Probe International

July 1, 2004

Power consumers, rural poor would be better served by smaller projects.

PRESS RELEASE

The World Bank and a French-led dam building consortium have failed to
make the economic case for the Nam Theun 2 hydro export scheme in the
tiny Southeast Asian republic of Laos, says a new report by Probe
International.

Proponents claim that export revenue from the US$1.1 billion dam would
outweigh the losses due to large-scale flooding and the resettlement of
thousands of poor farmers.

But the report, “Ten Reasons Why the World Bank Should Not Finance the
Nam Theun 2 Power Company,” argues that the 1070-megawatt dam would be
more costly and less reliable than other generating options in
Thailand.

“The business of power generation and transmission has changed so
radically since the Nam Theun 2 dam was proposed in the 1970s, that
there is no longer any valid economic or technical reason for building
such a remote and large-scale dam to serve Thailand,” says Gráinne
Ryder, the report’s author and policy director with the Toronto-based
citizens group, Probe International.

“Consumers in both countries would be better served by smarter and
smaller investments – fuel-efficient gas-fired combined cycle plants
for industrial cogeneration and off-grid generating technologies in
sparsely populated rural areas.”

If the Nam Theun 2 project were cancelled and its budget invested in
combined cycle plants, for example, Thailand could install at least 10
200-MW plants – wherever power is needed, for twice the dam’s capacity
– and without flooding 450 square kilometers of Laos, said Ryder.

“When Electricité de France pulled out of the Nam Theun 2 project last
July it should have stayed out and pursued more sensible investments in
the region’s electricity sector.”

The report concludes World Bank support for Nam Theun 2 would
constitute a subsidy to the dam’s lead investors, Electricité de
France, and Thailand’s largest private power company, EGCO, at the
expense of Thai power consumers and two million Laotians who do not
have electricity service.

Probe’s ten reasons why the World Bank should not finance Nam Theun 2 are:

# 1. Proponents have failed to demonstrate the dam’s economic viability for Lao PDR;

# 2. Theun 2 is viable only by monopoly;

# 3. Nam Theun 2 has no market demand;

# 4. Nam Theun 2 is part of EGAT’s high-risk monopoly expansion;

# 5. The Nam Theun 2 deal remains secret; not subject to competitive bidding or regulatory oversight in Lao PDR or Thailand;

# 6. World Bank experts are on record warning against uncompetitive power purchase deals (like Nam Theun 2);

# 7. Nam Theun 2 would sink part owner Electricité du Laos further into debt;

# 8. Rural Laotians would be better served by investments in cheaper and more reliable off-grid generating technologies;

# 9. Nam Theun 2’s output is more costly and less economically valuable
than gas-fired combined cycle plants in terms of reliability, operating
flexibility, and security of supply; and

# 10. Thai power consumers and citizens groups want utility reform (not Nam Theun 2).

To read the complete report, please see:

http://www.probeinternational.org/files/pdfs/muw/nt10reasons.pdf

or visit Probe International’s Web page at https://journal.probeinternational.org/

Notes

• The US$1.1 billion Nam Theun 2 dam, if completed,
  would be owned and operated by Electricité de France (35 percent), EGCO
  – Electricity Generating Company of Thailand (25 percent), Ital-Thai
  Development (15 percent), and Electricité du Laos (25 percent).
• Electricité de France expects financing for
  Nam Theun 2 to come from commercial banks covered against certain risks
  by the World Bank, the Asian Development Bank, and export credit
  agencies, including Coface of France, Export Development Canada, EKN of
  Sweden and GIEK of Norway. Other taxpayer-backed institutions,
  including the Nordic Investment Bank, are expected to provide direct
  loans to the Nam Theun 2 Power Company. (Source: www.namtheun2.com)
• The EdF-led Nam Theun 2 Power Company signed
  a power deal with the governor of the Electricity Generating Authority
  of Thailand, Sittiporn Rattanopas, on November 8, 2003. Four months
  later, Rattanopas was forced to resign following allegations of
  corruption and self-dealing. Before his appointment to EGAT, Rattanopas
  was the managing director of EGCO, EGAT’s largest private subsidiary.
  (Source: Bangkok Post, March 2, 2004; Khao Sod, March 3, 2004; International Water Power & Dam Construction, December 2003.)
• Probe International, a Toronto-based citizens
  group, investigates the economic and environmental impact of Canadian
  aid and companies in developing countries. Probe International is a
  division of the Energy Probe Research Foundation, Canada’s leading
  energy consumer advocacy group.For more information see: https://journal.probeinternational.org/CONTACT:
  Gráinne Ryder, Policy Director
  Probe International
  225 Brunswick Avenue
  Toronto, Ontario M5S 2M6
  Tel. (416) 964-9223 ext. 228
  Fax (416) 964-8239