July 1, 2004
French-led hydro venture in Lao PDR is uncompetitive and obsolete, says new report
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 Grainne 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 Electricite 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, Electricite 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 International’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 Nam 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 Electricite 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
The US$1.1 billion Nam Theun 2 dam, if completed, would be owned and operated by Electricite de France (35 percent), EGCO–Electricity Generating Company of Thailand (25 percent), Ital-Thai Development (15 percent), and Electricite du Laos (25 percent).
Electricite 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: http://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, CONTACT:
Grainne Ryder, Policy Director
225 Brunswick Avenue
Toronto, Ontario M5S 2M6
Tel. (416) 964-9223, ext. 228
Fax: (416) 964-8239
For further information, see: