Dam loan approved
08 May 2008
Laos: The World Bank (WB) has approved financing for the controversial US$ 1.25 billion Nam Theun II (NT2) dam project in Laos. When complete in 2009 the dam will have a generating capacity of 1070 MW. However, the scheme has drawn scathing criticism from environmental groups, which say it is unnecessary and will have serious human and environmental impacts.
The scheme comprises a 48 m high dam that will create a 450 km2 reservoir on the Nam Theun River. In addition, the Xe Bang Fai River will be diverted upstream of the dam to feed into the reservoir.
The project requires US$ 855 million in loans, accompanied by US$ 330 million of equity from its shareholders. WB support for the project comes in the form of a US$ 20 million grant, a US$ 50 million loan partial risk guarantee, and a US$ 200 million Multilateral Investment Guarantee Agency loan guarantee. The Asian Development Bank (ADB) will provide a further US$ 120 million in loans and risk guarantees.
Only 75 MW of the dam's electricity is expected to be consumed in Laos, with the remainder being sold to neighbouring Thailand. This is expected to generate annual revenues of US$ 150 million.
This is one of the reasons the project has received a hostile reaction from environmental groups. According to the World Wildlife Fund (WWF), current electricity supply in Thailand outstrips demand. It says the dam is unnecessary because demand over the next decade can be met more sustainably through energy efficiency schemes and renewable sources.
The WWF is also concerned about the impact of the diversion of the Bang Fai River into the Nam Theun, which it says will disrupt the farming and fishing activities of up to 130000 people. The organisation also warns that the flooding of 40% of the Nakai Plateau in southern Laos will threaten the already endangered wild elephant populations.
Marc Goichot of WWF's Living Mekong Programme said, “The growing number of hydropower projects in the Mekong basin needs proper assessment of their cumulative impact. A lot is at stake as the Mekong is not only a biodiversity hotspot but is also a major food source for those living in the region.”
However, WB president James Wolfensohn said, “We believe that a sound approach to selling hydroelectricity, supported by improved government policies, is the best way for the country to increase the amount of money it can invest in health, education and basic infrastructure for the benefit of the poor.”
Construction of the dam, which is already underway, is being managed by EDF International, a subsidiary of the French Government-owned Electricite de France national utility company. EDFI has a 35% share holding in the scheme. The Laotian Government and Thailand's Electricity Generating Public Co. Ltd. hold a 25% stake each, while 15% is owned by the Italian-Thai Development Public Co. Ltd. Joint venture.