The Electricity Generating
Authority of Thailand (Egat) could be put at a disadvantage because of
flaws in its proposed power-purchase agreement with the developers of
the Nam Thuen 2 hydropower project in Laos, according to the Office of
the Attorney General.

Egat, the only customer, must sign the
agreement for the long-delayed project to continue. If the government
agrees with the Attorney General’s findings, the project will be
scrapped. Egat governor Sithiporn Rattanopas said that under the
agreement, Egat was obligated to pay a fine at a higher rate than that
of the developers if any contractual parties failed to take or deliver
electricity from the project. This was due to the developers’ claim
that they had to invest up to US$1.2 billion in setting up the power
plant and transmission system while Egat would spend only one billion
baht to connect the transmission line from the Laotian border into
Thailand.

The Office of the Attorney General wants the
contract renegotiated so that the fines are equal between the two
parties. The office also disagrees with a clause that requires Egat to
purchase the project’s assets if it stops buying electricity in the
future, saying it is too risky to make such a commitment because the
assets are all located in Laos. In other similar power-purchase
agreements between Egat and other projects in Laos, no such requirement
existed. However, Mr Sithiporn said, Egat’s board viewed the contract
as reasonable, as the developers would not risk imposing conditions so
stringent that Egat might back out of a deal.

If the cabinet
approves the agreement as it stands, Egat is expected to sign the
contract next month. The project, designed to produce 920 megawatts of
electricity, is slated to start supplying power to Thailand in 2010.
The investors in Nam Thuen 2 are Electricity Generating Co, Egat’s
SET-listed spinoff, with a 25% holding, the Laotian government (25%),
Electricite{AAC} de France (35%) and contractor Italian-Thai
Development (15%).

Construction of the Nam Thuen dam, however,
has already been delayed seven years, after the original consortium
formed in 1995 backed out due to the impact of the 1997-98 economic
crisis and opposition from conservationists.