Laos' Nam Theun II dam

HANOI, April 2, 2005 - After unceasing financial and political fights, the immense Nam Theun II dam project in Laos is assured of going ahead after a decision by the World Bank to give it support and financial guarantees.

The project, which has already swallowed several million dollars in studies and research since 1993, must still be signed in the coming weeks by a number of financial and institutional financial partners. Several were waiting for the bank's guarantee before committing themselves to a project which seemed a little frightening because of its massive scale in this very poor and closed communist country. But the green light given by the bank puts an end to all the uncertainties over its existence and Vientiane, the Laotian capital, emitted an immense sigh of relief.

"We have always been scared not to get the World Bank's approval," said Yong Chanthalangsy, Laos's foreign ministry spokesman. "The impatience of local people has had an impact on the government. We have had to send some missions into the field to ask them to be patient. We have promised them lots of things over 10 years."

The Nam Theun II dam, about 250 kilometres (155 miles) southeast of Vientiane, has to provide electricity to 17 provinces in Thailand from 2009 and represents 1.25 billion dollars in investment. Around 6,200 Laotians will be displaced, and it will bring up to 150 million dollars in extra revenue a year to the country which is totally dependent on international aid.

Last autumn, the bank organized a global information campaign to try to counter the project's detractors. Recently about 153 non-governmental organisations from 42 countries sent a petition to James Wolfensohn, the bank's president, urging him not to support a project which they said was not benefiting the local population while causing environmental degradation. Now, the suspense has lifted.

"This dam is a combination of numerous financial, industrial and development experiences focused on one sole project," said Ludovic Delplanque, spokesman for the Nam Theun 2 Power Company (NTPC), the joint-venture in charge of the project based in Vientiane. "It should become an example, notably in terms of lasting development and public-private partnership," he said.

The history of this development, the first major hydro power project approved by the bank in a decade, is a veritable saga of disappointments and surprises, of flashbacks and political negotiations. In July 2003, while the Electricity Generating Authority of Thailand (EGAT) prepared to sign a contract to buy power over a 25-year period, the French state-owned Electricite de France announced the withdrawal of its subsidiary EDF International, which held 35 percent of NTPC. It was as if the French group had signed the project's death warrant. At the end of several months of bargaining which saw the intervention of French President Jacques Chirac himself, the public group was returned to NTPC in November, permitting EGAT to sign its contract.

Now, EDFI and its NTPC partners, Electricite du Laos (EDL) with a 25 percent share, EGAT with 25 percent, and Italian-Thai Development Public Co. Ltd with a 15 percent stake, will be able to begin work. Dozens of contracts with sub-contractors, finalized before the World Bank agreement, are being signed. "The bank's decision opens the door for the 1.25 billion dollars necessary to build the dam to be available in the weeks to come," Delplanque said.

In an apparent bid to allay some of the concerns, the bank has mandated that an untouched forest reserve nine times the size of the area being flooded be set aside as a biodiversity conservation area, and those relocated be provided improved housing and better incomes. "That was very slow," Yong Chanthalangsy said with a sigh. "Several experts told us that in any rich country that dam would have already been finished," he said. "But it was useful to have guarantees preventing negative impacts."

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Fact File:

The NT2 project includes a 50 meter high dam on the Theun River, a major Mekong Tributary, with an installed generating capacity of 1070 megawatts (MW). Water from the Theun would be stored in a 450 square kilometer reservoir on the Nakai Plateau and diverted to a powerhouse, before being discharged into another Mekong tributary, the Xe Bang Fai.

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