Unbalanced Interests: A Review of the Xayaburi Dam’s Power Purchase Agreement

Tuesday, August 13, 2013

An independent analysis done on the Xayaburi Dam’s agreement to sell around 95% of its electricity to the Thai government provides important insight into the first Mekong mainstream dam being built in Laos.  The independent analysis of the dam’s Power Purchase Agreement (PPA) signed in October, 2011 between the Xayaburi Power Company Ltd. and the Electricity Generating Authority of Thailand (EGAT), was commissioned by International Rivers and carried out by Aswini Chitnis of Prayas Energy Group.

The analysis has found that while Laos has heavily promoted the project as a way to help generate revenue for development, the Xayaburi Dam’s PPA has been found to heavily favor Thai interests, while placing significant risk and liability on the Lao government and its people.  The PPA also explains the significant financial costs associated with the project, should its construction undergo any delays.  This may be one reason why Laos has continued to push forward with the dam despite numerous requests made by the Cambodian and Vietnamese governments to halt construction in order to allow for further study and consultation.  For every day that construction is delayed, the Xayaburi Power Company would be required to pay the Thai government USD $30,000 per generator per day.  As the dam has 7 generators, this payment could amount to USD $210,000 per day, which would be a huge loss of money to both the Lao government and the project’s developers. 

Another important finding of the analysis is that despite agreements that have been made by the Lao government and developers to re-design the dam in order to minimize environmental impacts, the PPA’s contractual obligations may prevent the Xayaburi developers from fulfilling their promises.  For example, the Compagnie Nationale du Rhone has advised the Xayaburi developers that in order to prevent Mekong sediment flows from being blocked by the dam, it will be necessary to shut down operations for an estimated 10 days each year to allow for flushing.  However, this mitigation measure alone would result in expensive losses of energy, which have not been accounted for in the PPA, leading one to question whether the promises made will be kept.