.
The first BOT power project in China, and indeed in Asia, was the Shajiao B plant in
Guangdong Province. Despite the province’s success with this BOT project, the central gov-
ernment became concerned that developers would have opportunities to make excessive prof-
its when BOT projects were competitively bid, based on the price of power, and the
government had no other financial controls over such projects.
Laibin B was the first pilot project under a new legal and regulatory infrastructure to sup-
port BOT projects; its structure was intended to become the blueprint for future BOT projects.
Two key innovations of this project were that the concession was awarded in a competitive
bidding process and that the project was 100 per cent foreign-owned.
Meizhou Wan, financed during the depth of the Asian currency crisis, was China’s first
wholly foreign-owned power project successfully financed outside the state-sponsored BOT
programme. Not being bound by the BOT programme, the sponsors had more freedom to
design project arrangements and a financing package tailored to the project. However, with-
out the benefit of the BOT programme to fast-track approvals, they had to obtain approvals
one by one from various authorities in state and provincial governments. The project sets an
important precedent for project financing in China because the government may not contin-
ue to provide the benefits seen in prior BOT projects.
Project summary
The project involved the financing, design, construction, procurement, operation, mainte-
nance and transfer of a 2 x 360 MW coal-fired power plant located in Laibin County in the
Guangxi Zhuang Autonomous Region (Guangxi Province). The project, costing US$616
million, is entirely foreign-owned and foreign-financed. Construction began in September
1997 and was expected to be completed in three years. The Concession Agreement called
for the project to be transferred to the Guangxi autonomous regional government after 15
years of commercial operation by the two project sponsors. Guangxi, on the Vietnam bor-
der, is one of China’s poorer provinces and therefore the credit risk of the Guangxi Power
Industry Bureau (GPIB) was an issue. Also, at the time there had been little foreign invest-
ment in the area and the Guangxi provincial government had no exposure to the international
syndicated loan market.
The project company is a wholly foreign-owned enterprise incorporated in China. It is 60
per cent owned by Électricité de France International (EDFI) and 40 per cent owned by
Alstom, formerly GEC Alsthom. EDFI is a wholly owned subsidiary of Électricité de France
(EDF), which is 100 per cent owned by the French government. GEC Alsthom was jointly
owned by General Electric Company plc of the United Kingdom and Alcatel Alsthom of
France until its initial public offering in 1998, when it was renamed Alstom.
The Construction Services Contractor was a special-purpose joint venture between
Alsthom Export Compagnie Financière de Valorisation pour L’Ingénierie.
The Equipment Supplier was a consortium comprised of GEC Alsthom Centrales
Energetiques SA and EDF, acting through its division CNET.
LAIBIN B, CHINA