Supalak Ganjanakhundee
The Nation
October 4, 2002

Government of Laos signed a concession agreement with developer, Nam Theun 2 Power Company, for its controversial Nam Theun 2 dam. [The dam’s developers are now in their eighth year of trying to work out a deal with Thailand and the World Bank.]

The government of Laos yesterday moved forward with its controversial Nam Theun 2 hydroelectric dam project by signing a concession agreement with the developer, Nam Theun 2 Power Company (NTPC).

The project, which will generate electricity for Thai consumption, has faced delays since 1997 due to problems including the financial crisis and environmental concerns.

Under the agreement, NTPC obtained a concession from the government of Laos to build, own and operate the dam for 25 years.

The company will pay concession fees of US$2 billion (Bt86.6 billion) for the whole 25-year period to the government and transfer the dam to the government’s control when the concession expires, said Maydom Chanthanasinh, the project’s director.

“The signing is a significant achievement for the project, enabling the investors to work out financial arrangements of the dam’s construction,” he said in a telephone interview.

With registered capital of $400 million, NTPC is a group of syndicated investors comprising Electricite de France International (35 per cent), Electricity Generating Co (35 per cent), Electricite du Laos (25 per cent) and Italian-Thai Co (15 per cent).

Vientiane and the NTPC planned to build a 1,070-megawatt hydropower dam on the Nakai Plateau, 250 kilometres east of Vientiane, and to sell 995MW of electricity to Thailand.

The Electricity Generating Authority of Thailand (Egat) and investors signed an initial power-purchase agreement in February of this year and the full purchase accord will be inked in November, said Maydom.

The project has been widely accused of causing huge deforestation and relocation of some 5,000 people from the Nakai Plateau.

In 1995, the government of Laos and investors asked the World Bank to support the programme with a risk guarantee to cover the $100-million investment cost.

The bank announced in July that |it would not consider extending a |partial-risk guarantee to the project until it receives wider support among the international donor community |and from social and environmental groups.

The bank, a major donor to Laos, required that the project be incorporated in a development framework aimed at poverty reduction and environmental protection.

The developer said the project would provide environmental and social benefits to local people.

The Laos government sees the project as a major endeavour to alleviate poverty in the landlocked country and lessen the country’s dependence on international aid, Nam Theun 2 Power Company said in a statement.