moved away from negotiating over documentation details, trying to shave costs and limiting
the project’s rate of return. Under the new framework, however, project sponsors were con-
cerned about the reliability of their revenue streams and their ability to raise tariffs. They were
also concerned that western-style contractual arrangements might be more legally and finan-
cially complex than the Chinese regulatory framework could handle.^9
Bid tender and award
In early 1995 the SPC commissioned Bridge of Trust Infrastructure Consulting Company, Ltd
to conduct a feasibility study on implementing the Laibin B project on a BOT basis. Bridge
of Trust was a private firm with substantial experience in government infrastructure projects.
On behalf of the SPC, Bridge of Trust sent invitations to pre-qualify in the third quarter of
- Fourteen developers pre-qualified and six submitted bids in May 1996. The SPC for-
mally awarded the project contract to the consortium of Électricité de France and GEC
Alsthom in November 1996. One of the important reasons that consortium won the bid was
that it offered the lowest tariff (RMB0.4/kWh, less than US$0.05/kWh) – close to the then-
current electricity tariffs in large Chinese cities. The consortium was able to minimise its cost
structure by acquiring turbines from a Chinese manufacturer rather than importing them.^10
How the financing was arranged
When the SPC awarded the mandate to the sponsors, it required that the financing be struc-
tured within 12 months. Other recent power project negotiations had become bogged down
and delayed. This time the SPC wanted to show what was possible in China and what it
expected in the future. The financial closing occurred just two months after the target date.
All of the major documents are in both Chinese and English. Translation and checking
one version against the other were slow and painstaking processes. Under the terms of the
concession both versions have equal effect in law. An interesting though perhaps only hypo-
thetical issue could be which law took precedence if both stood up in court, but opposing
lawyers interpreted the two versions of the documents differently.^11
Government approvals and support
Because the Laibin B project was designated as the official pilot to set the benchmark for
future BOT projects, it received strong support from the central government. The project was
approved by the State Council, and the SPC and the MOP participated throughout the project
development, tendering, bid evaluation and tendering process.
Although the SPC served as the ringleader, the project sponsors also needed to reach
agreements with, and receive approvals from, the Ministry of Foreign Trade and Economic
Cooperation (MOFTEC), the MOEP, the State Administration of Exchange Control (SAEC),
the Tax Bureau, the Pricing Bureau, the Guangxi provincial government, the Guangxi
MOFTEC, the Guangxi SAEC and the GPIB.^12
To demonstrate the central government’s commitment and to back up the Guangxi gov-
ernment, the SPC, the MOP and the SAEC each issued letters of support. However, the let-
ters did not imply any form of direct central government guarantee.^13 In 1995 the Chinese
central government had adopted a policy of not issuing guarantees for projects.
POWER PLANT