The Electricity Generating Authority of Thailand (EGAT) signed an initial power-purchase agreement (PPA) with international developers to buy electricity from the Nam Theun 2 hydroelectric dam in Laos amid concerns about a lack of electricity demand in Thailand and envrionmental and social problems. Environmental groups on February 4, 2002 blasted Thailand’s state power agency for rushing to sign a deal to buy power from Laos despite low demand. The Electricity Generating Authority of Thailand the following day signed an agreement to buy 980 megawatts of electricity from Laos’ Nam Thuen 2 dam, starting from 2006, said the Non-Governmental Organisation Co-ordinating Committee on Development. Italian-Thai therefore started to ramp up its operations for the design and construction of the Nam Theun 2 project and instructed its Canadian engineering consultant to organise its value engineering team. The team visited Bangkok for discussions and negotiations during the second week of February.

 

“We are dismayed that the power agency has disregarded what we have pointed out … that the power purchase contract contains many flaws and must be reviewed before a final decision is made,” said Dej Poomkhacha, chairman of the organisation. The organisation said the contract lacked transparency and favoured Thai private investors in the Nam Thuen 2 dam project, particularly Italian-Thai Development Plc.

Activist groups demanded that EGAT explain the economic viability of the Nam Thuen deal as well as the impact of buying power from Laos despite the oversupply situation in Thailand.

Wittaya Kotcharak, EGAT’s manager, said the PPA would commit Thailand to buy electricity from the project for 25 years at a total cost of 275 billion baht. The cost agreed by both sides was 4.129 US cents (at the present rate 1.57 baht) per kilowatt-hour. Power from the project would be sent from Laos to a power station in Roi Et province.

The purchase deal was divided into two phases, he said. EGAT would guarantee the price for the first 13 years before deciding if the project should enter the power-pool system in the second phase for the remaining 12 years. The power pool, scheduled to be introduced in Thailand in 2003, would be an open market in which power-producers would have to compete in terms of retail prices.

Wittaya said EGAT expected to ink the final PPA in the following six months and that project construction would start 18 months after that. The construction was expected to take four and a half years. The agency anticipates power would be obtained from the dam in 2008.

“The deal today is the result of continuous negotiations between EGAT and investors in the project since we signed a memorandum of understanding on August 8, 2000,” Wittaya said.

However, the project might not be the best option for Thai power-consumers, said Dej Pumkacha, president of the NGOs Coordinating Committee on Development. He said Nam Theun 2 was a controversial project under close scrutiny by the international community. The World Bank had come under strong pressure not to support the project, Dej said. In a letter to Prime Minister Thaksin Shinawatra on February 4 the group said the deal came at a time of uncertainty over energy demand in Thailand. Given the current slow growth of the economy, Thai taxpayers are shouldering the cost of excessive energy reserves, Dej said.

Concerns arose that Nam Theun 2 would increase the amount of excess energy sitting idle in the Thai power-supply system. But if Thailand were to decide to delay the purchase agreement, EGAT would have to compensate investors. EGAT is the sole buyer of electricity from the 920-megawatt power facility. Investors in the US$1.1-billion (48.2-billion baht) project include Electricite de France, which holds a 35-per-cent stake, the Lao government, Italian-Thai Development Company together with a Canadian engineering consulting firm from vancouver, and Egco, a Thai private subsidiary of EGAT.

“I do not forecast any major difficulties in completing the project,” said one of the project’s developers, who spoke on condition of anonymity.