The Nation
April 26, 2000

Thai authorities have concluded negotiations on the price of Thai power purchases from the US$1-billion (Bt38 billion) Nam Theun 2 hydroelectric dam, the largest foreign investment project in Laos. Chalermchai Ratanarak, assistant governor for power purchase at the Electricity Generating Authority of Thailand (Egat), said the authority would seek approval today from the national energy policy committee, chaired by Deputy Prime Minister Supachai Panitchpakdi, to buy electricity from Nam Theun 2 at US 4.21 cents (Bt1.6) per kilowatt-hour.

“The negotiated price is in line with Egat’s stance not to buy the electricity at a higher price than the price it has finalised with (domestic) independent power producers,” the assistant governor said.

After several rounds of unfruitful negotiations, Chalermchai said Thai power authorities were finally able to induce their Laotian counterparts and the project’s developer to agree on a price mainly because Egat proposed to purchase an additional 300 million kilowatt-hours of electricity from the project.

The planned purchase of electricity from Nam Theun 2 fulfils the intent of the memorandum of understanding Thailand signed with Laos several years ago. In it, Thailand stated its desire to help its neighbour develop its hydropower resources by providing power purchase agreements, which would enhance the commercial viability of the projects.

But negotiations over the price of power purchased from Nam Theun 2 were stymied when Thailand, the buyer, suffered its worst recession in mid-1997.

The Nam Theun 2 project also faced strong resistance from environmentalists and non-governmental organisations that oppose big dam projects.

With previous talks on electricity pricing stalled, a senior executive of Electricité de France, the principal of the Nam Theun II development consortium, flew in early last month to meet with Savit Bhotiwihok, PM’s Office Minister in charge of energy affairs, in an apparent bid to break the deadlock.

Electricité de France International, the foreign investment arm of one of Europe’s largest electricity producers, has two partners in the consortium developing Nam Theun 2 – Thai construction company Italian-Thai Development and Australian firm Transfield.

The World Bank has also signalled its readiness to provide a project loan for the 920-megawatt dam on the Theun river in central Laos.

According to Chalermchai, power purchases from Nam Theun 2 will consist of primary purchases covering 16 hours a day and secondary purchases covering the remaining eight off-peak hours a day.

For the primary purchase, Egat agreed to take the full generation of 4,400 million kilowatt-hours. For the secondary purchase, he said, the authority agreed to increase its purchase to about 600 million kilowatt-hours, or about half of the project’s estimated total generating capacity during the period – double the 300 kilowatt-hours it earlier intended to import.

As a result, Egat’s total purchases will amount to 95 per cent of Nam Theun 2’s maximum generating capacity.

However, Chalermchai said the power purchase agreement for the Nam Theun 2 project was not expected to be finalised by the end of this year due to its complexity and more details needed to be worked out between Egat and the power seller.

At today’s meeting of the national energy policy committee, the national energy policy office is also expected to submit its plan for the establishment of a power pool system, as part of the country’s reform programme for the power industry.

The plan calls for Thailand to set up an open power market by the year 2003 to promote competition among power plants and allow consumers the opportunity to choose among power supply sources.