EDL-Gens LAK 1.6 billion ($200
million) rights issuance was a first for the nascent Laos
Securities Exchange. But deal counsel had to first overcome
complexities relating to the companys shares in four
independent power producers (IPPs).
Power generator EDL-Gen is a
subsidiary of Electricite du Laos (EDL), a state-owned
enterprise that owns 75 percent of EDL-Gens
One of two companies listed on the
LSX, EDL-Gen has spearheaded some important LSX market firsts,
including its first IPO in December 2010 and now its first rights
Deal counsel said a share swap with
EDL for its shares in four different IPP projects, as a payment
in kind for the EDL-Gen capital increase, complicated the
LS Horizons Khemajit
Choomwattana, who advised EDL-Gen in the deal, said that EDL
had various levels of ownership in the four IPPs. This meant
that he and his team had to deal with shareholders and lenders
in relation to each IPP.
LS Horizon senior associate Kidhanan
Choomwattana said this capital increase involved so many
parties, it was a challenge to deal with different groups of
lenders, different shareholders and various government
authorities to make the capital increase in a short period of
Another EDL-Gen rights issue is
unlikely in the short-term due to the large size of this
offering. But counsel said that more fund raising, either in
equity or debt offerings, is expected to acquire more IPPs in
The Lao government is keen to make
sure that the LSX is a success. Sources predict that more
state-owned companies will list to attract investors. The
LSX is trying to find the right companies in the public and
private sectors to list and add liquidity to the
exchange, said Choomwattana.
Because the exchange only has two
listings EDL-Gen and Laos largest bank, Banque
Pour Le Commerce Exteriur Lao that are both considered
strong assets, there is little incentive for investors to sell
shares and add liquidity to the market.
But lawyers remain optimistic about
the success of LSX due to the Lao governments pipeline of
state-owned companies that are listing possibilities. William
Greenlee, DFDLs head of Laos and China said the Lao
governments ownership of companies with good assets was
possibly an advantage over neighbours like Cambodia, whose
government may not own comparable assets.
Greenlee said he was quite bullish
on the LSX in the long-term, and predicted that it could become
a very good small regional exchange, specialising in
However, he warned that there were
still investment limits on foreign investors: the majority of
investors on the LSX are currently Lao-based investors. Chinese investors are the largest group of foreign
investors on the LSX.
More foreign investors are expected
to become involved once the Laos Securities Act is promulgated.
Current regulations provide a degree of IPO procedures and
reporting requirements, but counsel would prefer more guidance,
especially as more instruments such as debt offerings are
introduced to the market.