After the World Bank approved the project early this month,
the government, represented by the Finance Ministry, signed the
documents in Vientiane on Tuesday. The loan portion includes US$20
million from Asian Development Bank (ADB), and US$55 million from
European Investment Bank (EIB). The grant portion includes Euro 5
million from Agence Francaise de Development (AFD) and US$20 million
from World Bank’s International Development Association (IDA). The
World Bank also signed to provide US$50 IDA partial risk guarantee. The
government will subsequently retrocede these financial resources to Lao
Holding State Enterprise (LHSE), a company it fully owns, replacing
Electricit du Laos (EDL) as the 25 percent government shareholder in
Nam Theun 2 Power Company Limited (NTPC). EDF International (EDFI), a
subsidiary of Electricit de France with 35 percent, Electricity
Generating Public Company Limited of Thailand with 25 percent and
Italian-Thai Development Public Company Limited of Thailand with 15
percent are the other shareholders. The agreements were prepared to
manage the risks associated with the project, and include a clear
framework for managing project revenues soundly and transparently; the
extensive social and environmental measures to be undertaken by the
government and NTPC in respect of WB’s safeguard policies; and robust
oversight arrangements during project implementation. The Project
Agreement also commits NTPC to engaging a Lenders’ Technical Advisor
(LTA) to monitor and evaluate the physical, environmental, and social
aspects of the project and the management of the NT2 watershed on
behalf of the project guarantors and lenders. Other monitoring and
evaluation arrangements include international experts to monitor dam
safety, technical progress, project effectiveness, and the achievement
of income targets and other key objectives of the NT2 social and
environmental programmes; and annual consultations with stakeholders to
provide a high level of public scrutiny. The total base Project cost is
US$1,250 million, with an additional contingent financing of US$200
million that brings the total financing sources required for the
Project to US$1,450 million. The completion of the full Project
financing is expected by the end of April for the full construction
activities to begin in May. The beginning of commercial operations will
occur four and a half year later, in late 2009. This project is part of
efforts by the Lao and Thai governments to cooperate in the power
sector to transmit 3,000 MW of electricity from Laos to Thailand . NT2
will export about 5,354 gigawatt-hour (GWh) of electricity annually to
Thailand and provide revenue to Lao through taxes, royalties, and
dividends. It will generate about US$1.9 billion in foreign exchange
earnings for the government over the 25 year operating period, expected
to begin in 2009. An additional 200 to 300 GWh of electricity will be
supplied each year to consumers in Laos . The Lao government considers
this project extremely important and a key to sustainable development,
with revenue providing a significant contribution to the poverty
eradication programme. Nam Theun 2 is expected to improve the basic
infrastructure for 5,000 people and create new jobs.