The Electricity Generating Authority of Thailand (Egat) will scrap its plan to buy electricity
from the US$1.2-billion Nam Theun 2 hydropower project in Laos if new partners are not found within a year to replace a major French investor.

The withdrawal was announced on the eve of yesterday’s planned signing of a power-purchase agreement between Egat and the developers of the project in Vientiane.

EDF holds a 35% stake in the project while SET-listed Electricity Generating Plc (Egco) and state-owned Electricite du Laos (EDL) each hold 25%. The construction contractor Italian-Thai Development Plc holds the remaining 15%.

Energy Minister Prommin Lertsuridej and a group of Egat executives were set to
leave for Vientiane yesterday morning when the Laotian embassy in Bangkok notified Thai officials of “internal problems” that would lead to an indefinite postponement of the contract signing.

The power-purchase contract is critical as the developers need it as collateral to secure a loan facility from the World Bank and other financiers.

Egat governor Sithiporn Rattanopas said the utility could afford to wait for only one year for the Nam Theun 2 shareholding structure to be settled. Otherwise, he said, Egat would seek to buy power elsewhere to avoid possible supply interruptions starting in 2009, when Nam Theun 2 is scheduled to start supplying electricity to Thailand.

“Replacing the project is also unlikely as a new project will take about four years to  complete,” he said.

Mr Sithiporn, who is also the chairman of Egco, an Egat spinoff, said a thorough study would be needed before Egco could decide whether to take the place of EDF, given the large investment involved.

He said Egco already faced a financial burden over the next five years in raising its power production by at least 5,000 megawatts.

Dr Prommin said the government still had enough time to prepare contingency plans for electricity supply if Nam Theun 2 ends up being delayed.

“I have not yet received confirmation from the French power producer but [the pullout of EDF] will not pose a problem for the development because the project remains potentially sound enough to lure new investors,” he said.

Construction was scheduled to begin this year on the four-turbine, 920-megawatt Nam Theun 2 plant, located 250 kilometres east of Vientiane.

The plant is supposed to supply power to northeastern Thailand at an average price of 1.64
baht per unit (kilowatt/hour) throughout the 25 years of the contract. Mr Sithiporn said Egat had two alternatives to supply the Northeast if the supply from Laos was disrupted. One is to double the efficiency of existing power transmission lines from plants in the central and eastern regions and run the Nam Phong power plant in Khon Kaen at full capacity. The other is to buy electricity from other projects in Laos and southern China.

Nam Theun 2 Power Company Ltd said in a statement it “regrets the decision from
its main shareholder ” but it assured the Laotian government that it “will actively seek new arrangements”.

According to a statement by Egco to the Stock Exchange of Thailand, EDF had decided to pull out of the consortium following a strategic decision to focus its priorities in Europe.

“However, Egco is confident that the project is a quality one that enhances shareholders’ value since a concession agreement has been signed with the Lao government and the
consortium is in the process of signing the power purchase agreements with Egat and EDL,” it said.