(June 23, 2003) Attorney General questions Laotian deal, says several clauses too costly or risky.

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.

Yuthana Praiwan, Bangkok Post, June 23, 2003