The Nam Theun II Dam in Laos
Economic Benefits and Environmental Consequences for the Lao PDR
In 2005, in spite of opposition from a coalition of 153 environmental non-governmental organizations, the World Bank finally gave its support to the US$1.25 billion Nam Theun II (NT2) hydroelectric mega-project. NT2 is under construction on the Nam Theun river in Khammouane and Bolikhamxay provinces in central Laos. Its electricity generating capacity should be 1070 megawatts, of which near to 93% will be exported to Thailand, and its commercial operation is due to begin in December 2009.
The Nam Theun II project will divert water from the Nam Theun river, a tributary of the Mekong, to the Xe Bang Fai river. NT2 includes a 39 meter high gravity dam, a 450 square kilometer reservoir and a 27 kilometer long artificial downstream channel leading into the Xe Bang Fai river.
Shareholders in the Mega-Project
The project is developed by a private company, the Nam Theun 2 Power Company Limited (NTPC), of which the shareholders and sponsors are :
- Electricité de France (EDF) and EDF International (EDFI) of France (35%), which is also the Head Contractor and a Technical Services and Personnel Management provider;
- Lao Holding State Enterprise (LHSE) of Laos (25%), representing the Government of the Lao PDR;
- Electricity Generating Public Company Limited (EGCO) of Thailand (25%), which is also a Technical Services and Personnel Management provider;
- Italian-Thai Development Public Company Limited (ITD) of Thailand (15%), which is also the Principal Sub-Contractor under the Head Construction Contract.
Financing for Nam Theun II is provided at 30% from equity by the shareholders and at 70% by international loans from 26 financial institutions, including the Asian Development Bank and the World Bank, which had stopped funding large-scale infrastructure projects a decade ago.
Projected Economic Benefits for the Lao PDR
Laos is a poor and land-locked country with few options for economic growth and poverty reduction. Since large-scale export of tropical hardwood has been rejected has economically and environmentally unsustainable on the long term by the World Bank, export of hydroelectric power is seen as the only alternative. For the Lao government, Nam Theun II is seen as an opportunity to reduce its dependency on international development aid and as a way to reach its goal of lifting out of poverty by the year 2020.
The Lao government should receive near to $US20 billion in revenues over the 25-year concession period, after which it will take over full ownership of the dam. Laos will implement a special fund used solely for poverty reduction.
According to Shengman Zhang of the World Bank, Nam Theun 2 is not “a project per se, but as a vehicle through which to make a considerable progress in the effort of poverty reduction.” Thus, great hopes are placed in the project, not only by Laos, international financial institutions and foreign investor, but also by promoters of similar projects elsewhere in the world, who follow closely the development of Nam Theun II.
Environmental and Social Consequences
Many non-governmental organizations, including the Worldwatch Institute, the Environmental Defense Fund and International Rivers, have stated their objection to the project from the beginning because of its profound environmental and social impacts. The issues raised are many and touch several aspects of the dam like :
- The resettlement of 6200 villagers and their future;
- Downstream impacts both on the Nam Theun and Xe Bang Fai, on which depend the livelihoods of more than 120 000 people;
- The impacts on biodiversity, both on fisheries and on the 200 to 300 wild elephants living in the area;
- The management of revenues by the Lao government – an authoritarian, secretive and highly corrupt regime.
With the objective of alleviating fears and trying to make of NT2 a model dam, the NTPC created a comprehensive monitoring and evaluation mechanism including experts, advisors and independent agencies reporting to both the Lao government and the World Bank. However, many environmental defense groups have pointed to its serious inadequacies.
