Nam Ou Power, a unit of state-owned Power Construction Corp of China, has sued Laos utility Electricite du Laos in Singapore for $555 million in unpaid dues from a hydropower project it operates.

EdL has yet to respond to the filing, according to a source familiar with the case, who also said that it was the first instance of international arbitration by a Chinese state-run entity against a Laos government-run firm.

The person declined to be identified as the matter is not public. Details of the case are being reported for the first time.

The unpaid dues claimed arise from electricity generated from the $2.73 billion Nam Ou River Cascade Hydropower project, according to a filing with the Singapore International Arbitration Centre.

The Nam Ou project, one of Laos' largest that accounts for 7% of the country's 18 gigawatts of hydropower capacity, is a part of China's Belt and Road Initiative to build trade and transport links across Asia and beyond.

Western critics have said significant investments by China in countries struggling to repay loans have helped it to gain a strategic advantage, which China rejects.

PowerChina (601669.SS), and EdL did not immediately respond to requests seeking comment. Wong & Leow, a law firm representing Nam Ou Power, declined comment.

Operated by Nam Ou Power, part of PowerChina (601669.SS), the hydroelectric project has a capacity of 1.27 gigawatts from its seven cascades along 350 km (217 miles) of river in the landlocked, mountainous country of nearly eight million people.

China's foreign ministry, energy regulator and commerce ministries also did not respond to requests seeking comment.

INVESTING IN HYDROPOWER

Laos has spent heavily on hydroelectric schemes, many financed by its northern neighbour China, with the aim of becoming "the battery of Southeast Asia" by exporting electricity to neighbouring countries.

Those projects, along with a Chinese-built high-speed railway have caused high levels of debt.

In its filing last month with the Singapore International Arbitration Centre, PowerChina said EdL owed it $486.27 million in dues plus interest it estimates at $65.79 million. The claims are associated with monthly invoices made between January 2020 and December 2024.

The total is equivalent to about 4% of Laos' gross domestic product.

EdL ceded majority control of its transmission unit to state-owned China Southern Power Grid Co in 2020, as mounting debt, combined with the impact of the COVID-19 pandemic strained public finances and pushed Laos to the brink of a sovereign default.

Nam Ou, in the same filing, claimed damages of $3.02 million for EdL predominantly paying its dues using the Lao kip currency, while the agreement had stipulated that 85% of the payments be made with the U.S. dollar.

Laos has struggled with hyperinflation and fast depleting foreign exchange reserves since the pandemic, with the value of the Lao kip plunging nearly three-fifths over the last five years.

by Reuters