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Abstract: How does a public-private venture emerge in one of the world's poorest countries (Laos) and how does it obtain $280 million in financing for a 215 MW hydroelectric facility to supply power--not to the host country, but its neighbor? At the time of the project, Laos had no domestic capital market, and commercial lenders and equity investors believed the country too politically and economically risky. As a result, Laos had almost no foreign direct investment and had never entered into a public-private venture for energy infrastructure.
Learning Objective: The case allows the instructor to 1) discuss the difficulties of funding a project in a very poor country; 2) introduce the role of multilateral banks, such as the Asian Development Bank and export credit agencies; 3) discuss the importance of risk allocation in gaining investor confidence; 4) discuss currency risk and its impacts; and 5) touch on the political economy of hydroelectric facilities. It is a good capstone case for a financial module.