Export Credit

Row delays Laos hydroelectric dam at least a year

Songrit Pongern
Reuters
June 8, 2001

Delayed: NT2 won’t be ready until at least December 2007.

A row over contract terms will delay a $1.2 billion hydroelectric dam in Communist Laos by at least a year, investors in the project said on Friday.

 

The Nam Theun II dam, 35 percent owned by Electricite de France [EDF.UL], was originally scheduled for completion in 2006, but now won’t be ready until at least December 2007, they said.

Sources close to the project said a disagreement over the terms of a power purchasing agreement (PPA) with Thailand’s Electricity Generating Authority of Thailand (EGAT) had held up financing for the project, the largest power scheme in Indochina.

Even if both the buyer and the seller could reach an agreement and sign the PPA by the end of this year, the project would still not be completed before the end of 2007 at the earliest, they said.

In May 2000, state-run EGAT signed an deal with the Laotian government to buy 980 of the plant’s 1,060 megawatts (MW) output. The other 80 MW will be used by the state-run Electricite de Laos. Prime Ministers of both countries witnessed the ceremony.

But since then, neither side has signed the PPA because they disagreed on the purchasing prices and who should be paying for sub-stations to transfer the power from Laos to Thailand, EGAT and dam investors told Reuters.

“It’s true that the project has been delayed because we are still having differences over various issues,” Sitthiporn Ratanopas, managing director of Electricity Generating Plc , holding a 25 percent stake in the dam project, told Reuters.

PAYMENT FOR SUBSTATIONS

Sitthiporn said both sides were trying to agree the price.

Neither side wanted to pay for the construction of substations, which EGAT said were necessary for the delivery of electricity.

EGAT officials told Reuters dam investors would have to bear the construction cost of sub-stations in Laos to ensure the efficient delivery of the electricity.

“The cost of sub-stations was not stated in the signed memorandum, but logically, sellers are supposed to bear the delivery cost when they deliver their products to buyers,” an EGAT spokesman said.

Nam Theun II is the most developed dam scheme among various dam projects in landlocked Laos where most of its 5.2 million population earn less than a dollar a day.

Hydroelectric production is one of the country’s few industries and is a major export that brings scarce hard currency.

The remaining 40 percent of the Nam Theun II Electricity Consortium is owned 25 percent by the Laotian government and 15 percent by Thai construction contractor Italian-Thai Development Plc .

An investor in the consortium told Reuters the PPA delay had prevented the group from seeking a bank guarantee from the World Bank, which was prolonging the completion of the project.

“We hope the differences will be ironed out so that we can sign the purchasing agreement by the end of this year,” the investor said.

(With additional reporting by Pisit Changplayngam and Nopporn Wong-Anan)

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