Divisive dam likely to go ahead

Key Issues: 

The Nation 8 February 2004

By Nantiya Tangwisutijit

Mired in controversy for a decade, the Nam Theun 2 hydroelectric project is likely to get the green light from the World Bank after its executive directors from Washington visit the dam site in Laos this weekend for their final appraisal of the plant.

World Bank support is crucial towards moving the project off the drawing board.

Since the 1990s, the developer has requested the World Bank provide a partial risk guarantee, which is needed to secure loans from private financial institutions to construct the US$1.1 billion (Bt43 billion) project.

Nam Theun 2 would become one of the largest dams in Southeast Asia with more than 1,000 megawatts of generating capacity.

The developer has been given 18 months from last November - when it signed a power purchase agreement with Thailand - to finalise its financial arrangements for the project, said Ian C Porter, the World Bank's country director for Southeast Asia.

"They are looking forward to our answer within this period of time," he said.

On Friday in Bangkok, while on their way to Laos, five of the World Bank's executive directors met with a group of senators and social and environmental academics and activists at the airport hotel.

The directors from the United States, Austria, the United Kingdom, Japan and Venezuela are among those who have a vote on the project.

The Thai representatives told the directors that the project would benefit neither the power consumers in this country nor the people in Laos.

They said electricity from the Nam Theun 2 project, priced at a contractual $0.42 per kilowatt/hour, was more expensive than other sources in Thailand.

"Independent power producers can generate electricity at $0.413 kw/h plus cost of transmission," said Witoon P Charoen, an energy researcher and member of the National Economic and Social Advisory Council.

"Power from Nam Theun 2 is already more expensive before inclusion of transmission costs.

"On the other hand, $0.42 is too cheap for the producer in Laos, which need $0.57 to cover estimated costs if inflation is not too high, Witoon said.

To sell for less than that means lower revenue for Laos.

"But everybody knows that after the Asian economic crisis in 1997, inflation in Laos jumped to 200-300 per cent.

I can't imagine how this project could become a poverty alleviation tool for Laos as the World Bank has hoped for," he said.

Nam Theun Power Co, the project developer, is owned by the international arm of Electricite de France, Electricity Generating Plc and Italian-Thai Development Plc from Thailand, and Lao government-owned Electricite de Laos.

The Electricity Generating Authority of Thailand (Egat) is the primary buyer for the project's output.

Egat's inclusion of Nam Theun 2 in its power development plan (2003-2016) was criticised by the Thai group.

The move would eliminate small players, which would use renewable and local energy sources such as biomass and small dams to generate electricity of potentially more than 4,000MW, said Chuenchom Sangarasri, an independent energy analyst.

The group also pointed out the tremendous social and environmental impacts that the project would have around its site on the Nakai Plateau, known for having Laos' most pristine natural forest and where a species of wildlife, called saola locally, has just been discovered.

Despite their efforts to raise concerns, the group's members did not harbour high hopes that the directors would vote against the project because most of the directors attending the meeting were interested in the project's economic benefits while believing that adverse impacts could be mitigated with appropriate safeguards.

Per Kurowski from Venezuela, for example, told The Nation that based on the experience of his country, hydropower has been proven to be the best source of energy with no social and environmental impacts.

"If you go ask people in my country, 100 per cent would say dams are good," he said.

"There was no problem about [blocking the migration of] fish and no displacement [of people].

Think about it – we are an exporter of oil and gas, but 70 per cent of our energy comes from hydro dams.

Premrudee Daoroung, director of regional environmental group TERRA, said that although the World Bank delegation appeared unsympathetic with concerns of people in the region, a drive to stop the project has been set up by international civil society.

"We know this will be a long battle," she said.