BKK Post / 12 June 1998  
POWER PURCHASE DEAL  

Govt urged not to sign pact with Laos  
Opponents cite drop in domestic demand  

   Fourteen environment groups yesterday called on the 
government to forego signing of an agreement to purchase 
electricity generated by the planned Nam Theun Two dam in 
Laos.
   In a letter addressed to the prime minister and related 
officials, the groups claimed that the signing of the power 
purchase agreement was not justifiable considering existing 
economic conditions and falling power demand within the 
country as well as the project's negative social and 
environmental impact.
   The move came as the Laotian government recently 
requested the Electricity Generating Authority of Thailand 
to discuss the agreement to buy 600 megawatts from its 
mega-hydro electric project.
   Egat earlier signed a memorandum of understanding to 
purchase 3,000 MW from Laos by 2006. It has already signed 
a power purchase agreement for electricity from four other 
dams.
   The non-governmental organisations argued that Egat has 
been forced by the economic crisis to revise downward its 
15-year estimates of internal power demand. The demand will 
decrease by 11 percent from 21,432 MW to 19,049 MW in 2001 
and from 41,638 MW to 37,047 MW in 2011.
   If the purchase from Nam Theun Two goes ahead, it would 
result in excessive reserves which would become a burden on 
Egat and eventually that burden would fall on Thai 
consumers.
   The groups said the expected lower demand increase can 
be met by several power generation sources already 
contained in Egat's development plan. These include the 
independent power producers and small power producers, the 
new Ratchaburi power plant, and China's Jin Hong dam.
   The groups also pointed out that the estimated price 
that Egat would have to pay the Laotian government for 
power from Nam Theun Two would be much higher than what it 
would be for other projects.
   With the year 2004 as the base, the estimated price for 
Nam Theun Two electricity is US$0.57 per kilowatt/hour. 
This is compared to the price previously quoted for power 
generated from the Houay Ho dam project in Laos at $0.466 
per kilowatt/hour, a difference of one cent which is 
considered to be very high.
   Moreover, Laos has indicated that it will request an 
increase in prices quoted in all previous agreements.
   The groups concluded that the Nam Theun Two project was 
a highly risky venture - not only for Egat which would be 
the sole customer - but for Laos as well. In five years 
since the project was proposed, the estimated investment 
cost has nearly doubled from $800 million to $1.5 billion 
and its expected return has dropped 85 per cent from $250 
million to $38 million.
   "Under the circumstances, the signing of a contract with 
long-term commitment should be avoided, especially with 
high-risk projects," the groups' statement said.
   Egat had earlier informed Laos of its intention not to 
sign the purchase deal because of delays and uncertainties 
in the project. In February last year, the Egat governor 
announced that Nam Theun Two would not be included in its 
plan to purchase electricity from Laos.
   The groups also oppose the pending signing of the 
agreement on social and environmental grounds. They said 
construction of Nam Theun Two, when completed, would block 
the Nam Theun River, creating a reservoir over 450 square 
kilometres of forest which has been declared the largest 
biodiversity-conservation area in Laos.
   Several wildlife species, some of them endemic and newly 
discovered, would be threatened. These include Saola, a 
type of forest deer and newly discovered species of carp.
   In addition, 28 ethnic tribes called Lao Theung living 
there will be vulnerable to devastating changes brought 
about by modern development because their way of life and 
culture are too fragile to adapt to changes.
   The action has been called for by leading environmental 
NGOs such as the Alternative Power for the Future, Wildlife 
Fund Thailand, the Foundation for Ecological Recovery, Thai 
Volunteer Service and the NGOs Coordinating Committee.