OECF Japan Newsletter
January 1, 2000

This project is for the construction and operation of a rockfill dam and hydroelectric power plant with 440MW maximum output on the Nam Ngum River, a tributary of the Mekong, on a 25-year build-operate-transfer (BOT) basis. The power generated is to be sold to the Electricity Generating Authority of Thailand.  Not only will this project be an important source of foreign currency revenue for Laos, which is poor in export products, but it will also assist in developing the economic infrastructure of the river valley. At the same time, the project has high economic cooperation value for Thailand in contributing to the stable supply for electric power in that country. Considering the importance of the project, OECF has adopted a policy of support from the study preparation stage with a view to exploring possibilities for future investment. Accordingly, it is providing a loan for preparatory surveys.

The request to OECF for support for this project came from GMS Power, an independent power producer (IPP) in Thailand. This company, which already had experience in bringing a hydropower project on-line in Laos on a BOT basis, holds the development rights for the present project.

GMS Power subsequently made contact with two Japanese corporations, an electric power company and a trading company, which initiated a study of participation in the project in the form of technical support and coordination as well as investment.

The two companies considered it necessary to make a complete study of the project before deciding on participation. In April 1998, therefore, they made a request to OECF for use of the preparatory survey loan scheme under Private Sector Investment Finance.

One advantage of the preparatory survey loan scheme is that it makes it possible to check the items subject to appraisal for an OECF project proper, and to verify them at the study preparation stage. This results in speeded-up appraisal of the main project. In order to make the most of this advantage, it is necessary to have a full grasp of the project content, appraisal items, and terms of reference (TOR) at the time that appraisal of the study project loan takes place.

OECF and the group studying participation in Japan agreed on the policy of clarifying the issues to be considered for moving forward with the main project, and including these in the TOR for the study preparation. In August 1998, an appraisal mission was dispatched to the site. There, it was confirmed that OECF would consider the possibility of support for the project proper, in accordance with the study results, and verified the expectations and cooperative stance of the Government of Laos toward financing the study project. As a result of this series of inquiries and appraisals, it was concluded that there were no problems that would prevent support for the preparatory survey project, and a loan commitment was made on October 2, 1998.