Mekong Utility Watch

Viability of four export projects in question

Bangkok Post
June 18, 1998

A host of problems including funding threaten the viability of four large power-generation projects in Laos. Thai energy officials are now sceptical that the projects, which would export a total of 1,956 megawatts, can proceed as planned. The projects have been promoted by joint ventures that include Thai companies.

The projects are: Hongsa, a lignite-fired plant to export 608 megawatts with commissioning in 2002; the Nam Ngum 3 hydropower plant (430 megawatts, 2003); the Nam Ngum 2 hydropower plant (553 megawatts, 2003); and Xe Pian-Xe Nam Noi (365 megawatts, 2004-6).

After a recent review, the National Energy Policy Office (Nepo) concluded that the ventures would be “considerably delayed”, prompting it to take a second look at the country’s master plan for importing power from Laos.

A senior Nepo official said the Hongsa project sponsor, Thai-Lao Lignite, had asked to renegotiate power sale tariffs with the Electricity Generating Authority of Thailand (Egat), citing the depreciation of the baht. New talks could result in postponement of the project for some time.

The Hongsa tariffs are tied partly to the baht and partly to the US dollar. Laos has also called for a revision of the tariff structure since the depreciation of the baht had greatly reduced potential returns to Hongsa sponsors.

At the same time, industry sources said there have been unspecified disagreements among shareholders of Hongsa, further complicating project financing.

Egat completed a power-purchase agreement with the Hongsa group last December, a draft of which is still being scrutinised by the Office of the Attorney General.

In the case of Nam Ngum 3 and 2, preliminary agreements for power sales were agreed on by Egat and the two developing consortia last September. A commercial operating date of March 2003 was planned.

However, negotiations for a formal power purchase agreement have made little progress and the commercial operating date also looks doubtful.

Meanwhile, negotiations on power sales with the Xe Pian-Xe Nam Noi consortium have just begun and no early conclusion is foreseen. The consortium consists of the Laotian government, Dong Ah of South Korea, and Electrowatt.

Savit Bhotiwihok, the Prime Minister’s Office minister overseeing energy policy, met recently in Vientiane with Laotian ministers including Deputy Prime Minister Boonyoung Worlajit. Dr Savit asked Laos to look at the viability of all four projects and realistic completion dates.

Assigning priorities to projects will be essential to Thailand’s planning of procurement of power supplies from domestic and neighbouring sources.

A memorandum of understanding is in place for Thailand to purchase up to 3,000 megawatts from Laos by 2006. To date, Egat has finalised power purchase agreements for two Laotian projects: Thuen Hinboun (187 megawatts) and Houay Ho (126 megawatts). Deliveries of Thuen Hinboun power began on April 1.

Laotian ministers have renewed calls for Thailand to increase power purchases beyond the 3,000-megawatt level.

Officials from the two countries have identified a total of 10 projects with a proposed export capacity of 4,254 megawatts.

Laos is said to be reacting to pressure in that it has granted concessions for 17 power projects and all the sponsors are looking for the market, which is Thailand.

However, due to the economic crisis and a slowdown in national power demand, Thailand is reluctant to discuss the issue.

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