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dam-l from Mekong list @ IRN
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>From: owner-irn-mekong@igc.org
>Date: Thu, 20 Aug 1998 12:37:52 -0700 (PDT)
>>Cc: admin@focusweb.org, aviva@irn.org
>To: "undisclosed-recipients:;"@lox.sandelman.ottawa.on.ca
>
>>
>>DEVELOPMENT-LAOS: Asian Slowdown Dams Hydropower Ambitions
>>
>>BANGKOK, Aug 20 (IPS) - Champagne toasts and chanting by Buddhist monks
>>accompanied the opening in April of the Nam Theun Hinboun dam, the first
>>major hydroelectric project in Laos in 20 years.
>>
>> The Lao government is counting on the 210-megawatt project, located on the
>>Theun River in central Laos, to earn it foreign exchange mostly by selling
>>electricity to neighbouring Thailand.
>>
>> But the collapse of the Thai economy has cast severe doubts on the
>>viability of this plan and other big hydropower projects.
>>
>> This leaves Laos, one of Asia's poorest nations, facing a mountain of
>>debt, cancelled power purchase contracts and serious social and
>>environmental damage.
>>
>> ''The economic crisis just accentuates what many people have been saying
>>for some time now: that hydropower is simply too risky for a poor country
>>like Laos,'' Aviva Imhof, Mekong programme coordinator of the U.S.-based
>>International Rivers Network, said in an interview.
>>
>> Analysts predict Thailand's economy will contract by 8 percent in 1998
>>and further in 1999, and others see a decade-long recession following.
>>
>> Already, Thailand has sharply cut back on plans for expanding power
>>capacity. Late last year, the Electricity Generating Authority of Thailand
>>(EGAT) approved a new 15-year development plan based on a reduction in
>>power demand of 10 to 12 percent.
>>
>> The state utility scaled back purchases from domestic power producers,
>>postponed the commissioning of several power projects, and delayed
>>purchases from some Laos projects to at least 2006.
>>
>> The Thai power firm's actions reveal the risks inherent in Laos'
>>dependence on hydropower and Thailand as its only customer.
>>
>> As early as 1995, Lao officials conceded the price at which Thailand
>>would buy the electricity produced at Theun Hinboun was too low. The
>>situation has been worsened by the devaluation of the Thai baht, which has
>>lost nearly half its value since being floated in July 1997.
>>
>> This has further reduced the expected returns from Laos' dam projects,
>>since power purchase payments by Thailand provide for payment made half in
>>U.S. dollars and half in baht. For the Nam Theun Hinboun, this has cut
>>expected annual revenue from 25 to some 19 million dollars.
>>
>> Nam Theun Hinboun's major financier, the AsDB, had hailed the project
>>''a winner'' that was ''set to pay its investors big time''.
>>
>> In May, the Lao government and private hydropower developers said the
>>financing of future schemes had become difficult or even ''unbankable'' due
>>to the impact of the baht devaluation.
>>
>> Doubts over EGAT's long-term reliability as a power purchaser and the
>>shaky creditworthiness of many Thai partners involved in Lao power
>>projects, have made commercial lenders even more reluctant to provide
>>financing.
>>
>> The result is that by the year 2000, despite the substantial human and
>>financial resources poured into the hydropower sector in Laos, Vientiane
>>could be selling but a fraction of the power it originally envisaged -- for
>>a fraction of the returns.
>>
>> Instead of the 350 million dollars Laos was projected to earn annually,
>>it would likely earn no more than 40 million a year by 2000, the IRN
>estimates.
>>
>> ''With such a high reliance on a notoriously risky sector such as
>>hydropower, the economy could be in for further shocks in the coming
>>years,'' Imhof said. ''It is increasingly unlikely that any consortium will
>>be able to attract necessary financing in a country considered to be of
>>high political and economic risk.''
>>
>> Laos has its own economic woes. Its currency, the kip, has been falling
>>along with approvals of foreign investment. As of the first quarter of
>>1998, Thailand's investment in Laos of 57 million dollars made up 90
>>percent of foreign investment there.
>>
>> And while Laos' hydropower plans slow, IRN calculates the debt service
>>of Electricite du Laos, the state-owned utility, will rise fivefold by 2000
>>to 64 million dollars, from 12.5 million dollars in 1996.
>>
>> The Nam Theun Hinboun dam is 60 percent owned by Electricite du Laos, 20
>>percent by the Thai company GMS Power, and the remaining 20 percent by a
>>consortium of Nordic interests.
>>
>> The development of Laos' hydropower potential has been at the centre of
>>its development strategy since market reforms began in the late eighties,
>>following advice from the World Bank, the Asian Development Bank (AsDB), UN
>>agencies and private sector.
>>
>> Sixty percent of all water in the Mekong River originates from
>>tributaries in Laos, giving it a hydroelectric capacity of more than 18,000
>>megawatts. Its small population of 4.6 million people and dramatic mix of
>>high and low land topography appear to make the country ideal for dam
>building.
>>
>> Multilateral banks and donors then started touting Laos as the future
>>'Kuwait of South-east Asia'.
>>
>> A hydropower boom ensued, and many agreements to build power projects
>>struck between foreign investors from North America, Europe and Asia and
>>the Lao government. Up to 10 dams are now in varying stages of negotiation
>>or construction.
>>
>> Theun Hinboun is the first to be completed. The 150-megawatt Houay Ho
>>project, a joint venture between South Korea's Daewoo and a Thai/Lao
>>consortium, is to be completed in early 1999 in the southern province of
>>Champassak.
>>
>> The rest remain stalled due to the lack of power purchase agreements with
>>EGAT, the only realistic buyer so far for Lao electricity, and problems
>>seeking commercial financing.
>>
>> The Nam Theun Hinboun project has also come under from residents who
>>have complained of ill effects from drops in fish catch to loss of drinking
>>water sources.
>>
>> On Jul 21, more than 40 NGOs from 12 countries wrote to AsDB President
>>Mitsuo Sato to protest the Bank's handling of the project. ''The AsDB
>>appears to be more concerned with protecting the interests of private
>>investors than those of affected Lao citizens,'' they said.
>>
>> Still, Laos continues to support hydropower as the economy's key pillar.
>>As the industry and handicrafts minister Soulivong Daravong said at Theun
>>Hinboun's opening in April: ''The development plans for the next coming
>>years place the energy sector at the highest level.''
>>(END/IPS/ap-dv-en/awn-js/js/98)
>>
>>
>>Date: Thu, 20 Aug 1998 18:34:37 +0800 (PHT)
>>From: IPS Asia <ipsasia@webquest.com>
>>Subject: ips story devt-laos
>>To: ausasia@ozemail.com.au, isis@phil.gn.apc.org, infoms@pdx.rpnet.com
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>Date: Thu, 20 Aug 1998 11:47:59 -0700
>From: Aviva Imhof <aviva@irn.org>
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>
>*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*
>Aviva Imhof, Mekong Program Coordinator
>International Rivers Network
>1847 Berkeley Way, Berkeley CA 94703 USA
>Tel: + 1 510 848 1155 (ext. 312), Fax: + 1 510 848 1008
>Email: aviva@irn.org, Web: http://www.irn.org
>*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*
>
>
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Dianne Murray,
Coordinator, Dam-Reservoir Working Group
Webmistress, Dam-Reservoir Impact and Information Archive
http://www.sandelman.ottawa.on.ca/dams
vox: 1-613-520-2757 fax:1-613-520-3898 e: dianne@sandelman.ottawa.on.ca
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