February 1, 2002
Egat, again, plans to sign an agreement to buy power from the Nam Theun 2 project, putting Thai taxpayers at risk of shouldering the burden of a deal negotiated under the highly centralised decision-making framework of technocrats in state agencies.
We are meant to learn from past mistakes so that they are not repeated. But it seems the government has not come to terms with this concept. For decades, state enterprises ordered up major infrastructure projects with little input from the public. Transparency and public scrutiny were not an issue. But if the government hasn’t learnt a lesson the public certainly has and will no longer tolerate additional burdens on their shoulders.
We all know about the Bt62 billion compensation demanded of the Expressway and Rapid Transit Authority (ETA) and possibly another almost Bt200 billion by the Electricity Generating Authority of Thailand (Egat) if the government eventually decides to change the conditions in the contracts for the controversial Bor Nok and Hin Krut power plants. These deals were negotiated under the highly centralised decision making framework of technocrats in state agencies.
And if history is to be any indicator, we are likely to repeat the mistake. The Nam Theun 2 Hydroelectric project is another case in point. Egat planned to sign an agreement that would commit it to buying power from the project next Tuesday. By allowing Egat to go ahead, the government will put Thai taxpayers at risk of shouldering another burden because the project is unlikely to sail smoothly through the World Bank nor stand up to scrutiny from the international community.
The plan to sign the socalled initial or technical power purchase agreement between Egat and the corporate consortium operating the Nam Theun 2 project entails a number of unresolved questions. Among others, what may count as a force majeure in the contract? If the project is delayed or cannot be built because of the World Bank, who, between Egat, the Lao government and the private dam development consortium, should be held responsible for compensation?
The question is an essential one because the future of the dam very much depends on whether the World Bank provides a political risk guarantee for the project.
Such a guarantee is required for international financial institutions to provide loans for the corporate consortium to build the dam. To provide the guarantee, the World Bank demands an environmental impact assessment (EIA) and studies on the project’s economic viability that meet its high standards.
The project’s EIA has been turned down by the bank a few times in the past several years. According to the World Bank’s coordinator on Nam Theun 2, no date has yet been fixed for completion of the project’s EIA.
Neither is the economic study completed. The bank has to make sure it contains practical measures to alleviate poverty in Laos. In sum, both studies are overdue with no expected date of completion.
Another point to ask is whether or not power from the project will enter the power pool – a system designed to make energy producers compete in the retail market – when it is introduced next year.If so, will Egat guarantee the possible loss of revenue for the project
developing consortium as it did with those of Hin Krud and Bor Nok?
The contracts of Hin Krud and Bor Nok stipulate that Egat – and therefore Thai taxpayers – must pay an amount of compensation to the project developers equal to the amount of revenue they would lose under the power pool system. How can we call this competitive when some producers are being compensated?
These are among the major questions the public needs answered before Egat signs the agreement with the Nam Theun 2 project developing consortium next week.