Electricité de France Quits Lao Dam: Future of Project in Doubt

International Rivers Network
Friday, July 18, 2003

Electricité de France, the lead investor in the controversial Nam Theun 2 (NT2) Hydropower Project in Laos, announced on July 17 that it was withdrawing from the US$1.1 billion dam project. EDF's withdrawal from the World Bank-promoted dam comes just a day before the crucial Power Purchase Agreement between the consortium and the Electricity Generating Authority of Thailand was due to be signed.

"The withdrawal of EDF casts serious doubt on the future of the project. Over the past 14 years, tens of millions of dollars have been squandered on planning and promoting this socially, environmentally and economically questionable project, money that could have been invested in projects that would now be providing real benefits to the Lao people," says Aviva Imhof, International Rivers Network's Southeast Asia Program Director.

Almost all the power from the dam would be exported to Thailand which has numerous cleaner options to meet its energy needs. Thai energy minister Prommin Lertsuridej said in the wake of EDF's decision that his country would seek power from elsewhere if there is no progress on Nam Theun 2 over the next year.

The withdrawal of EDF is a major blow to the credibility of the World Bank, ADB and other donors. Since 1989 these institutions have encouraged Laos to borrow tens of millions of dollars and devote large amounts of scarce government funds and human capacity to attract foreign investors into hydropower, which was held out as the country's economic saviour. But Laos' dreams of hydro-prosperity were badly shaken in 1997, when the Asian economic crisis sent Thailand's power demands tumbling. While numerous other hydro projects have been on indefinite hold since 1997, the World Bank and Nam Theun 2 development consortium continued to insist that NT2 would be an economic boon.

"Nam Theun 2 was the jewel in the crown not only of the World Bank's country strategy for Laos, but also of its much criticized global strategy of promoting private sector investment in massive dams," says International Rivers's Imhof. "The World Bank is insisting that it will step up its funding of what it terms 'high risk/high reward hydraulic infrastructure.' Nam Theun 2 shows yet again that the risks of these projects are huge but the rewards often non-existent."

"It's time for the World Bank and the ADB to own up to their failure in encouraging private sector hydropower development in Laos. These institutions should learn from this failure and encourage less socially and environmentally destructive forms of development in Laos. And in future, no project should proceed without a sound economic, social and environmental appraisal in accordance with the recommendations of the World Commission on Dams," Ms. Imhof concludes.


The 50-meter high Nam Theun 2 Dam would be located on the Theun River, a major tributary of the Mekong. The project would forcibly displace 5000 people living on the Nakai Plateau and affect another 120,000-130,000 people dependent on the Xe Bang Fai River for their livelihoods. The Nam Theun Electricity Consortium (NTEC) included Electricit� de France with a 35% stake, the Electricity Generating Company of Thailand (25%), Ital-Thai Development of Thailand (25%) and the Lao government (25%). Without formally committing either way, the World Bank has been promoting Nam Theun 2 since it funded the first feasibility study in 1989. A political risk guarantee from the World Bank is crucial for developers. Without the World Bank to protect them, neither commercial banks nor export credit agencies would dare invest in Nam Theun 2.

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