Mekong Utility Watch

Hydro dam in Laos will fail as money-maker, says report

Probe International Mekong Press Backgrounder #1

August 8, 1996
Hydro dam in Laos will fail as money-maker, says report

Asian Development Bank’s analysis of project seriously flawed

The Asian Development Bank’s Nam Theun-Hinboun hydropower project in Laos is unlikely to be the financial boon predicted by its proponents, according to the Borealis Energy Research Association of Canada. “The project is very likely to fail as an investment and to result in a net financial liability of significant magnitude,” says Borealis consultant Thomas Adams in a report prepared for the environmental group Probe International.

As the leading proponent of the 210-megawatt dam, a joint venture including Electricite du Laos, MDX of Thailand, and Nordic Hydropower, the ADB claims the project will earn US$25 million for the government of Laos from electricity exports to Thailand. But the ADB’s assessment of Nam Theun-Hinboun is seriously flawed, according to the Borealis report. The project’s backers, for example, are overly optimistic about the price at which the Laos government will be able to sell the dam’s electricity and have inflated the dam’s projected efficiency.

The report also criticizes the ADB’s calculation of the project’s debt to equity ratio and argues that the bulk of the financial risk for the project — over 80% — falls on the Laos government as debt, rather than on the Nordic-led consortium building the dam. In addition, the report reveals that because of the availability of more efficient technologies, like combined-cycle gas turbines, imported electricity from Nam Theun-Hinboun will be uneconomic and Thailand could well abandon it for cheaper alternatives.

The ADB lent the Laos government US$60 million in 1994 for the US$280 million project currently under construction on a large tributary of the Mekong River. The remainder of the financing, according to the dam’s proponents, is still expected to come from export credits, commercial loans, and private equity from Thailand.

Categories: Mekong Utility Watch

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