Turning water into capital: Political ecology of financing ......Turning water into capital:...

Turning water into capital: Political ecology of financing hydropower development

The influence of financial actors in the Mekong Basin

Vincent Merme MSc Thesis Environment and Resource Management Student n° 2205452 [email protected]

Joyeeta Gupta ‐ First supervisor Professor of climate change law and policy at the Vrije Universiteit ‐ Amsterdam ‐ and Professor of water law and policy at the UNESCO‐IHE ‐ Delft Rhodante Ahlers ‐ External supervisor Senior Lecturer in Water Resources Management at the UNESCO‐IHE ‐ Delft

Word count: ≈ 21 000

Vincent Merme ‐ ERM MSc Thesis 2

Abstract Foreword Abbreviations List of tables and figures 1 Introduction ................................................................................................................................... 5 1.1 Problem definition .............................................................................................................. 5 1.2 Background: The Mekong River ................................................................................... 9 1.3 Methodology ....................................................................................................................... 12 1.3.1 Literature review ..................................................................................................... 12 1.3.2 Conceptual framework .......................................................................................... 14 1.3.3 The Mekong Basin and the Case study ........................................................... 16 1.3.4 Contacts and others ................................................................................................ 17

1.4 Focus and limitations ..................................................................................................... 18 1.5 Outline ................................................................................................................................... 18

2 Historical context of hydropower development in the Mekong Basin .............. 19 2.1 Mekong regime history .................................................................................................. 19 2.1.1 Inception of the Mekong regime: 1957‐1975 .............................................. 19 2.1.2 Geopolitical hitches to MC progress: 1975‐1991 ...................................... 20 2.1.3 Regionalization and economic development in the post Cold war context: post 1991 .................................................................................................................. 21

2.2 Financial context evolution .......................................................................................... 23 2.2.1 Reform process in the power sector ............................................................... 24 2.2.2 Drivers of structural reforms ............................................................................. 25 2.2.3 Implications for hydro‐development .............................................................. 26

3 Case study: the Nam Theun 2 Project Company ......................................................... 27 3.1 Context and Background ............................................................................................... 27 3.2 Financial flows and actors ............................................................................................ 29 3.3 Implications for NTPC .................................................................................................... 35

4 Stakeholders and mechanisms of hydropower development ............................... 38 4.1 Stakeholders involved .................................................................................................... 38 4.1.1 National states .......................................................................................................... 38 4.1.2 Multinational companies ...................................................................................... 39 4.1.3 Financial actors ........................................................................................................ 40

4.2 Hydropower financing mechanisms ........................................................................ 42 4.2.1 Contractual arrangements ................................................................................... 42 4.2.2 Financial flows .......................................................................................................... 43

5 Analysis and generalization: Influence of financial actors ..................................... 46 5.1 Shifting source of funds ................................................................................................. 46 5.2 Relationships between financial actors .................................................................. 48 5.3 Weighting of objectives ................................................................................................. 50 5.3.1 Political objectives .................................................................................................. 50 5.3.2 Economic objectives ............................................................................................... 51 5.3.3 Normative and Instrumental objectives ........................................................ 52 5.3.4 Internal objectives ................................................................................................... 53

5.4 Implication for hydropower development ............................................................ 55 6 Conclusion and recommendations .................................................................................... 57 Bibliography Appendixes


Abstract The current potential of economically feasible hydropower projects in developing countries equals around 1,330 GW. It would roughly require more than US$2 trillion to commodify the energy confined into these waters. Although past hydropower investment returns were disappointing, financial attractiveness tends to increase. Despite the considerable funds and the irremediable social and environmental impacts at stake, common and clearly defined scientific knowledge on the financial dynamics related to dam building remains sparse. This surprising gap in knowledge leads to the following research question: how do financial actors influence hydropower development? Using a political ecology approach, this report examines the role of the financial actors in hydropower development through a literature review. Dam proponents evolve in a politicized environment around the contested water resource. This research uses the Mekong Basin and an explanatory case study, the Nam Theun 2 power company, to excavate the financial dynamics behind dam building. Along its eventful institutional history, the Mekong regime has met geopolitical and financial hurdles to fully develop the hydropower potential of its basin. But following the end of the Cold War and the structural reforms of the riparian countries power sector, large‐scale hydropower development is back on the agenda with 100 dams under construction, licensed or planned in the lower Mekong basin ‐ of which 11 are planned on the lower mainstream. The Nam Theun 2 started its commercial operations in 2009 following years of negotiation and financial scheme building. Based on the case study, financing trends were identified and generalized. Stakeholders of large dams are interconnected throughout the water resource. Financial backers’ influence takes shape at the outset of contractual arrangements and financing mechanisms. The general understanding of hydropower financing actors and mechanisms helps structure this investigation and draw relevant conclusions. The analysis shows that financial actors’ leverages of influence imply practical consequences over dam building. Shifting sources of funds, interplays between financiers and weighting of objectives sway the forthcoming hydropower prospects. It appears that the normative rationalization and sustainable hydropower financing promoted by investors mislead the real purpose of hydropower development, at the expense of recipient country sovereignty and poorest people’s livelihoods. Capital surplus needs to be invested in growing privatized energy markets; large dams are suitable infrastructures to embrace such aspiration. Foreword This research project took place at the UNESCO‐IHE, Institute for Water Education in Delft, from April to July 2012. It forms part of my MSc Thesis, a compulsory course of the Environment and Resource Management Master at the VU University of Amsterdam. The UNESCO‐IHE provided the central topic of this investigation. Joyeeta Gupta and Rhodante Ahlers supervised me along my Thesis, and helped me to stay on track and to structure this report. In addition, Ineke Kleemans was of great support to conduct efficiently this research. I was extremely pleased to work with my supervisors on this fascinating subject and would like to thank them sincerely.


Abbreviations ADB Asian Development Bank ASEAN Association of Southeast Asian Nations BDA Bilateral Development Agency CA Concession Arrangement ECA Export‐Credit Agency EIA Environment Impact Assessment EIB European Investment Bank GMS Greater Mekong Sub‐region HCC Head Construction Contract ICOLD International Commission On Large Dams IFI International Financial Institutions IHA International Hydropower Association IMC Interim Mekong Committee IMF International Monetary Fund LMB Lower Mekong Basin MC Mekong Committee MDB Multilateral Development Bank MRB Mekong River Basin MRC Mekong River Commission MRC DB Mekong River Commission Data Base OECD Organization for Economic Cooperation and Development NTPC Nam Theun 2 Power Company PPA Power Purchase Agreement PCL Private Commercial Lenders SAP Structural Adjustment Program SH Shareholders Agreement UMB Upper Mekong Basin UN United Nations WB World Bank WCD World Commission on Dam WWF World Wildlife Fund List of tables and figures • Figure 1: Construction of dams by decade – 1900‐2000 • Figure 2: Hydropower development ratio for world regions and top five countries

with the highest potential • Figure 3: Hydropower development in the Mekong Basin • Figure 4: Conceptual framework • Figure 5: Cumulative installed hydropower capacity (MW) in the LMB • Figure 6: Key existing and proposed dams in the Nam Theun Basin • Figure 7: NTPC financing scheme • Figure 8: Schematic representation of the main financial flows after and before

dam commissioning and the main contractual arrangements • Table 1: Hydropower development in the Mekong Basin – Number of dams and

hydroelectric capacity per country and status • Table 2: Main characteristics of NTPC • Table 3: NTPC source of funds


1 Introduction 1.1 Problem definition During the 20th century, more than 45.000 large dams were built throughout 140 countries (WCD, 2000). According to the International Commission on Large Dams (ICOLD), a large dam has a height of 15 meters or more from the foundation and has a volume reservoir of more than three million cubic meters. Dam building pace has not been linear, rather it has evolved along with major international periods. After World War II, the reconstruction of Europe led to the construction of many large dams. The US Marshall Plan helped to rebuild Europe 1 and open the era of multilateral and bilateral foreign aid. The success of this plan led to the creation of the International Bank for Reconstruction and Development (later called the World Bank) aimed at exporting the western model of economic development in developing countries. Dams suited well for materializing this model of foreign aid. During the cold war, building large dams became a symbol of state control over natural resources in communist regimes. While for the western bloc, dams turned into an instrument of development to slow down communist expansion in sensitive regions (WCD, 2000; Temple, 2010; Hirsch, 2010). However, during the last two decades of the past century, the pace of dam building dropped down. The development of most attractive hydropower sites in Europe and North America partly explains this decline. In addition, rising global environmental and social concerns, together with financial constraints, slowed down dam expansion (WCD, 2000; WB, 2009) (see Figure 1 below). Today, hydropower development is back on the world agenda. In an increasingly globalized context, new opportunities for the energy sector appear and stimulate a revival in dam investment by traditional and emerging donors (WCD, 2000; ADB, 2002; WB, 2009; IHA, 2011).

Figure 1: Construction of dams by decade – 1900‐2000 (WCD, 2000) (Graph excludes dams in China)

1 With the transfer of US$ 17 billion aid (WCD, 2000). 2 Mainly International Financial Institutions (IFIs) and dam industry.


Proponents2 of large dams claim that the general purpose is to meet water and energy needs and help economic development. Depending on the region, large dams serve different overall objectives. In water‐abundant regions such as North America, Northern Europe or the Amazon, dams are generally built for hydropower generation. In dryer countries such as South Africa, Australia or Spain, dams are built for water supply. In East and Southeast Asia, where hydraulic flows change significantly along the year, dams are built for flood control during the monsoon and water supply during the dry season. Though large dams are built for a specific purpose, electricity generation remains either the primary purpose or an additional function in many countries. Today, hydropower provides around 17% of the world’s electricity supply (WCD, 2000; WB, 2009a; IHA, 2011). Large dams demand substantial investment. The World Commission on Dams (WCD) 2000 report estimated a worldwide investment of at least US$ 2 trillion during the 20th century. In 1998, Briscoe estimated an average US$65 billion annual investment in water‐related infrastructure in developing countries during the 90’s, of which US$15 billion was used for hydropower3 (Briscoe, 1998). In 2000, the WCD estimated an annual investment during the 1990s in hydropower dams between US$ 19‐28 billion (WCD, 2000; Bosshard, 2010). In 2001, the WCD gave another rather coarse estimation, with an annual dam investment in developing countries in the range of US$21‐31 billion in the 1990’s (WCD, 2001). This shows a rather large inconsistency in these financial data. Such massive investments are justified by dam proponents with the argument that water infrastructure plays a crucial role in promoting economic development and social welfare (WB, 2009). According to the International Hydropower Association, in 2009 the global hydropower installed capacity was around 980 gigawatts (GW) (IHA, 2011). Today the potential for scaling up hydropower production remains huge, especially in developing countries where 70% is not yet exploited (see Figure 2; it is worth noting that substantial potential remains in developed countries) (WB, 2009a; IHA, 2011). According to the World Bank, 75% of the total potential in South Asia has not yet been exploited. The economically feasible hydropower potential equals 1330 GW in developing countries4. The economic feasibility is determined by a hydropower plant load factor5 that determines the price of a kWh. The economic feasibility is different from the financial attractiveness. The later is determined by the ability to compete with other energy sources. This hydropower potential estimation far exceeds the actual existing capacity 6 (WB, 2000; WB, 2009a) (see Figure 2). In his study commissioned by the World Bank, Chris Head (2000) roughly estimated the hydropower cost between $1,000 and $3,000 per kW capacity. Consequently, a very 2 Mainly International Financial Institutions (IFIs) and dam industry. 3 US$25 for water and sanitation, US$25 billion for irrigation and drainage (Briscoe, 1998). 4 The total hydropower capacity in developing countries exceeds 1,900 MW, of which 70% (1330 GW) is not yet exploited (WB, 2009b). Economically feasible if benefit cost ratio exceed 1. 5 The load factor is the ratio of the actual energy produced over a period of time and the potential energy production if the plant would produce at its full capacity. 6 Existing hydropower installed capacity: 437 GW in developing countries and 315 GW in Europe and North America (WB, 2009b).


broad approximation of the investment required for developing hydropower potential in developing countries stands between US$1,33 and $3,99 trillion. The profit for equity donors is around 20‐30% while it is around 2‐3% for debt lenders (WB, 2000; WCD, 2001). This gives a general idea of the prospective market for investors in developing countries.

Figure 2: Hydropower development ratio for world regions and top five countries with the highest potential (IEA, 2010)

Unfortunately, little research has been done to record overall dam investments, and even less to understand the influence of financial actors in hydropower development. In 1997, Usher wrote a book titled “Dam as aid: a political anatomy of Nordic development thinking”, in which the author deals with the intractable dilemma for Western donors when giving dams as aid, as the negative effects of dams are disproportionally borne by poor people, which these donors aim to help (Usher, 1997). This book addressed specifically the role of bilateral cooperation in hydropower development but not other types of financial actors. In 1998, Briscoe made an assessment of public and private investments in water‐related projects for the UN Commission on Sustainable Development. He used World Bank general financial data as pointers to build up his study. Nonetheless, the author highlighted the fact that “reliable data on trends in hydro financing are not available” (Briscoe, 1998:p.14). In 2000, Chris Head authored a study on the modalities of private hydropower financing, commissioned by the World Bank. In it, he explains the financing mechanisms and contractual arrangements linked to hydropower projects. Even though this report is valuable in that it provides an overview of issues and challenges related to the private financing of hydropower in developing countries, it does not provide a critical analysis on the influence of financial actors. In 2001, the World Commission on Dams published a report titled “Trends in the financing of water and energy resource projects”. In addition to offering a strategic overview of dam financing, it reviews the financial actors involved in dam building and highlights the influence of the changing financial context in water resource management (i.e. decision‐making, planning, policy, option assessment etc.). In its work, the Commission acknowledges the overall lack of reliable financial statistics related to


hydropower projects. It strongly recommends developing a global picture of total investments in dams by drawing together fragmented data from a wide range of sources (even these data seem rather scarce) (WCD, 2001). In 2003, World Wildlife Fund (WWF) commissioned a report titled “Policies and practices in financing large dams”. This investigation tries to assess the influence of financial institutions in dam projects using empirical data to evaluate the funding mechanisms, policies and practices of twelve commercial banks and three development banks related to 23 globally distributed large dams. Subsequently, the Dam and Development Project (DDP), hosted by the UNEP, organized in April 2004 a two day workshop on the theme of financing dams and sustainable development with central focus on risks (financial and investment risk, reputational risk, risk to livelihoods and environmental risk). Interesting background papers were submitted. Finally, in 2010, the WWF organized a conference to discuss sustainable hydropower financing in the Mekong Basin. It gathered multilateral and bilateral agencies, investors and hydropower experts (WWF, 2010). As explained above, large dam development is facing a new revival after a significant decline was observed at the end of the past century. At first glance, water and energy needs are the likely, predominant forces driving this renaissance. Quickly growing economies have increasingly emerged from the so‐called South in an expansively globalized context, and require energy. Hydropower represents a straightforward way to exploit the potential of natural resources while supplying electricity and foreign currency for regional development. Nevertheless, hydropower development remains feasible only with access to large volumes of capital and financial attractiveness compared to conventional sources of energy. In this context, the role of financial actors seems crucial in the future path of dam development. To sum up, the resurgence of dam development in developing countries is driven by a combination of factors: a huge hydropower supply potential, a growing clean energy demand from emerging economies and potential profits to be made (Matthews, 2012). As past century dam expansion turned dams into highly contested objects, this reviving global interest in dam building raises a number of questions, especially regarding financial aspects. This thesis focuses on (i) mapping out the financial actors and dynamics, (ii) identifying leverage of influence and (iii) characterizing how these investments translate into claims over the landscape. This research investigates the role of the financial actors on hydropower development from a political ecology perspective. Because the literature on dam financing is scarce, this study uses one basin to excavate the financial dynamics behind dam development: the Mekong River Basin. Furthermore, this research employs the Nam Theun 2 dam as an explanatory case study to identify financing trends. This leads to the following central research question:

How do financial actors influence hydropower development?


In order to answer the research question, sub‐questions are defined as follows: 1. How has the Mekong regime evolved since the inception of the Mekong

Committee in 1957? a. What are the decisive political and economical periods of the Mekong regime

evolution? b. To what extend has the financial context changed in the greater Mekong sub‐

region and what does this imply for hydropower development? 2. How has the Nam Theun 2 dam been developed?

a. Who are the actors involved and how are they related to each other? What are the financial dynamics related to the project?

b. What are the implications along the NT2 life cycle? 3. Who are the actors involved and how does financing hydropower work?

a. What is the role of each advocating stakeholders? b. How are stakeholders officially related to each other? What are the main

financial flows along the life cycle of a dam project? 4. To what extend do financial actors influence hydropower development?

a. Which leverages of influence embodied in financial actors can affect hydropower development? How are they characterized?

b. How do these leverage of influence materialize along the life cycle of a dam project?

1.2 Background: The Mekong River The following section addresses the ecosystems services provided by the Mekong River, the status of dam developed in the basin and the cost related to hydropower. The Mekong River and its tributary system shape the Mekong River Basin (MRB). The Mekong drains the eastern watershed of the Tibetan plateau, together with its sister rivers, the Salween and the Yangtze (UNEP, 2006; Mehtonen, 2008). The Mekong is an international water body that runs through parts of six riparian countries: China, Myanmar, Lao PDR, Thailand, Cambodia and Vietnam. It takes its source in the Tanggula mountain range in Qinghai province in China at around 4000 meters high and discharges in the South China Sea about 4900 kilometres downstream, creating the Mekong delta in South Vietnam (MRC, 2010; UNEP, 2006; ADB, 2002; Morgera, 2011). The MRB is divided in two parts known as the Lancang or Upper Mekong Basin (UMB) and the Lower Mekong Basin (LMB). The UMB, mainly mountainous, drains the western part of the Chinese Yunnan Province and forms the northeast border of Myanmar. The LMB, mostly consisting in lowlands and floodplains, covers around 70% of the whole MRB (MRC, 2010; UNEP, 2006; Hirsch, 2006; see Appendix I). Approximately 70 million people live in the MRB, of whom around 60 million live in the LMB. The population in the MRB consists mostly of fisherman and farmers, with about 80% living in rural areas. Within this rural population, 25 million people live within a 15 kilometres corridor either side of the Mekong mainstream, with the higher proportion in Cambodia (75%) and Lao PDR (53%) compared to the national population (MRC, 2010a). The population in the MRB depends largely on the


ecosystem services provided by the Mekong River for their livelihoods, food security and source of incomes (UNEP, 2006; MRC, 2010a). On the one hand, farmers depend on Mekong waters to irrigate their crops and benefit from natural flood fertilization, especially rice crops in the southern part of the LMB. This is one of the reasons why the Mekong delta is the most productive rice‐growing area in Vietnam (Bakker, 1999). On the other hand, the Mekong supports a very rich freshwater fishery (UNEP, 2006; Hirsch, 2006; Grumbine, 2011). The Mekong also presents high species diversity (second after the Amazon) with around 60 important commercial migrant species. Around 50% of fish catches depend on long distance migration (MRC, 2010c, pp.97). Fish provides the main source of quality protein at low‐cost. In 2003, roughly 40 million people in the LMB were economically engaged in Mekong fishery activities, at least part‐time (MRC, 2003; MRC, 2010). With a yield of more than 3 million tons a year, the Mekong fishery has an estimated value from US$2 to 3 billion per year (Lee, 2009; MRC, 2009), contributing notably to the economies in the LMB. Fishery in Cambodia, for example, contributes 16% to the GDP. People’s economic dependency greatly relies on the river ecosystem. The previous figures show the dependency of local population livelihoods on the Mekong river system (MRC, 2010, pp.153). Besides the ecosystem services delivered, the MRB presents another valuable asset: its hydropower potential. So far, hydropower projects built in China on the Lancang River are located on the mainstream, whereas all hydropower plants built in the LMB are located on the tributary system (MRC, 2010a). Four operational dams, called Manwan, Dachaoshan, Jinghong and Xiaowan, are situated on the mainstream upper Mekong for a total installed capacity of 8,800 megawatts (MRC, 2010a; Stone, 2011). The lower Mekong tributary dams total 5,808 MW7 installed capacity spread over 36 operational dams, with the following repartition per country: 2,284 MW in Vietnam, 745 MW in Thailand, 2,778 MW in Lao PDR and 1 MW in Cambodia (MRC DB, 2009; see Appendix V: Location map of hydropower project in the LMB). Thus, the total hydropower capacity installed in the MRB amounts to more than 14,600 MW. The estimated hydropower potential according to the Mekong River Commission equals to 53,000 MW, of which 33,000 MW are identified for the lower Mekong. Only around 18% of this potential has been developed in the LMB, mostly in the past two decades. The potential hydropower growth is considerable. According to the Mekong River Committee Hydropower Database (MRC DB, 2009), the number of existing, under construction and planned dams listed is:

‐ 136 dams in the LMRB. 74% are in Lao PDR and 10% are in Cambodia and Vietnam each. Thailand is not planning any more dam projects8;

‐ 8 mainstream dams in the UMB, all in China (MRC, 2010a).

7 This figure has been updated compared to 2009. Actually, 11 projects have been completed between the creation of the database in 2009 and 2011. 8 In 1995, after years of criticisms, the Thai government announced that no more hydropower plants will be built in the country (Usher, 1997).


Status

Country Existing Under

construction Licensed Planned Capacity per country (MW)

Thailand 7 - - - 744.7 Vietnam 13 - 1 1 2,583.0 Cambodia 1 - - 13 5,590.0 Lao PDR 15 3 22 609 20,792.6

China 4 2 2 - 15,805.0 Myanmar10 - - - - - Number of dams 40 5 25 74 144 Capacity per status (MW) 14,608.1 6,692.0 5,130.6 19,084.6 45,515.3

Table 111: Hydropower development in the Mekong Basin – Number of dams and hydroelectric capacity per country and status (based on data from MRC DB, 2009 and MRC, 2010a)

Figure 3: Hydropower development in the Mekong Basin12

(based on data from MRC DB, 2009 and MRC, 2010a) The total cost for the 100 dams under construction, licensed or planned in the LMRB, of which 11 are planned on the lower Mekong mainstream, is estimated to be around US$50 billion. Regional investors and developers (mainly from China, Malaysia, Thailand and Vietnam) are leading the renewed interest of constructing

9 Thailand and Lao PDR share border on two planned mainstream dam. These dams are counted under Lao PDR in this table. 10 No reliable and updated hydropower data found for Myanmar. 11 Some uncertain data from the MRC DB (2009) may create some inaccuracies in this table. 12 Hydropower development in Myanmar is not included in this chart.

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Existing Under construction

Licensed Planned

(in MW) Hydropower development in the Mekong Basin

Thailand

Vietnam

Cambodia

Lao PDR

China (Yunnan)


mainstream dams in the LMB, accompanied by rising private sector investment and continual support from IFIs (IR, 2008a; MRC, 2010b; Middleton, 2011). Thus, financial actors have an important role to play in the future prospects of hydropower development in the Mekong Basin. This topic will be discussed further in Chapter 3. These 100 licensed and planned dams will have several impacts, both positive and negative. On the one hand, proponents of such large dam development plan praise their benefits. At regional level, they will secure power availability and allow for increased trade and foreign investment. At national level, these dams will support economic development and contribute to poverty alleviation (WCD, 2000; ADB, 2002). On the other hand, negative consequences of such a plan are widely documented. Mainly, these dams will affect the integrity and diversity of the Mekong ecosystems. Consequently, impacts on fishery and agriculture will threaten food security in the region. Finally, social and economics systems of affected communities will be disturbed (MRC, 2010b; Li, 2011; Vaidyanathan, 2011). The following section describes the methodology used to answer the research questions.

1.3 Methodology The subsequent section describes specific activities to answer the research questions and the methods to collect data. It also provides an overview of the existing literature related with the research questions and its implications for this investigation. It describes the conceptual framework and its application. In addition, it explains the role of the Mekong basin and the case study. Finally, it highlights the employment of contacts with experts and scientists.

1.3.1 Literature review This research was mainly based on literature review. The literature used consists of relevant scientific documentation (peer‐reviewed articles and papers, books, reports, websites) and was seen through an appropriate theoretical framework. To find and access the literature, open access databases of VU University library and SciVerse Hub (500 millions scientific records) were used. Other tools such Google Scholar were also used. Different kind of scientific journals available online were identified and consulted. All issues from the inception of each journal were checked. These journals are classified by themes as follows:

‐ Development: World Development, Perspectives on Global development and Technology, Futures, Journal of Development Economics, Science Magazine, Contemporary Southeast Asia

‐ Economics: European Journal of Political Economy, Journal of Asian Economics, Journal of World Business, Radical Political Economics, New proposals: Journals of Marxism an interdisciplinary inquiry, L’Eveil Economique de l’Indochine, Hand book of Development Economics

‐ Water and Energy: Water Alternatives, Water International, Energy Policy, Energy


‐ Politics and Sociology: Political Geography, The Journal of American History, Regards Sociologiques

‐ Geography and Ecology: Climate Policy, Frontiers in Ecology and the Environment, Singapore Journal of Tropical Geography, Petermanns GeographischeMitteilungen, Nature.

In addition, public websites from international institutions (e.g. World Bank, Asian Development Bank, World Commission on Dam, Mekong River Commission, UN Environmental Programme) and international NGOs and associations (e.g. International Rivers, WWF, Oxfam, International Hydraulic Association, International Institute for Sustainable Development) were examined to access more empirical data. . On the one hand, a specific research amid the media described above was conducted to strength the point raised in the problem definition (see 1.1) regarding the gap in knowledge about the financial dynamics and influence of financial actors over hydropower development. The key words “hydropower” (or “infrastructure”) and “finance” (or “investment”) were searched in the title and abstract. This has led to the following results:

‐ VU University library: 6 hits, mostly on private investment necessity to develop infrastructures and services in developing countries and incentive to attract capital. No results on influence of financial actors in hydropower;

‐ SciVerse Hub: 49 hits, multilateral and bilateral hydropower financing, international finance and power sector, hydropower controversy and impacts, influence of financial actors in developing renewable energy projects (exclude hydropower). No valuable results on influence of financial actors in hydropower;

‐ Google Scholar: 58 hits, climate change and hydropower, investment risk and management, small hydropower, incentives and barriers to invest. No valuable results on influence of financial actors in hydropower.

This research process confirms a major gap in knowledge. In addition, a brief research in French and Spanish was done to corroborate the lack of defined knowledge on influence of financial actors in hydropower development among the scientific community. On the other hand, an intense research was conducted to gather and collate the information needed to write this report. This investigation sought to have an inter‐disciplinary approach, focused on the Mekong Basin. In order to research efficiently, the research was divided in five themes. To access relevant literature, a snowball method was used, beginning the search using general terms and gradually narrowed down using more specific terms provided below. For each theme, a set of keywords was identified:

1. General data on the Mekong: Mekong, fishery, agriculture, livelihoods, impacts, hydropower, geography, ecosystem services.


2. Mekong regime evolution: Mekong Committee, Mekong River Commission, Asian Development Bank, Greater Mekong Sub‐region, International Monetary Fund, structural adjustment, energy sector, economic integration.

3. Case study: Nam Theun II, donors, loan disbursement, conditionality, controversy, financing arrangements, contracts, cost, benefit, impacts.

4. Actors and mechanisms: hydropower, multilateral development bank, bilateral aid agency, export credit agency, commercial banks, private sector, recipient, equity, debt, concession arrangements, contractual agreements, World Bank, Asian Development Bank.

5. Influence of financial actors: investment conditionality, hydropower building, private sector, multilateral, loan condition, disbursement, investment guarantee, risk, profitability, accountability, corruption, participation.

Based on keywords listed above, more than 100 documents consistent with this research have been found (roughly 50 peer‐review publications, and 50 official reports and presentations). Little work is deeply focused on the financial aspects of dam building (see 1.1.). An annotated bibliography identified and classified relevant sources. Based on this research, we assume that there is extensive literature on the following issues:

• Dam impacts and hydropower challenges; • Dam historical evolution and hydro‐politics; • Foreign power infrastructure investment and the private sector.

Nonetheless, there is little common and clearly defined scientific knowledge on: • Hydropower financing dynamics; • Financial actors influence in dam building; • How investments translate into claims over the landscape/basin.

1.3.2 Conceptual framework

This research intends to understand and analyse the intrinsic financial drivers of hydro‐development. Few studies focus on the influence of financial actors in dam building (see 1.1.). This investigation aims at providing a preliminary investigation and raising questions related to dam financing. It is part of broader research currently on going at the UNESCO‐IHE, considering landscape analysis as an integrated approach for analysing socio‐ecological transformation and dynamics of large water‐related infrastructures, e.g. dams (Ahlers, 2011). Beyond the usual pros and cons debate related to dams, this investigation applies an interdisciplinary analysis of hydropower development in the Mekong Basin over time through a critical socio‐ecological lens. The political ecology perspective allows us to study dam development beyond the usual cost‐benefit argumentation provided by technocrats and bureaucrats, and the endless list of adverse effects claimed by the civil society and environmental scientists (Baghel et al., 2010).


Political ecology is employed as an appropriate approach in critically analysing the influence of financial actors in hydropower development. This integrated framework highlights the interrelations between politics, people, economy, technology and environmental change. Water is a critical resource in thriving human societies and ecosystems. Powerful actors commonly manage the water resource, whose decisions impact each level of a society (Sneddon et al., 2006; Matthews, 2012). A critical interdisciplinary perspective is required to embrace all dynamics associated with water‐related infrastructure financing.

A four‐dimensional representation forms the conceptual framework of this study. Three interconnected dimensions shape our spatial system: (i) the socio‐economic system, (ii) the biophysical system and (iii) the technology. They are not static but evolve (iv) over time. This investigation aims at understanding how hydropower investments transfer into claims over the landscape. To do so, we need first to analyse the interdependent evolution of the human organization and the biophysical system over time. This historical analysis examines dynamics between politics and socio‐economic driving factors in relation with dam development. A special attention is given on the evolution of the financial system and its effects on the power sector, and thus hydropower development. In addition, the dam life cycle is a second component of the temporal dimension at a project‐scale. It will help to identify the implications of leverages of influence over the project life cycle, for both case study and generalization. Based on the case study and in order to explain the potential influence of financial actors over dam building, we must understand who else is involved in the process and what their formal and informal interrelations are (the size of boxes reflects the focus). This is important to show which leverages can be activated by financial players. Finally, to assess the role of financial actors, three leverages of influence were identified: (i) a shifting source of funds, (ii) the relationship between financial actors and (iii) the weighing of their objectives. This may allow identification of emerging trends in dam financing and, consequently, assessment of the role of financial actors. The conceptual framework is schematically represented in the figure below.


Figure 4: Conceptual framework

The impacts caused by the dam on the River Basin and on the adverse affected people are not studied in this investigation. However, there are represented in the previous figure to depict the global picture of dam building from a political ecology perspective. The dam company has strong interelations with the river basin, as well as adversed affected people have a substantial interdependency with the biophysical system.

1.3.3 The Mekong Basin and the Case study The Mekong Basin was chosen as a spatial background framework for this investigation, essentially because of (i) the notable hydropower revival, (ii) the interest of financial actors, (iii) its regionalization and economic integration and (iv) the literature available. The Nam Theun 2 Power Company (NTPC) is the explanatory case study selected for this investigation. An explanatory case study is not only used to study and depict a peculiarity, but also to explain causal relationships and to develop theories. An explanatory case study includes a precise description of facts, considering alternative interpretations. Then, it leads to conclusions based on reliable explanations and consistent with the facts (Mills et al., 2010). The role and implication for this research are to analysis and identify trends in dam financing dynamics with special attention on the influence of financial actors. The financial patterns detected in the case study are crosschecked with other regional projects (and to some extent with worldwide dams planned). Then, these trends are analysed and generalized and finally lead to conclusions and recommendations. The Nam Theun 2 Power Company was chosen for the following reasons:

‐ NTPC is representative to understand future hydropower development in the Mekong basin (especially mainstream dams planned in the lower basin). It is


a financing prototype model. However, it has a limited representativeness compared to most dams previously built in the Mekong Basin;

‐ It has a complex financing scheme with 27 parties involved. Financial actors are diverse (e.g. from international financial institutions to commercial banks, from traditional to emerging actors) and have different motivations and conditions for loan disbursements;

‐ So far, it is the largest investment ever made in Lao PDR; ‐ It is in Lao PDR, where approximately 70% of forthcoming dams are planned; ‐ There is broad literature and empirical data on the project.

The main characteristics of the Nam Theun 2 Project Company are found in table 2 (Chapter 3 gives further details):

Nam Theun 2 Project Company Installed capacity (MW) 1,070 Height / Width (m) 39 / 436 Total cost (US$ billion) 1,25 Reservoir (km2) 450 Construction start 2002 Commissioning year 2009 Table 2: Main characteristics of NTPC (WB, 2005; MRC DB, 2009)

Finally, contacts were established to fill the gap in the literature and crosscheck trends identified in the analysis of the case study. Moreover, other tools were applied to support this study.

1.3.4 Contacts and others During this research, several contacts were established to access information or to counterbalance the gap in knowledge. Professionals from specialized institutions and scholars from universities were contacted by email. The Appendix IX lists the position and location of key informants contacted along the research. In addition, a table was created in order to list all dams built over the Mekong using the publicly available Mekong River Commission Data Base (2009). This database provides an overview of status of the LMB dams and related overall costs. As the MRC DB dated from 2009, status data were updated (dam under construction in 2009 which are now operational). The compiled table can be consulted in Appendix IV. Furthermore, to map out the financial dynamics, a schematic representation of donors and their contractual and financial interactions with other actors was done (see Figure 8). The relevance of this diagram was corroborated with contacts in France and Australia (see Appendix IX). The four previous sub‐sections have presented the methodology used to answer the research questions. The following section describes the focus and limitations of this investigation.


1.4 Focus and limitations This research is limited in time and space. The spatial limitation of this study refers to the Mekong basin. This research mostly focuses on the lower Mekong, with a special emphasis on the relationship between Thailand and Lao PDR (because of the case study selected). The consideration of the lower Mekong basin is justified because eleven mainstream hydropower plants are back on the agenda. Furthermore, downstream riparian’s dwellers suffer from upstream building effects. Thus the assemblage of dams (mainstream and tributary) is examined as a whole with special attention on the NTPC case study. Even though, China already built three mainstream dams (Manwan, Dachaoshan and Jinghong) over the Lancang Jiang River (name of the upper Mekong) and plan to build five more mainstream dams (Lee et al., 2009; Hirsch, 2010), the upper Mekong is overlooked along this study mainly due to financial data accessibility concerns. The temporal scope is established from the inception of the Mekong Committee in 1957 to date. This is consistent as first official talks and negotiations over dam planning started with the creation of the Committee. The following section describes the outline of the report. 1.5 Outline This investigation is conducted through a political ecology framework. This implies to connect multiple disciplines in a logical and analytical thread along this study. In Chapter 1, the research problem is defined, the context of the Mekong river system depicted and the methodology to answer the research questions explained. Chapter 2 gives a political and economical historical analysis of the Mekong Basin, with special emphasis on the path of dam development and the financial context evolution. Then, Chapter 3 explores the explanatory case study, the Nam Theun 2 power company. It provides a brief contextual history of the project, a description of the financial dynamics and actors involved and draws alternative explanations. Subsequently, Chapter 4 points out large dam proponent roles and financial mechanisms of hydropower development. Successively, Chapter 5 provides an analysis of financial leverage of influence and seeks to generalize findings based on the case study. Finally, Chapter 6 concludes with further conclusions and gives policy and scientific recommendations.


2 Historical context of hydropower development in the Mekong Basin

2.1 Mekong regime history

The following paragraphs expose briefly the key milestones of the Mekong regime evolution in a changing geopolitical context. In addition, a depiction of the hydropower projects achieved during each period is presented.

2.1.1 Inception of the Mekong regime: 1957‐1975 The institutional history of the Mekong River Basin management emerged in the 1950s, with regional dialogue on trans‐boundary water collaboration between the four emerging nation‐states, four years after the withdrawal of France from Indochina: Lao PDR, Kampuchea (currently Cambodia), Thailand and South Vietnam (Hirsch, 2006; Morgera, 2011). In 1957, the Committee for the Coordination of Investigations of the Lower Mekong Basin, or “Mekong Committee” (MC), was created under the auspices of the United Nation Economic Commission for Asia and the Far East (ECAFE 13 ). The mandate of the Committee was to coordinate investigation, research and study of the LMB water‐related development projects and to appeal for bilateral and multilateral financial and technical assistance. Its core areas of activity were at this time hydropower, irrigation, flood control, drainage, navigation, watershed management and water supply (Makim, 2002). Its primary task for this period was the collection of hydrologic data required to build large dams, especially mainstream dams (Sneddon et al., 2006). The two upper riparian countries, China and Burma (currently Myanmar), were not involved in the MC. However, they agreed in 1960 a bilateral treaty14 to regulate trans‐boundary issues and establish navigation rules over the Mekong (Morgera, 2011). The Mekong Committee was born in the cold war context with rising influence of the United States of America (USA), the Union of Soviet Socialist Republic (USSR) and People’s Republic of China (PRC) over Southeast Asia. Complex and changing ideological alliances took place between the allies of the capitalist bloc and the communist bloc (Makim, 2002). The Vietnamese reunification crystalized these differences. South Vietnam found support from the USA, while the PRC and USSR backed North Vietnam. Thailand was closely allied with the USA. Lao PDR, supposedly neutral, was closely supported by USA and South Vietnam. Cambodia, also apparently neutral, had closed ties with the PRC. From the Committee’s inception, the USA played a dominant role in the Mekong waters cooperation, invoking the MC as mean for setting peaceful political relations in the region.

13 In 1956, the ECAFE published a report advocating numerous large dams projects in the LMB. Currently, the ECAFE is known as the United Nation Economic and Social Commission for Asia and the Pacific (ESCAP) (Yu, 2002; Makim, 2002). 14 The “Boundary Treaty between the Union of Burma and the People’s Republic of China” (Morgera, 2011).


American officials and engineers15 were directly involved in planning hydrologic activities. The American backing was also part of a wider geopolitical strategy to channel aid funds to economic development projects and thus counteract the communist expansion (Sneddon et al., 2006; Bakker, 1999).

Despite ideological tension and conflicts, Lao PDR, Cambodia, Thailand and South Vietnam agreed to work together for the sake of sub‐regional Mekong water development, under the condition of only approving unanimously every activity to be undertaken in the basin. In 1970, the MC released an indicative basin plan that proposed 17 potential large mainstream dams by 2000 (MRC, 2010). In 1975, the MC approved the “Joint Declaration of Principles for the Utilization of the Waters of the Lower Mekong Basin”. This declaration promulgated specific rules and principles for water use and gave veto power to riparian nations over activities to divert water from the mainstream (Hirsch, 2006; Makim, 2002). From its inception to 1975, the MC focused its work in planning a cascade of mainstream large dams from northern Lao PDR to southern Cambodia. Nonetheless, none materialized, primarily due to political reasons rather than technical or even financial (Hirsch, 2010). According to the MRC (MRC DB, 2009), seven tributary dams were built during this period in Thailand and Lao PDR, of which four are considered large dams. The first of them was built in 1966 on the Nam Pong River, province of Khon Kaen, district of Ubonrat, Thailand. The Ubol Ratana dam cost US$17,42 million and has an installed capacity of 25.20 MW. In 1971, the Nam Ngum 1 hydroelectric project was built in the province of Vientiane, district of Keo oudom, Lao PDR. It is the largest dam built during this period with a total cost of US$97 million and an installed capacity of 148.70 MW. Its main purpose was to supply electricity to Thailand (Hirsch, 2010). Following, two other dams were achieved in 1971 and 1972 in Thailand, the Sirindhorn dam (US$13,6 million and 36 MW) and the Chulabhorn dam (US$14,6 million and 40 MW) respectively (MRC DB, 2009). Multilateral institutions such as the World Bank supported financially the realization of these hydropower and irrigation projects.

2.1.2 Geopolitical hitches to MC progress: 1975‐1991 From 1975 to 1991, LMB countries faced a difficult period punctuated by various disruptive events. Following the end of the Vietnam War in 1975, Lao PDR, Cambodia and Vietnam endured political regime shifts. From 1975 to 1979, the Khmer Rouge took political and military control of Cambodia. Meanwhile, regional leadership dispute between Thailand and Vietnam was fierce (Makim, 2002). The USA stopped its financial support for the MC due to several economic embargoes16 . Other Bilateral Development Agencies (BDA), in particular from Scandinavian and Japanese

15 Staff came from both the United States Bureau of Reclamation and Army Corps of Engineers. Few months before the creation of the MC, the US government released influential reports to draw attention on the substantial hydropower and irrigation potential of the Mekong (MRC, 2010a). 16 Embargoes were imposed on Cambodia (removed in 1992), Vietnam (removed in 1994) and Lao PDR (removed in 2004) (MRC, 2010a).


governments, replaced this financial gap and maintain support to this day (MRC, 2010). In this context, the Committee’s activities were partially halted. The 1975 declaration was impeded by these politically disruptive events. The Committee did not meet during 1976 and 1977 and was on the brink of failure of the cooperation process started two decades earlier (Hirsch, 2006). But, in January 1978, Vietnam, Thailand and Lao PDR signed a declaration to establish an interim body and thus promote a continuation of the discussion. The Interim Mekong Committee (IMC) maintained interval activities17 until 1991, as it was not possible to plan basin‐wide development without the Cambodian government (MRC, 2010a). Indeed, dam development slowed down during this period. In approximately 20 years (1972‐1991), only two small‐scale dams were built (MRC DB, 2009). In 1982, the Huai Kum dam (1,18 MW/ S$7,28 million) was built in the Chaiyaphum province, Kaset Sombun district, Thailand. Then, in 1990, the Dray Hlinh 1 dam (12 MW/NA) was built in the Dak Lak province, Dak Nong District, Vietnam (MRC DB, 2009). This decline in hydropower development in the Mekong Basin was over with the end of the Cambodian civil war in 1991. The pacification of the region brought a new favourable framework for promoting discussion and basin‐wide planning.

2.1.3 Regionalization and economic development in the post Cold war context: post 1991

In December 1991, the collapse of the USSR precipitated the cessation of the Cold War, following the USA‐USSR détente process started in the late 1980s (Hirsch, 2006; Makim, 2002). Meanwhile, the Cambodian civil war officially came to an end with the signature of the Paris Peace Accords in 1991 (Sneddon et al., 2006). The Mekong sub‐region development opportunities revived as main political and military hurdles were eliminated. For the international community, the Mekong River arose again as symbol of peaceful cooperation with possibilities for rapid economic growth due to, among other things, its potential for hydropower and irrigation (Sneddon et al., 2006). Few years earlier, in 1988, Thai Prime Minister Chatichai Choonhavan expressed this renewed interest in transforming the region from a battlefield to a market place (Hirsch, 2006; Makim, 2002). According to the Asian Development Bank (ADB), the Greater Mekong Sub‐region (GMS) encompasses the six Mekong riparian countries: the Yunnan Province of China, Myanmar, Lao PDR, Thailand, Cambodia and Vietnam. It accounts about 326 million inhabitants (Yu, 2002; ADB, 2012). The restoration of a basin‐wide planning in changing regional geopolitics relations has been strongly promoted by the Asian Development Bank (ADB). In 1992, the six members entered into an economic cooperation program supported by the ADB: the GMS initiative. This cooperation program includes nine priority sectors: energy, trade, investment, transport, 17 Mostly consisting in data collection. In 1987, the IMC released a revised basin plan that proposed less hydropower development than the 1970 plan (MRC, 2010a).


telecommunications, agriculture, environment, human resource development and tourism. A set of economic corridors was also established to facilitate North‐South and East‐West commercial activities (see Appendix II) (Krongkaew, 2004). Trade and investment are important components to improve commercial relations between members. The GMS initiative fosters large loans and co‐financing between members. In addition, it enhances private sector involvement and improves competitiveness (Yu, 2002). With no appropriate energy supply in the GMS, MDBs such as WB and ADB advocated regional power trade as a main strategy for economic development. The Mekong River plays a central piece for this regional cooperation. All members have their own interest in harnessing the Mekong waters energy, e.g. producing electricity for Thailand or earn revenues from hydroelectricity selling for Lao PDR. This includes the construction a sub‐regional interconnected transmission network. It is included in the GMS framework (Krongkaew, 2004). Other signs of economic integration intensification were the Vietnam admission to Association of Southeast Asian Nations (ASEAN) in 1995, then joined by Lao PDR and Burma in 1997, and finally by Cambodia in 1999. ASEAN was established in 1967 by Thailand, Indonesia, Malaysia, Philippines and Singapore. The ten member states18 are gathered under the motto “One Vision, One Identity, One Community”. The central mission of the association is to accelerate economic growth and social progress through active collaboration and mutual assistance between member states19 (Krongkaew, 2004; ASEAN, 2010). In 2004, ASEAN heads of State agreed to improve economic integration and cooperation amid the poorer nations of the MRB: Myanmar, Cambodia, Lao PDR and Vietnam. The MRC, ADB’s GMS and ASEAN actively cooperate to identify and support development opportunities in the MRB (Karki, 2005; MRC, 2010a). Almost twenty years after the GMS initiative launched, the MRC (2010a) praises large benefits of this economic cooperation and extensive investments in the region20 . Improved road connectivity and power infrastructures have provided numbers of direct and spill over benefits for LMB countries (MRC, 2010a). Previous statements present views of the MRC and may not reflect other opinions, e.g. from subsistence farmers (Hirsh, 2006). In April 1995, Thailand, Lao PDR, Vietnam and Cambodia21 signed the Agreement on the Cooperation for the Sustainable Development of the Mekong River Basin (“Mekong Agreement”) (Hirsch, 2006). The MC became the Mekong River Committee (MRC) and kept a similar mandate in terms of planning and development of water resources in the LMB. Although the MRC promotes equitable and reasonable use of the Mekong River (MRC, 2010a), the veto power accorded to each

18 Brunei Darussalam joined the ASEAN in 1984 (ASEAN, 2010). 19 In 1992, the six original members of ASEAN agreed to set up a free trade area (AFTA) (Krongkaew, 2004). 20 Between 1992 and 2008, more than US$3 billion were invested in the area. 21 Cambodia asked for its re‐admission in 1991. Despite Thailand opposition, negotiations led to Cambodia reintegration with the signing of the 1995 Agreement (MRC, 2010a).


member state in 1975 was abandoned. This salient change allows each nation to build large dams without approval of other countries. Only the Procedure for Notification, Prior Consultation and Agreement (PNPCA, introduced in the 1995 Mekong Agreement) is required before a new dam is built (Lee, 2009; MRC, 2010a; Grumbine et al., 2012). The MRC turned out to be the foundation of further dam development for the LMB. Despite absence of Myanmar and China22 in this new agreement, large hydropower projects and bilateral power trade perspectives have developed a better economic collaboration between the six riparian countries. From 1990 up to now, 28 hydropower dams were built in the LMB (MRC DB, 2009) and 4 in the UMB (MRC, 2010a). Figure 5 distinctly shows the hydropower development boom in the LMB.

Figure 5: Cumulative installed hydropower capacity (MW) in the LMB

(based on data from MRC DB 2009) (Yunnan and Burma dams are not included in this picture)

2.2 Financial context evolution In the new world order succeeding the end of the Cold War, Southeast Asian countries experienced a gradual shift from highly centralized to open market based economies (MRC, 2010a; Baird, 2011). While strengthening regional economic integration and political cooperation in the 1990’s, the power industry sector was reshaped by structural adjustment programs (SAP) promoted by international financial institutions (Makim, 2002; Yu, 2002). Also, powerful central control states shaped their economies and supported such reforms. It is the case of Thailand that became a tiger economy during the last decade (along with Indonesia, Malaysia and Philippines) and suffered substantially during the financial crisis in 1996 (MRC, 22 The PRC and Myanmar became dialogue partners in 1996(MRC, 2010a).

0

5 000

10 000

15 000

20 000

25 000

30 000

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

Cumulative installed hydropower capacity (MW) in the LMB

Existing dams

Planned dams


2010a). As a whole, it has resulted in substantial changes in the manner in which power facilities are financed, built, owned and operated (WCD, 2001).

2.2.1 Reform process in the power sector According to western oriented international financial institutions, the core purpose of power sector reform, gradually implemented in South‐east Asia since the 1980s, is to design a suitable industrial framework that enlarges competition, accountability, innovation and efficiency opportunities. These structural changes usually materialize in deregulation, privatization and public spending cuts, fostering optimum profitability and competitive tariffs required by electric utilities (Ingco, 1996; Yu, 2002; Williams, 2006). The usual first step is to break the classically state‐owned electricity utility into smaller entities. It involves restructuring power generation by creating independent power producers (IPP) that compete against each other through the market. When possible, electricity distribution is divided into a number of concession zones. Then the regulatory authority compares each company based on performance criteria and fixes individual tariffs and targets. The transmission network usually remains centralized for practical reasons. Furthermore, these reforms aim at attracting private financial funds for system expansion and service quality improvement (Ingco, 1996; WB, 2000; WCD, 2001). To encourage private sector involvement in energy development projects, appropriate forms of project financing were established. Under pressure from IFIs (such as the IMF, WB or ADB), private sector participation in hydropower development was stimulated in terms of research, design, investment, construction, operation, transmission and distribution through the establishment of new forms of contracts (such as Built‐Own‐Transfer (BOT), Built‐Own‐Operate (BOO), Built‐Own‐Operate‐Transfer (BOOT) 23 and Joint Venture) (Yu, 2002). These mechanisms encourage large infrastructure project and public‐private partnerships with long‐term arrangements. They allow stakeholders to recover their initial investment and operational and maintenance expenses (WCD, 2001). Since the emergence of an energy market system in the early 1990s, the GMS countries have gradually transformed their energy policies and restructured their power sectors. Yu (2002) has identified and listed the evolution of energy utility structures in each GMS member states. The most important changes for each country’s utilities are described in Appendix III. The objectives and implications of such reforms were diverse. For instance, in Lao PDR, the deregulation of the power sector was designed principally for the export market. The government of Lao (GoL) in 1986 introduced the New Economic Mechanism, whose objectives were, among others, to foster private investment in power projects and increase revenue from hydroelectricity sales. The Hydropower Office was created to plan and implement hydropower generation plants aimed at supplying energy to neighbouring countries. This new entity was separate from the 23 Further in the text, all similar contracts will be commonly named BOOT.


historical state‐owned utility, Électricité du Laos (EdL), which remained in charge of the national electricity market. Both institutions are dependent on the Department of Electricity. The Foreign Investment Management Committee manages all private investments, negotiates terms of concessions and acquires support from all national bodies involved. In addition, as the banking and legal system represented a concern for investors, during the 1990s, the GoL started a series of reforms concluding in the Foreign Investment Law (WB, 2000), minimizing risks and optimizing profitability for foreign investors.

2.2.2 Drivers of structural reforms Before structural reforms, the power sector worldwide was generally centralized in state utilities who managed electricity supply and distribution. However, by the 1980s and the 1990s, many developing country utilities experienced a lack of capital resulting in decreased public service quality (supply shortage, worsening equipment, transmission loss 24 ) (Barnett, 1992; Williams, 2006). International financial institutions, especially the IMF, argued that state‐owned utilities were in need of structural reforms. External macroeconomic factors, such as economic crisis, precipitated actual implementation of these reforms. The essential external driving force was finance. Impacts of such reforms over growing economies are controversial (Ingco, 1996; Williams, 2006; Dreher, 2006). Following the oil crisis in the 1970s and the accumulation of financial burden (foreign debt, inflation and budget deficit) in the 1980s, developing countries fell prey to economy‐wide SAP. Within this global economic context, many developing nations were anxious about the future of their power sectors. Even when electricity public companies were profitable, they were worried about the incapacity of public debt financing to provide capital needed in future power infrastructure investments, as power demand was forecasted to rise substantially. Consequently, the absolute necessity for alternative sources of funds became the central driving force of the power sector reform in developing countries. Foreign Direct Investment (FDI), encouraged by growing interest in energy from international firms and commercial lenders in new market opportunities, turned into a mean to fill this financial gap. The IMF and the WB strongly supported these visions. Their SAP loan policies adopted the neoliberal dogma of the “Washington Consensus” (Yu, 2002; Williams, 2006; Baird, 2011). In 1994, the ADB adopted a new lending policy that required liberalization and reforms prior to new power sector loans (Williams, 2006). The Asian financial crisis hit Southeast Asian economies from mid‐1997 to 1998. The crisis caused two opposed outcomes on power sector reforms. First, several Asian countries such as Thailand prompted their reforms as a result of stabilization loan conditionality imposed by the IMF and the WB. Second, the Asian Crisis provoked a sudden drop in

24 For example, in Vietnam in 1998, 19% of the electricity produced was lost through transmission and delivery (Yu, 2002).


FDI that had increased extensively in response to reforms since the beginning of the 1990s (Baumüller, 2009; MRC, 2010a).

2.2.3 Implications for hydro‐development The power sector privatization stemming from structural program adjustments has resulted in a shift from public to private control over the development and ownership of new power facilities (WB, 2000). The emergence of new financial mechanisms through IPP and PPP has helped to set up a financial structure that minimizes the perception of risk for financiers. In addition, privatization of energy sector has provoked an increase in power production to maintain profits of privatized firms. Thus demand side management and energy efficiency are marginalized (Yu, 2002). For instance, in Lao PDR, little attention is given to off‐grid alternatives, such as pico hydropower plants or solar systems. Instead financial actors, along with governments and multinational companies, promote large‐scale investments in large hydropower dams and grid electrification. These projects are usually financed and developed by foreign companies through BOOT contracts (Smits, 2010; IR, 2012). Furthermore, the promotion of bilateral energy trade has also been stimulated. As a result, Lao PDR have signed a MoU with Thailand and Vietnam, in which they allow to purchase from Lao PDR 3000 MW of hydropower by 2006 and 2000 MW by 2010 respectively. At the same time, Lao PDR concluded thirteen official contracts and seventeen unofficial arrangements with foreign companies. Myanmar identified eight potential large dam export projects for a capacity of 8200 MW (Yu, 2002). The legislative reforms engaged in Lao PDR were focused on enhancing foreign investment for export hydropower projects, as Lao PDR hydropower potential resources are far larger than its national electricity demand (WCD, 2001). The 1990s have been a turning point period for hydro‐development in the Mekong Basin and has resulted in a changing dam financing pattern. The 2001 report from the WCD argues that the reforms arose a number of concerns such as impacts on the poor and on energy efficiency, the loss of sovereignty and societal authority over key development resources, the national ability to regulate the power sector and concerns of corruption and nepotism (WCD, 2001; IR, 2012). However, these issues are not further discussed in this report as they are outside of the scope of this research. Following this background historical analysis, the subsequent section deals with the explanatory case study: the Nam Theun 2 dam.


3 Case study: the Nam Theun 2 Project Company Nam Theun 2 Project Company (NTPC) was chosen as case study to identify and understand hydropower‐financing trends in the LMB. This project is comparable in size to the eleven dams planned on the Mekong mainstream, although some argue that is less representative due to its unusual financing plan compared to dams already built in the Mekong Basin (key informant from the World Bank, see Appendix IX). The analysis of the complex financial set‐up of NTPC will help further studies to assess and understand the influence of financial actors in the completion of future large dams. NTPC symbolizes the considerable potential for hydropower in Lao PDR (IEC, 2010) and represents a prototype of best project finance deal (EGCO, 2010). Following the financing success of NTPC, the first proposed mainstream dam in the LMB, funded by Thai banks and developed by a Thai company (Matthews, 2012), is underway. In September 2010, the GoL informed the MRC of its desire to build the Xayaburi Dam (Grumbine et al., 2012). The construction costs are estimated at US$ 3.8 billion (Stone, 2011). This project will need to mobilize substantial funds. Private lenders’ involvement will be crucial. NTPC seems to open doors to future similar projects aimed at “extracting the blue gold” of Lao PDR.

3.1 Context and Background The intention to exploit the hydropower potential of the Theun River and the steep slope offered by the Nakai Plateau is not a new idea. The 1st of May 1927, the headlines in L’Eveil Economique de l’Indochine weekly newspaper read “Les Forces hydrauliques de la Nam Theune (Laos)” (“The hydraulic forces of the Nam Theune”). French engineers were already contemplating a multipurpose dam in this area. Their plan was to divert Nam Theun waters toward a 300 meters cliff on the edge of the plateau and thus create a hydropower plant of 40,000 horsepower capacity (equal around 30 MW). This proposal aimed also at improving irrigation, navigation and opening up this remote region. However, “well‐informed” settlers criticized this project of electrifying “a savage country where there is nothing to do for a hundred years”25. A final interesting point raised by the article is the potential energy market of the Siam Kingdom26 (Cucherousset, 1927). Thailand was already considered as a potential power export market. The project never saw the light, probably for technical, financial or political constraints. Approximately ninety years later, the Nam Theun 2 (NT2) power facility is operational. The plant is situated in the central provinces of Khammuane, Bolikhamxay and Savannakhet, approximately 200 hundred kilometres southeast of Vientiane. It is the largest tributary dam in the Mekong Basin with an installed 25 In the original text : «…que des gens dits « bien informés » ont ridiculisé l’idée d’électrifier le Cammon, pour eux pays sauvage où il n’y a rien à faire avant cent ans » (Cucherousset, 1927). 26 Currently known as Thailand.


capacity of 1,070 MW. The hydropower facility consists of a 39 meters27 high dam, a 450 square kilometres reservoir and a power station. The NT2 is a trans‐basin diversion hydropower plant, which means water is diverted from its original stream and the power station is not located nearby the dam. Water stored in the reservoir is diverted to the power station through an underground shaft. The station is located at the bottom of the Nakai escarpment (South‐west of the reservoir, close to the village of Gnommalat) and benefits from a natural drop of 350 meters. From the station, waters are discharged into a regulating pool and then flow into a 27 kilometres downstream channel toward the Xe Bang Fai River, which drains in the Mekong around 150 kilometres south of the Nam Theun junction. The project also contains two transmission lines: one 500kV transmission line to the Thai border and one 220kV transmission line to the domestic Lao PDR power grid (World Bank, 2005; MIGA, 2006; Sinha, 2007a; Sinha, 2007b; IR 2008). To visualize where and how the NT2 project is integrated into the Laotian landscape, the map below shows the hydropower development in the Nam Theun River basin. In Appendix VI and VII, two other maps present the regional location as well as a technical schematic representation of the hydroelectric plant.

Figure 6: Key existing and proposed dams in the Nam Theun Basin (IR, 2008b)

27 Sources differ from 39 to 48 meters (same for installed capacity from 1070 and 1075 MW).


Although the project was already contemplated in the 1920s, feasibility studies on the Nam Theun were actually considered from the 1970s on, when the MC identified the hydropower potential of the Nam Theun. It led to a World Bank feasibility study achieved by Snowy Mountains Engineering Corp between 1989 and 1991. Shortly after, the Government of Lao PDR (GoL) signed an agreement to develop the project and asked the World Bank to contribute to the project financing in 1994. In 1995, the NT2 project became a priority for the GoL (WB, 2005; Sinha, 2007b). In 1997, a first round of socio‐environmental studies was produced but the Asian crisis delayed temporally the project development. In 2000, the EGAT and the NTPC agreed on a proposed electricity tariff. That was the starting point for further agreements: the Shareholder Agreement (SA) was signed in 2001, the Concession Agreement (CA) in 2002 and the Power Purchase Agreement (PPA) in 2003. While safeguard documents were finalized, financing activities continued and reached financial closure in 2005. On November 2005, the Prime Minister of Lao PDR, the Prime Minister of the Thailand and the Ambassador of France in Lao PDR, along more than 300 local and international officials, celebrated the NT2 construction inauguration. From this date on, the construction moved forward and the NT2 power facility started its commercial activities in December 2009 (Sinha, 2007b). With a total cost of more than 53% of Lao PDR annual GDP28, NT2 is the most valuable asset and greatest source of foreign exchange for the GoL. Over the concession period, the GoL will benefit from about US$ 2 billion of revenues from its 25% share in the NTPC. For this purpose, the GoL established a special‐purpose company, the Lao Holding State Enterprise (LHSE), to become the shareholder in NTPC (among others IPP projects). The Laotian Ministry of Finance owns 100% of LHSE. Deducting LHSE’s expenses and debt pay‐back, it will represent the principal source of funds for the country’s public finance and is meant to improve its financial resources aimed at poverty alleviation. These development programs for poverty reduction and environmental protection will follow the procedures and rules stated under the revenue and expenditure management agreement signed between the Gol and International Development Association (IDA, part of the World Bank group) (ADB, 2005; MIGA, 2006; Sinha, 2007b; IR, 2009).

3.2 Financial flows and actors Three components of the project are being described here: (i) the shareholders of the project company, (ii) the contractual arrangements and (iii) the financial structure and actors involved in the project. A special emphasis is given to the third element. The Nam Theun 2 Power Company Limited (NTPC) has implemented the NT2 hydropower project. The company was created on August 27th, 2002, as a limited liability company under Lao PDR law, and its registered head office is located in Vientiane, Lao PDR. The firm was owned by four parties: Électricité de France 28 Compared to US$ 2,718 billion 2005 Lao PDR GDP (in current US$) (World Bank data).


International (EDFI – 35%), Electricity Generating Public Company of Thailand (EGCO – 25%), the Lao Holding State Enterprise (LHSE – 25%) and Italian‐Thai Development Public Company (ITD – 15%). In 2010, ITD sold its shares to EDFI29 and EGCO30. The NTPC bears all the risk related to the project (except political risk) (WWF, 2003; WB, 2005; Sinha, 2007a; MIGA, 2006). All parties involved in the project are bound together by formal contracts. The key contracts related to the NT2 project are briefly described here after:

• Shareholders Agreement (SA): signed in 2001 with a duration of 45 years, the SA establishes the rights and obligations of the four shareholders. It provides for the goals, organization, management and operation of NTPC (ADB, 2005; WB, 2005).

• Concession Agreement (CA): signed in 2002 between the GoL and NTPC with duration of 25 years, the CA grants NTPC to develop, finance, build, own and operate the NT2 hydropower plant; and to pass the project to the GoL at the end of the concession period. The CA provides for the right and obligations for both GoL and NTPC (CA, 2005; ADB, 2005; WB, 2005). Under this agreement NTPC is in charge of the entire water management aspects related to NT2. Except for water release obligations and restrictions, NTPC has the right of using the water stored in the reservoir (Sinha, 2007b). The full CA (a 1000‐pages document) is confidential, leaving citizens without access to the dam’s operating cost and liabilities (Probe, 2004).

• Power Purchase Agreement (PPA): signed in 2003, it stipulates the conditions under which the EGAT and EDL will purchase the electricity produced by the NTPC. It is the central contract for the completion of the project, ensuring the future revenues of the hydropower plant on the basis of a promise to buy. EGAT approved to buy 5,636 GWh per year at agreed tariffs on a take‐or‐pay basis over the concession period. EDL agreed to purchase 200 GWh per year. In return, the NTPC is obliged to make these amounts of energy available (ADB, 2005; WB, 2005).

• Head Construction Contract (HCC): signed in 2005 between NTPC and EDF, it is a turnkey contract. It gathers engineering, procurement and construction activities. EDF has subcontracted four other companies for civil works and electromechanical installations. These firms are well‐known: ITD from Thailand (also a shareholder in the project), Nishimatsu Contracting Company from Japan, General Electric from the USA and Mitsubishi‐Sumitomo Electric from Japan (ADB, 2005).

Other contracts regarding staff management, technical services, implementation arrangements or socio‐environmental management are not described in this report. The schematic representation in Appendix VIII shows graphically the contractual structure of the NT2.

29 In September 2010, EDF acquired 5% extra shares in NTPC (EDF, 2010). 30 In October 2010, EGCO acquired 10% stake in NTPC (EGCO, 2010).


So far, the NTPC power facility is the biggest infrastructure investment in Lao PDR. In total, the estimated project base cost US$1.25 billion, plus an additional US$200 million for contingencies. The costs are attributed as follows: US$722 million for the Head Construction Contract, US$250 million for financing charges, US$229 development and pre‐operating expenses and US$90.5 million for environmental and social impact mitigation and compensation programs (ADB, 2005; WB, 2005). The total project cost was funded 28% by equity (US$350 million) and 72% by debt (US$900 million)31. The additional US$200 millions contingent costs are financed half by equity and half by debt (WB, 2005). The Nam Theun 2 dam was created under a BOOT contract. It means that the NTPC has built the dam and will operate it for a concession period of 25 years from starting commercial operations. After that, the dam will be transferred at no cost to the GoL. With this financial structure, the GoL is not entirely exposed to financial risks such as building cost overruns or delays (WWF, 2003; Sinha, 2007b). In order to assess roles and influence of financial actors over the Nam Theun 2 dam building process, financial actor profiles must be established. To do so, a set of criteria is identified. It allows distinguishing or clustering each financial actor. Three criteria have been established as follows:

• Source of funds: sector (public, private, public/private), country of origin, scale (importance of investment) and type (loan, grant, guarantee);

• Relationship between financial actors (temporality / common interest / risk allocation);

• Weighting of objectives. Source of funds 27 parties have participated in financing the NT2 large‐scale project. The four shareholders directly finance the equity package. The GoL, through the LHSE, owns 25% share in NTPC. The LHSE equity participation in the project accounts for US$87.5 million32. As the GoL has limited capital, this package was funded by grant, loans and credit from the IDA (US$20 million loan), the French Development Agency (AFD, €5 million grant), the European Investment Bank (EIB, €40 million loan) and the Asian Development Bank (ADB, US$20 million loan) (WB, 2005). Detailed financing schemes of the equity participation of the three other shareholders are not publicly accessible. It was not found in time for this report. Financial institutions provide the US$ 1,000 million total debt package through loans to NTPC and/or guarantees to private lenders. The following financial actors are:

• MDB: IDA, ADB, Multilateral Investment Guarantee Agency (MIGA), Nordic Investment Bank (NIB), European Investment Bank (EIB);

• BDA: AFD, PROPARCO, Exim Thailand33; • ECA: COFACE, EKN, GIEK;

31 When contingent cost are taking into account, the debt‐equity ratio slightly changes to 69:31. 32 It represents 25% of US$ 350 million equity package, excluding contingent equity. 33 Exim Thailand is not a BDA but assimilate as such. It is a state‐owned bank that provides loans.


• Private lenders: o 9 international commercial banks: ANZ Investment Bank, Bank of

Tokyo – Mitsubishi, BNP Paribas, CALYON Financial, FORTIS Bank, ING, KBC, Société Générale and Standard Chartered;

o 7 Thai commercial banks: Bank of Ayudhya, Bangkok Bank, Kasikorn Bank, Krung Thai Bank, Siam City Bank, Siam Commercial Bank, TMB Bank Public Company Limited.

International financial institutions have offered US$ 300 million in form of loans or guarantees. MIGA, IDA and ADB have provided US$ 126 million in debt guarantees to support private financing. ADB, NIB, AFD and PROPARCO have made US$ 144 million in direct loans to NTPC (private part‐owner equity and long‐term private commercial bank debt) (WB, 2005). Exim Thailand has provided a US$30 million loan to NTPC. COFACE, EKN and GIEK have covered private dollar international lenders with total debt guarantees of US$200 million. ECA involvement aimed at protecting the nine international commercial bank investments. Finally, the seven commercial Thai banks have invested US$500 million equivalent in the form of direct loans to NTPC. These investments are not covered for political risks. Hereafter, Figure 7 represents the financing structure of NTPC and table 3 resumes the sources of the fund of NTPC.

Figure 7: NTPC financing scheme (Sinha, 2007b)


NTPC Source of funds Sector / Origin Scale

(US$ million / %) Type

Equity34 (sponsors) EDFI Public‐Private / Fr 157.5 10.9% Core capital LHSE Public / Lao 112.5 7.7% Public Grant/Loan EGCO Public‐Private / Thai 112.5 7.7% Core capital ITD Public‐Private / Italy, Thai 67.5 4.7% Core capital

Debt (financial actors) MDBs Public / International 21035 14.5% Debt guarantees/Direct loans BDAs Public / Fr, Thai 90 6.2% Direct loans ECAs Public‐Private / Fr, Sw, Nw 200 13.8% Debt guarantees

Private36 Private / Thai 500 34.5% Direct loans Total 1,450 100%

Table 3: NTPC source of funds (adapted from ADB, 2005 and WB, 2005) Relationships The international dollar lenders requested to NTPC the accessibility of appropriate political risk37 mitigation, both in Lao PDR and in Thailand. This was a condition sine qua non for international dollars investors to lend to NTPC for the project. Therefore, GoL and NTPC asked the World Bank to provide political risk guarantees to cover the international investment package for NTPC. According to the WB, multilateral guarantees were the single realistic solution for such a project. Applying this model of guarantees and limited direct loans, multilateral and bilateral donors gathered approximately US$ 1, 150 million in limited private funding (WB, 2005). Private Thai baht lenders did not cover their investment with political risk guarantees. They financed around one third of the project. The different actors involved in NTPC are linked in the following ways:

• The French played an important role in the development of NT2. Not only have French financial institutions supported the project, the main shareholder and also contractor is the French multinational electric company EDFI. The AFD, PROPARCO, COFACE and French commercial banks have financial and institutional relations. PROPARCO is a subsidiary company of AFD specialized in supporting the private sector. The AFD owns 57% share of PROPARCO. In addition, seven French financial institutions own 27% stakes in PROPARCO. Société Générale and BNP Paribas are shareholders and thus they both have a permanent representative in the PROPARCO board of

34 Contingent costs are financed 50% by equity and 50% by debt, on a pari‐passu basis. Contingent equity is provided proportionally by the four shareholders and it is included in this table. 35 Guaranteed loans from IDA, MIGA and ADB are supporting $US 126 million of private funding and direct loans of $US84 million from ADB and NIB have been provided to NTPC. 36 Only Thai commercial banks. Dollars commercial lenders are covered under debt guarantees. 37 Political risks can be shift in law taxes and duties regime, expropriation, force majeure or other specific obligations of a sovereign nature. In addition, the IDA PRG also insures investment against natural force majeure events.


directors. Finally, one member of the COFACE is an observer in PROPARCO’s activities (Proparco, 2012). These observations raise logically a number of questions regarding conflict of interests that are not addressed in this report.

• General electric was a subcontractor for the NT2 construction. The company has around 33% (Krungsri, 2012) stake in the Bank of Ayudhya (Middleton, 2011), which has financed part of the NT2 debt package.

• ING Bank and TMB Bank Public Company Limited have participated in financing the private debt package. ING owns 25% stakes of the TMB Bank Public Company Limited (TMB, 2012).

• BNP Paribas owns Fortis and both have decided to invest in NTPC. Risks are shared between the different parties involved in the project. The construction risks were taken by the Head Contractor, which then passed them to the subcontractors. The completion of transmission line risk was taken by EGAT. The political risks were covered by multilateral bank guarantees for the part of the debt financed by international dollars lenders. Even though Thai commercial bank investment represent around one third of the total cost of the project, these investments are not covered/guaranteed against political risks. Weighing of objectives The purpose of the NT2 project is to satisfy the Thai energy demand thereby reducing Thailand’s strong dependency on natural gas, and stabilizing energy prices for consumers (ADB, 2005). For Thailand, NT2 is also a way to avoid the environmental and social restrictions on new domestic projects due to environmental and social concerns (ECA, 2009). Probe International (2004) however argues that the World Bank, along with the power utility EGAT, have overestimated Thai power demand growth to justify the viability of the project. According to the ADB (2005), the economic objective of the project is to “promote economic growth in the region by helping the Lao PDR develop its hydroelectric power resources in an environmentally and socially sustainable manner and to promote power trade in the GMS” (ADB, 2005, pp. 6). To assess the financial viability of the NTPC, multilateral banks have prepared financial projections over the concession period (ADB, 2005). Probe International highlighted that the proponents of the project were not able to prove the financial viability of the project. Based on an economic analysis conducted by Washington‐based consultants in 1997, the average energy price should be 40% higher than the tariffs negotiated in 2003 in the PPA to cover the project costs (Probe, 2004). International lenders sought to secure their investment by minimizing risks and setting up the level of interest rate. A borrowing plan was incorporated to the financial plan. It fixes the interest rate associated with long‐term loans. These documents could not be found for this research. The normative objective of the financial actors was to enable the GoL “to generate revenues through investment in hydropower resources that are used to finance spending on priority poverty reduction and environmental programs” (ADB, 2005, pp. 104). The NT2 revenue and expenditure management arrangements intend to insure


that revenues will be spent with transparency and efficiency. Multilateral and bilateral institutions will monitor the effectiveness of the use of the GoL revenues in terms of social and environmental programs (ADB, 2005). Through the Public Financial Management Strengthening Program (PFMSP), the ADB, WB and IMF seek to reform the GoL revenue and spending strategy (ECA, 2009). The instrumental objectives promoted by the financial actors were translated into three social and environmental mitigation programs: the Social Development Plan, the Environmental Assessment and Management Plan and the Social and Environmental Management Framework and First Operational Plan (ECA, 2009). To evaluate the performance and quality of the project, monitoring and evaluation arrangements were established. Experts from the MDB/BDA and commercial lenders supervise this multilayered monitoring system (ADB, 2005). All international commercial banks38 involved in NT2 have committed to the Equator Principles (Equator Principles, 2012), which should mean that the project was in compliance with strict environmental and social performance standards. Nevertheless, International Rivers assessed that the Nam Theun 2 dam was in violation of the World Bank safeguard policies (IR, 2009). Finally, the reputational objectives of the Nam Theun 2 project were enhanced when the project received six awards of best project finance deal by magazine and private bodies specialized in finance. The project is considered as a financing prototype model that enabled to mobilize the largest amount of capital through the highest number of financing sources in South‐east Asia (EGCO, 2010).

3.3 Implications for NTPC The financing dynamics of the NT2 project have played a major role in the establishment of the NTPC. Financial actors have made the completion of the project possible by using different strategies, ranging from the incentives provided by multilateral banks for drawing in private lenders in, to the promotion of biased overestimations on the financial viability and local spill over benefits. Although the NT2 project was established under a BOOT scheme with private ownership, this project would not have been possible without the involvement of international financial institutions such as the WB. The participation of reliable traditional donors encourages private lenders to enter into project financing. In this way, MDBs have permitted the realization of the project by facilitating private investment. The NT2 project financing used a combination of large sums of private capital covered by a set of guarantees provided by international financial institutions. This 38 Considering that CALYON Financial and FORTIS Bank are respectively part of Crédit Agricole and BNP Paribas, which are members of the Equator Principles.


project is an example of the ability of these institutions to mobilize private capital with a guaranteed private lending ratio of around 1:28 (it means that US$42 million guarantees accomplished about US$1.15 billion of private loans and investment). This project is being a showcase to guide and lead the way for future private projects (WB, 2005). Consequently, the NT2 financing structure success may influence positively the economical feasibility of mainstream dams planned and stimulate investments. The CA negotiations were strongly influenced by WB requirements in terms of obligations for all parties supporting the project, especially regarding social and environmental measures. The NT2 CA is an exhaustive document compared to other public‐private project of similar extent (WB, 2005). MDBs have influenced the quality of the project by enhancing social and environmental impact mitigation. According to the WB, the NT2 project financing is one of the first large funding packages that is conditioned on social and environmental principles, which all donors have endorsed. This means if the NTPC does not respect social and environmental agreements, multilateral and bilateral funding would be halted and it will lead to a commercial default of the company (WB, 2005; ECA, 2009). EGAT negotiated the NT2 project for its own interests and those of its subsidiary EGCO (which is a sponsor in NTPC). According to Probe International, the price for imported electricity in Thailand will be more expensive than the expansion of domestic generation capacity (Probe, 2004). The Thai buyer facility has influenced the option of building a dam in Lao PDR rather than in Thailand for its own interests. Financing set‐up is based on recommendations made by the largest influential donors such as the WB and the ADB. Their experts advised the Project Company and recipient government on the best practices for financing such a project. The financial advisors also assessed financial projections based on a model especially made for the project. This model intends to show the future performance of the project company during the concession period on a base case scenario (WWF, 2003). These institutions are also driver donors for the completion of the project and have promoted benefits of such a project. There was bias in the financial viability as proponents of the project made this feasibility analysis. The GoL applies royalty and income taxes on the revenues earned by NTPC. Nonetheless, according to the CA, these tax rates are applied at reduced level during the first period of the concession (tax income exemption during the first five years, and then gradually raise from 5% to 30% at the end of the concession) (ADB, 2005; Sinha, 2007b). The GoL financial incentives to draw foreign investment may be a threat to the Laotian national sovereignty over its natural resources. One can argue that the GoL is selling off its resources. Questions remain about the way contracts have been awarded. No literature was found on the subject. The process of awarding contracts remains rather opaque. Probe International states that the NT2 deal remained secret and without competitive bidding or regulatory oversight in Lao PDR or Thailand (Probe, 2004).


Finally, lessons learned from NT2 might reinforce the regional power system integration by providing economic, financial, environmental, regulatory and institutional strategies to overcome development obstacles (ECA, 2009), at the benefit of financial actors willing to invest in the region. The Nam Theun 2 case study has identified financial actors leverage of influence. The subsequent Chapters 4 and 5 describe and analyse the trends defined along Chapter 3. This explanatory case study does give valuable insights into the methods used by financial actors to influence the prospective of a project.


4 Stakeholders and mechanisms of hydropower development

4.1 Stakeholders involved

The purpose of this section is to provide an overview of actors involved in the

hydropower building process. It aims at briefly describing the overall role of each player. Following sub‐sections are based on the politicized environment described by Nüsser (2003) in his critical review of large dams through a political ecology perspective (see Figure 6 below) and the findings of the case study analysis. The following section will only examine the advocate’s side described by Nüsser (2003) and applies the conceptual framework described in Figure 4. Figure 8: The main actors in the controversial large dam debate (Nüsser, 2003)

4.1.1 National states According to Nüsser (2003), hosting countries are amid the most central players in large dam planning. Today mostly constructed in developing countries, large dams are perceived as a symbol of nation building and national industrialization (Cullather,


2002; Gonzáles, 2003). Puissant state‐owned regulatory agencies and bureaucratic bodies usually support planning and realization of such large projects. These institutions seem to have a fundamental self‐interest to promote dam‐building to maintain their authority and reputation (Nüsser, 2003; Williams, 2006). Governments with weak institutional frameworks and little organized public opposition are more attractive for investors. For instance, the lack of public resistance to dams makes Lao PDR attractive for private investors (Usher, 1997). The national state intervenes in hydropower project through their central government and the public power facility, which generally participate in financing equity. Furthermore as argued in section 2.3., energy market privatization has facilitated private sector participation in financing debt in large dams projects. In the conceptual framework and along the case study, two roles of the state were identified. States can participate in a large dam project as public utility, shareholder or both at the same time through different public institutions. The type of hydropower project, either domestic or export oriented (WB, 2000; WWF, 2003), usually determines the role of the state. In the case of NTPC, the GoL through the LHSE played the role of shareholder by funding part of the equity package. The Gol is in need for revenues, has little capacity to invest and thus promotes export projects. Thailand, through EGAT, played the role of public utility. EGAT is the main electricity purchaser (even though EDL is also buying a 5% share of hydroelectricity produced). Thailand needs energy and promotes projects abroad for importing electricity. In other cases, countries with energy needs, financing capacity and potential hydropower resources might play both roles.

4.1.2 Multinational companies Transnational corporations represent the dam‐building industry. They consist mostly of engineering, consulting, manufacturing and equipment supply companies and they are significant driving forces outward developing countries. Many companies gather several of these specializations (Bosshard, 2010). They usually conduct feasibility studies and environment impact assessments. This professional sector is organized in powerful lobbying associations such as the International Commission on Large Dams (ICOLD) or the International Hydropower Association (IHA). These associations promote expansion of large dams by holding international seminars and conferences. However, they have difficulty coordinating and developing common positions due to the heterogeneity of their focus. They also compile their knowledge into technical expert committees and gather all technical data related to dams. Technology transfer and successively economic development are their main arguments for stimulating dam expansion (Nüsser, 2003; Bosshard, 2010; Baghel et al., 2010). Their overall mission is to promote “sustainable” hydropower and to assist nations for meeting their water and energy needs (IHA, 2011). The ICOLD is more specialized in setting up guidelines and standards to optimize dam building and operation.


Developers involved in the Mekong hydropower development are usually multinational experienced companies. Foreign hydropower developers are often fully or partly state‐owned utilities such as Électricité de France (EDF) or Norway’s Statkraft Norfund Power Invest (SNPI). Equipment suppliers (like turbines and generators) tend to be massive private multinational companies such as Alstom, Siemens or General Electric (Bosshard, 2010). Construction contracts were always attributed to traditional foreign firms because of the lack of reliable qualified local companies (WB, 2000). However since 2000, skilled dam companies have been emerging in developing countries, such as in China and India. For instance, with half of the world’s large dams, China has been able to strengthen its dam building industry and equipment supply chain. Today, the Chinese companies (and financiers) are playing a significant role in Southeast Asia hydropower development. Synohydro, China Southern Power Grid (CSG), Gezhouba or China International Water and Electric Corporation (CWE) represent main Chinese dam developers. Many others firms are involved in equipment supplying. Chinese dam industry is very active in the MRB. For example, Synohydro is involved in six dams planned in Lao PDR and Cambodia; CSG in three projects, of which the colossal Sambor mainstream dam planned in Cambodia has an estimated 7,110 MW installed capacity. Regional hydropower developers are also gradually emerging from Thailand (such as EGCO, Ratchaburi, GMS Power, ITD, Ch. Karnchang), Vietnam (such as EVN, PetroVietnam, VLPC) or from Malaysia (such as Megafirst Corporation or Gamuda) (Ramamurti, 2004; Liebman, 2005; IR, 2008a; Middleton, 2011). Therefore, the traditional, western dam building industry will experience progressively tougher competition in exploiting hydropower potential in developing countries. As identified in the case study, multinational companies can play different roles. They can be shareholder, developer/constructor or both at the same time. For instance, in the case of NTPC, EDFI is one of the main shareholders but also the central developer/constructor of the hydropower plant.

4.1.3 Financial actors For this study, financial actors are clustered in four categories: Multilateral Development Banks (MDB), Bilateral Development Agencies (BDA), Export Credit Agencies (ECA) and Private Commercial Lenders (PCL). They are the principal actors providing funds for dam development. This study is not considering other possible sources of funds such as public domestic investment or private sponsors 39 . International financial flows from traditional actors are well documented and trends have been identified. However, investment data from the private sector are much harder to access. This section gives a brief overview of the roles played by different type of financial institutions.

39 Dam developers can turn into financiers in some cases. See example of EDFI in the NTPC case study (Chapter 3).


4.1.3.a Multilateral development banks During the 20th century, Multilateral Development Banks have been the most important engine of dam development worldwide via direct investments. Since the beginning of the 1990’s, their support for hydropower has first declined in real terms and then took new forms. They have gradually reduced their direct investment to destructive projects due to international criticisms from the civil society and scientific community. Nonetheless, under international political pressure to continue lending, MDBs still play an important role in hydropower expansion. They facilitate other source of funds through guarantee and legitimization in order to mitigate investment risks. They are still funding debt and equity through loans (Kardam, 1993; Strickland et al., 1998; WCD, 2001; WWF, 2003; WB, 2009a). The most important multilateral financial institutions are the World Bank and its agencies (IBRD, IDA, IFC, MIGA), the Inter‐American Development Bank, the Asian Development Bank and the European Investment Bank (WCD, 2001).

4.1.3.b Bilateral development agencies Bilateral Development Agencies are national agencies aimed at supporting government in developing countries to alleviate poverty. They represent the channel for the Official Development Assistance. BDA and MDB play a similar role. They can be united under the name International Financial Institutions (IFI). Their financial supports in hydropower development are usually in the form of equity grants or loans to the host governments, or to the power companies. Although BDA are a rather a minor source of debt financing, they act as a catalyst for gathering other sources of funding, like multilateral banks (WB, 2000; ADB, 2002). The most influent BDA in the Mekong basin are the Japan International Cooperation Agency (JICA), United States Agency for International Development (USAID), Swedish International Development Agency (SIDA), Agence Française du Développement (AFD) or the Australian Agency for International Development (AusAID) (WWF, 2003; UNEP, 2006).

4.1.3.c Export credit agencies Export credit agencies have a facilitating role that helps finance overseas exports of a nation’s goods and services. They are either public‐private or private entities. They generally provide guarantees and insurances to protect loan exporters against political or commercial risks. Over the last decades, their role in hydropower development has increased by assisting dam industry exportation. During the 1990’s, they played a substantial role in the expansion of infrastructure financing by the private sector. However, their involvement in dam building may decrease in the future as they are gradually facing pressure to apply more sustainable policies. In addition, large emerging economies such as Brazil, India and China have been


developing their own dam industries able to compete with traditional international hydropower companies (WCD, 2000; WWF, 2003).

4.1.3.d Private commercial lenders Private commercial lenders such as commercial banks have always been involved in hydropower development, though private investors used to be reluctant to participate in hydropower projects that have significant front‐end costs, a high‐risk profile and long payback periods. But since the beginning of the 1990’s, worldwide private sector investments in infrastructure building have substantially increased. MDB, BDA and ECA have been providing risk mitigation instruments that have convinced private lenders to upscale their investments. In addition to direct participation in debt financing, commercial banks very often play a financial advisor role to establish and negotiate financing plans. Commercial banks are usually highly skilled and experimented in piecing together a large diversity of financial instruments into a reliable financing plan (WCD, 2000; ADB, 2002; WCD, 2001; WWF, 2003). Their advisor role might have a greater influence than their lending activities. 4.2 Hydropower financing mechanisms Based on the case study, the most important contractual arrangements between stakeholders of a hydropower project were clearly distinguished. In addition, the financial flows related to a dam project are described on the base of the depiction of the financial dynamics of the case study and the literature available.

4.2.1 Contractual arrangements In this section, four central contracts are briefly explained: (i) the Concession Agreement (CA), (ii) the Power Purchase Agreement (PPA), (iii) the Shareholder Agreement (SA) and (iv) the Head Construction Contract (HCC). Furthermore, complementary contracts will be succinctly described. Concession Agreement (CA) The CA is the central contract of the hydropower project. It stipulates the conditions under which the dam company can operate (usually under BOOT schemes). The average duration of the CA is ranging from 20 to 30 years. It also specifies the obligations of the government to the dam company. Habitually, the CA protects the power company against political force majeure event and shifts in law and taxation regimes (WB, 2000; WCD, 2001). Power Purchase Agreement (PPA) The PPA is a contract between the electricity utility and the dam company. It is a long‐term agreement to purchase a certain amount of power at pre‐defined tariffs. It also includes different technical and financial undertaking by both parties.


Hydropower project financing is strongly dependent on this long‐term arrangement as it provides a long‐run financial outlook of a project (WB, 2000; WCD, 2001). Shareholders agreement (SA) The SA sets out the right and obligation of the shareholders and stipulates the objectives, establishment, management and operations of the power company. It usually has a longer duration than the CA (WB, 2000; Sinha, 2007b). The Head Construction Contract (HCC) The HCC is signed between the Head Contractor and the Power Company. The HC is in charge of the design, the completion of the civil and electromechanical works and the procurement of all equipment under the supervision of the PC. The HCC is typically a turnkey contract for a fixed price, subject to penalties in case of delay. Complementary arrangements are listed hereafter: Memorandum of Understanding (e.g. between host government and dam developer based on energy consumption forecasts), Royalty arrangements (return revenue to the hosting government for the utilization of its natural resources), Technical Services and Personnel Management Contracts, Operation and Maintenance Agreement or Loan Agreements (loan maturity, repayment and rate of interest). This list is not exhaustive and further detailed as it does not fit in the scope of this report.

4.2.2 Financial flows Two main types of funding package are used in hydropower financing: (i) the equity package and (ii) the debt package (Briscoe, 1998; WB, 2000; WCD, 2001; WWF, 2003; Williams, 2006). In average the debt/equity ratios for hydropower project are around 70:30 (WCD, 2001). Based on the case study, two distinct periods along the life cycle of a project were identified based on a turning point: the dam commissioning date. Before commissioning, financial flows come mostly from financial actors and shareholders into the power company; whereas after the beginning of commercial operation, financial flows are reversed, from the electricity buyers to the shareholders (dividends and royalties) and financial actors (loan repayment, plus interests). The Figure 9 maps out these financial dynamics in a schematic diagram. Financing equity On average, equity represents around one third of total investment. Equity lenders and investors hold the share of the power company. Holders of equity are of different nature. Generally, equity holders are the host government and the multinational companies. Host government can buy power company shares thanks to loan and grants provided by MDBs or BDAs. Hosting governments can also directly participate in funding equity when they have the sufficient financial capacity. Private sponsors provide participation in equity (typically multinational companies). Sponsors are usually public‐private foreign hydropower developer, multinational engineering companies, IPP and national private groups (Briscoe, 1998; WB, 2000; WCD, 2001; WWF, 2003; Williams, 2006). As private entities, it is difficult to assess


where there capital comes from. In this report, it is assumed that their equity participation is based on commercial loans from private banks and on their own capital. Shareholder’s return on investment is around 15‐20% over 40 years (WCD, 2001; Tractebel, 2005). Financing debt On average, debt represents around two thirds of total investment. The public and private donors provide sources for financing debt. Funds are raised in the form of direct loans to the dam company and guarantees to commercial financiers. Most hydropower projects are not feasible without public funding and guarantee support. MDBs used to be the most important source of debt financing. To a minor extent BDAs also provide debt financing in forms of loans and guarantees. ECAs can finance up to 30% of the total project cost (Briscoe, 1998; WB, 2000; WCD, 2001; WWF, 2003; Williams, 2006). The participation of private lenders is difficult to assess due to opacity of their financial operations. Debt lenders get a return margin over the cost of capital around 2‐3% over approximately 10 years (WCD, 2001; Tractebel, 2005). The figure below is a global picture that seeks to map out the financing dynamics and actors involved in a hydropower project. The figure is based on the explanatory case study and on the literature accessed along this research. It is representative to many hydropower projects and can be applied in most cases. However, it does not include particular type of financing (e.g. bonds issues, domestic investment) and leaves out some relationships (e.g commercial loans to sponsors).


Figure 9: Schematic representation of the main financial flows after and before dam commissioning and the main contractual arrangements


5 Analysis and generalization: Influence of financial actors In order to assess the role of financial players in a dam building process, three leverage of influence have been identified based on the trends drawn from the case study: (i) the sources of funds, (ii) the relationships between financial actors and (iii) the weighting of objectives. The following analysis and generalization is based on the facts and alternative explanations described in the case study. The description of these aspects will help to identify general implications over hydropower development.

5.1 Shifting source of funds Funding sources have changed during the course of dam building history, following macroeconomic dynamics and geopolitical events. Even though the type of financial actors involved in dam financing remains relatively the same (see 4.1.3), some aspects have changed substantially. Major shifts have occurred since the end of the Cold War and today these trends appear to be reinforced. Four changing aspects of dam financing have been selected: (i) sector, (ii) origins, (iii) scale and (iv) financing mechanisms. They are described hereafter. Shifting sector Declining involvement of public institutions and the increasing role of the private sector seem to be confirmed today. This trend was already identified by the end of the 1990’s (Briscoe, 1998; WCD, 2001; WWF, 2003; Baumüller, 2009). The role of classic western donors and international financial institutions, such as the World Bank, in funding large infrastructures in developing countries is declining since global criticisms increased during the last decades of the past century. There is a gradual shift from international public donors to the private sector, through increasing establishment of Independent Power Producer (IPP) and Public‐Private Partnerships (PPP). Nonetheless, the public sector continues to have a large influence on new hydropower projects, either developed by the public or private sector. With decreasing involvement of the public sector and the difficulty of financing a project entirely by the private sector, the PPP seems an appropriate alternative according to the 2001 report of the WCD (WCD, 2001; WWF, 2003; Middleton, 2011). Furthermore, commercial banks are becoming key financiers and thus major decision makers. For instance, Thai commercial banks are increasingly providing loans to support regional infrastructure development. They regularly co‐finance projects in collaboration with international dollar banks 40 and with the support of IFIs. Nonetheless, the backing of international financial actors does not seem absolutely necessary to achieve a project. As described in Chapter 3, Thai commercial banks financed around one third of NTPC total investment without IFIs guarantees. In

40 The international dollar banks are all banks that lend money in the US dollar official currency. This is in contrast with regional banks, such as Thai banks that lend money in Thai Baht.


addition, Nam Ngum 2 dam41 has been entirely financed by three Thai commercial banks42. Nam Ngum 2 is a large dam completed in 2010 in Lao PDR. With a US$ 760 million total cost, it has an installed power capacity of 615 MW. The details on the financing plan remain obscure. The power company is a holding by Thai construction and energy firms (MRC DB, 2009; IR, 2009; Middleton, 2011). Finally, only four commercial Thai banks are financing the US$3.8 Xayaburi project (Middleton, 2011; Matthews, 2012). Shifting origins In the Mekong Basin, the origins of hydropower financing are also changing, from traditional international lenders to more regional financiers. Intraregional investments are rising in the development of the Mekong Basin. New regional financial players and developers are emerging from riparian robust economies such as Thailand, Vietnam and China. The regional commercial banks have accumulated capital and have strengthened their understanding of the hydropower sector and the complex financing mechanisms implicated. More widely, regional economic powers such as Malaysia or Russia also play a role in providing investments in the Mekong basin (IR, 2009; MRC, 2010c; Middleton, 2011). For instance, regional banks from Thailand cofinanced one third of NTPC (see Chapter 3). Shifting scale Over the last decade, the rush to install hydropower in Mekong waters has been astonishing (see Table 1 and Figure 3 and 5). Lao PDR is maybe the best representation of this boom with 22 licensed and 60 planned dams, of which 9 are proposed on the Mekong mainstream (Matthews, 2012). The GoL has agreed to supply 7,000 MW of hydroelectricity to Thailand by 2015. The first mainstream dam planned in the LMB is the controversial Xayaburi dam. If built, this US$3.8 billion project will be financed by Thai commercial banks and developed by a Thai development company (Stone, 2011; Grumbine et al., 2012; Matthew, 2012). This investment will be almost three times bigger than the current largest investment in Lao PDR, the Nam Theun 2 dam (see Chapter 3). Shifting financing mechanisms Since the gradual establishment of power sector reforms, new financing schemes emerged to foster private sector investments. Today, the BOOT type of financing structure is widely implemented in the Mekong Basin. The increasing use of BOOT mechanism is a direct incentive for the creation of IPPs, but also for PPPs. It has changed the traditional financing scheme used in dam projects where public funds played a central role. BOOT mechanisms have allowed private investors to get more involved in dam financing in growing privatized energy markets (Usher, 1997). In addition, MDB’s direct investments have decreased under international pressures of environmental groups. However, they now provide the

41 Nam Ngum 2 has been developed in a chaotic development context within the Ngum River Basin. 10% of Lao’s population live in the area. The competition between the hydropower, mining and logging business is threatening ecosystems and livelihoods of ten of thousand local people (IR, 2009). 42 Krung Thai Bank, Siam City Bank and Thai Military Bank.


essential guarantees (such as the World Bank Partial Risk Guarantee) to attract commercial funds. They facilitate foreign private investment by providing appropriate political risk guarantees and credit enhancement mechanisms that can be used to prolong the maturity of debt financing (WB, 2001). As seen in Chapter 3, NTPC was created under a BOOT contract and IFIs provided appropriate guarantees.

5.2 Relationships between financial actors Diverse types of relations between financial actors have been detected through this research. These relationships might have a great influence on the future of dam projects. The different relationships are divided in two types: (i) mutual support and (ii) risk allocation. Mutual support Financial actors have established diverse kinds of interconnections that enable one or another actor to get involved in the project and make profit out of it. Based on the case study, four types of mutual support between financial actors, but also with the dam industry and the host government, have been identified:

‐ Official financial institutions involvement attracts commercial lenders In many hydropower projects, the participation of international financial agencies is required. Their role is generally to provide sufficient guarantees and legitimacy to project lenders, especially from the private sector. Here intervenes the concept of temporality of financial actors input‐output, which is defined in this report as the chronological order of entry or exit of a financial player that can influence others. Usually, private lenders wait until internationally recognized financial institutions get involved in the project. This can be translated into equity investments, guarantees from MIGA, partial risk guarantees from the World Bank or ECA’s loans and guarantees (WCD, 2001; Ward, 2010). This was the case for NTPC.

‐ International investors have shares in regional banks Major Thai commercial banks have drawn strategic international investors after the Asian financial crisis. These banks raised additional capital from foreign investors to recapitalize their assets. These same banks are today important investors in hydropower development in the Mekong Basin. For instance, Thai commercial banks have foreign holders that have interest in dam development: GE Capital International Holding Corporation43 has 33% shares in the Bank of Ayudhya, ING Bank from the Netherlands holds 25% stakes in the Thai Military Bank and the Bank of Nova Scotia owns 50% of the Thanachart Bank (IR, 2009; Middleton, 2011; see also 3.2). International strategic investors support these banks to fortify their business and thus help them to be independent from traditional western banks in their hydropower investments44.

43 It is a subsidiary of General Electric US. 44 I assume that can be a way for traditional western banks to bypass international environmental commitments.


‐ BDA and ECA promote the exportation of their national dam industry

Common interests exist between bilateral cooperation activities and private industry. Even though Aid has formally been untied for more than ten years (OECD, 2012a), close relations continue to exist between donor agencies and their national private industries45. For example, French cooperation is keener to invest in countries where French industries are well positioned to obtain contracts (personal communication with French Ministry of Foreign Affairs, 16th of May 2012). It can be considered as “diplomatic externalities” in the name of greater state interests. This is further explained in Chapter 3. Additional research on the issues would be interesting. For instance, correlations between the board of directors of both bilateral cooperation and hydropower companies were found when exploring hydropower development. Further research on how actors in bilateral cooperation overlap private sector hydropower development may be fruitful in shedding light on the close relations between Aid and private sector interests. The Theun Hinboun dam illustrates these relations quite clearly. Completed in 1998, it has an installed capacity of 210 MW and has cost US$240 million (MRC DB, 2009). The Nordic Development Bank provided a grant to the project. This funding was certainly facilitated because Norwegian and Swedish state‐owned utilities were shareholders in the project (Usher, 1997; WB, 2000). In the same way, French cooperation and dam industry actively participated in the completion of NTPC (see Chapter 3). Logically, ECAs support their national dam industry, as it is their central purpose.

‐ Host governments encourage foreign investments In the Mekong Basin, the race to develop hydropower is the most observable in Lao PDR. The GoL attracts international involvement through important investment incentives: reasonable tax holidays, government taxes and other impost waived, withholding tax on net profit repatriated to home countries waived, special rates of import duty for materials, equipment and supplies, foreign contractors/labor accepted, concession period of 25‐30 years or even offshore bank account permitted (Powering Progress, 2012). The latter is quite stunning. These incentives raise a dilemma between the need to attract investors and the loss of legitimate revenues by selling off natural resources. Risk allocation The identification and mitigation of risks are essential for structuring a successful project‐financing plan. From a donor perspective, risk can be classified in three categories depending on the stage of the project: development risks, construction risks and operating risks. Usually, the highest risk for a project is during the construction phase. The nature of the risks is different for every project and for each participant (developers may have different concerns than lenders for instance). At every stage, different types of risks can interfere with the project. Hereafter is a non‐exhaustive list of potential risks: commercial (delay and cost overruns usually related 45 Untied aid releases the country that receives international aid from the obligation to purchase goods and services from the country that supplies the aid.


to environmental and resettlement issues), political (expropriation, laws, force majeure), hydrological (sufficient water), environmental (compliance with standards), social (local/ international opposition), regulatory (legality, licenses, permits and concession) and reputational risks. Financiers generally establish contingency plans for overcoming risks (Palmieri, 2010; Kasikornbank, 2010; PROPARCO, 2010). Risks are borne by all project participants in different proportion. Before the introduction of private sector incentive mechanisms (such as BOOT), the public sector used to assume most of the risks. With the establishment of PPP and IPP, risks are spread between the public and private partners. These risks are shared between the project participants through a set of legal documents (WCD, 2001). As project finance is highly weighted with debt ‐ usually accounting for 70 to 80% of total financing ‐ commercial lenders are the driving forces in risk mitigation. In many cases, equity providers negotiate contracts with the governments, but when debt lenders enter in, they insist to change terms of contracts that imply that the government or the power company must take higher risks. The reason is that sponsors get high returns on their investment (around 15‐20%) whereas private lenders obtain a small margin (around 2‐3%) over the cost of capital (WCD, 2001). As debt providers’ participation is usually imperative, commercial lenders have a great bargaining power to influence the provision of contracts and therefore the hydropower project itself.

5.3 Weighting of objectives Every financial stakeholder shares a set of objectives, with a favourite preponderance function of their own interests. During the financing set‐up (before financial closure), power relations and negotiations between financial actors determine the general financing configuration of the project. Different instruments and conditionality are employed to reach these goals. The overall financing arrangement for a dam project reflects a mixed of these different objectives. Depending on the composition of this “recipe”, the final outcomes of each hydropower project will be affected (a project might be purely commercial, or more “equitable” if it has equal weighting between objectives) (personal communication with French Ministry of Foreign Affairs, 16th of May 2012).

5.3.1 Political objectives Political objectives concern essentially the bilateral and multilateral donors and their relation with recipient countries. Two main components have been identified: (i) reinforcement of political relations and (ii) loan conditionality on recipient country policy reforms. On the on hand, bilateral and multilateral donors seek to enhance political relations with recipient countries. It is not an officially claimed objective. It can be considered as aid externality. In the case of bilateral agencies, grant or loan attribution may


strengthen the relations between the donor country and the recipient country. This can lead to a better economic cooperation, for instance. On the other hand, international public donors attach broad governance conditionality to loan allocation. This is explained by the necessity of a strong enabling environment for investment with stable political and macroeconomic conditions and solid legal and governance institutions (Agostino, 2008; Kilby, 2009; Delina, 2011). For instance, investors can condition their aid to the improvement of accountability and transparency mechanisms, to the recognition of human rights or to the reform of the public sector (Temple, 2010). Power sector lending policies have been promoting structural reforms and encouraging private sector involvement (WCD, 2001). The World Bank has put considerable efforts in developing energy market opportunities in its recipient countries (Strickland et al., 1998). For instance, in the case of NTPC, IFIs conditioned their loans to social and environmental principles (see Chapter 3).

5.3.2 Economic objectives Any investment has intrinsically an economic component, mostly in terms of profitability. All financial actors involved in hydropower projects share common economic objectives, which are to maximize profitability and to minimize risk. Profitability depends on the general competitiveness of hydropower. Volatility of gas and oil prices has made hydropower more economically competitive. In addition, a predicted increase in dry season flows as a consequence of the Lancang dam cascade make hydropower in the lower mainstream Mekong more attractive for investors (Lee, 2009; PROPARCO, 2010). The potential energy market is based on the prediction of rising energy demand in the region. Minimization of risk is also a determining factor in evaluating expected economic returns. Risks are usually shared among different actors (see 5.2). Economic objectives take different forms depending on the type of financial actors involved. The MDBs economic objectives have influenced hydropower projects by favouring large supply projects over small‐scale alternative projects. The World Bank has been focusing on supply‐side investments in the power sector. The main reason explaining the supply side bias in the bank’s policy is the economic argument: if prices reflect actual costs, the market will function efficiently. The pressure to lend is also a factor for applying a supply‐side policy. The Bank seeks to develop large projects where they can lend substantial amounts of money, without consuming too much staff time in managing smaller projects (IR, 2012). As a consequence, the World Bank tries to avoid demand‐side or energy efficiency projects. In addition, the Bank imposed a minimum economic internal rate of return (around 10%) to any project financed by the Bank at the expense of the quality of a project. The main objective of the World Bank is to develop a project for financing, not really to solve a problem. These economic policies prevent the creation of alternative development solutions (Usher, 1997; Strickland et al, 1998; IR, 2012).


A correlation between the presence of foreign companies in recipient country and bilateral aid allocation is likely to exist, though it is not totally official. With the end of the dam era in the North during the second half of the 20th century, developed countries started to export their technology to the South. Bilateral aid has supported dam industry exportation in developing countries, formerly through subsidies and currently via loans to the project company. It has helped these companies to find new market opportunities by creating competitive advantage in international tenders (Usher, 1997). Even though aid untying has been officially implemented for more than ten years now, BDAs still display bias in favour of projects where their national industry has good opportunities to win contracts (personal communication with French Ministry of Foreign Affairs, 16th of May 2012). For instance, the French cooperation agency (AFD) and the main electric multinational company contributed actively in NTPC. ECAs main activity is to support the exportation of goods and equipment through loans and guarantees. Their official main objective is to facilitate and insure long‐term infrastructure investment. For example, COFACE, EKN and GIEK have covered private dollar international lenders in the NTPC project. Private lenders have reacted intensely to the new opportunities in power infrastructures. Even after a decline in private investment following the 1997 Asian Crisis, private hydropower investments are continuing their rising trend (Briscoe, 1998; WCD, 2001). Investors, especially private lenders and sponsors, seek to get the highest margin possible. In that sense they can influence the terms of contracts. The more investor participation is necessary for the realization of a project, the more bargaining power these investors will have to orientate the project legal document in their favour. For instance in NTPC, a borrowing plan was incorporated to the financial plan in order to set up the level of interest rate (see Chapter 3).

5.3.3 Normative and Instrumental objectives Normative objectives play a significant, rhetorical role in legitimizing the construction of hydropower plants. Generally, they can be related to concepts such as sustainable development and economic growth. Specifically, they encompass notions of environmental protection and poverty alleviation. These normative objectives are typically translated into instrumental objectives. For instance, environmental protection related to a dam is addressed through an Environmental Impact Assessment and poverty reduction is addressed through social programs. Dam proponents commonly emphasize the normative benefits for local communities and the necessity to mitigate social and environmental impacts. The main objectives of bilateral and multilateral banks are to promote economic growth and poverty reduction by funding projects through loans and grants, providing policy advice in developing countries, and financing the private sector through debt, equity and guarantee on behalf of the international community (Temple, 2010; Delina, 2011). IFIs face a dilemma providing large dams as a mean to alleviate poverty. Actually, these projects aid the rich at the detriment of the poor.


IFIs promote dams as a solution to improve rural electrification for instance. However, the power produced usually goes to urban or industrial centres (Usher, 1997; IR, 2012). Other financial actors such as ECAs and private lenders increasingly point out their desire to improve their financing activities. Sustainable hydropower financing is rising through the implementation of internal policies and guidelines (see section 5.3.4). To reach the normative objectives promoted by dam proponents, different types of instruments are used to assess, evaluate and monitor the potential social and environmental impacts related to the construction of a dam. This usually materializes in safeguard documents such as Environmental Impact Assessment, Sustainable Impact Assessment and Resettlement Programs. These documents aim at planning mitigation measures to compensate impacts on the livelihoods of affected communities, biodiversity or erosion for instance (WCD, 2001; ADB, 2002; Hirsch, 2010; MRC, 2010a). Donors usually finance EIA and other safeguard documents. There is a trend of pro‐dam EIA made by biased consultants. Consultancy firms are hired by donor to realize impact assessment of a proposed dam project, making the firms much more likely to provide an EIA that reflects positively for the donors who funded the study. They are not accountable to the public and thus evolve into a grey zone between the public and private sector. These impact assessments are based documents for financial actors to decide whether or not to finance such a project (Usher, 1997; IR, 2012). The adoption of WCD recommendations may increase the up‐front costs, but it can reduce the project’s risks. Therefore the project may be better accepted and so it will be easier to finance (WCD, 2000). Thus, sustainable financing can be seen as a mean to legitimize hydropower development. Others normative objectives refer to issues of accountability, corruption (Hillman, 2004), public participation or human rights (Doig et al., 2005; Furuoka, 2005). These concerns are not further developed in this report.

5.3.4 Internal objectives In this report, internal objectives consist of the improvement of financial actor financing policies and the implications for hydropower development. Obviously, donors have other types of internal objectives, but they are not covered in this report. Over the past twenty years, financial players have enhanced their desire to finance sustainable dam projects (UNEP‐DDP, 2004). Internal review processes have been reinforced in large traditional financial institutions. For instance in the 1990’s, the World Bank introduced new policies and guidelines for improving sustainable development practices and addressing social issues. The WB has assigned an external Inspection Panel to be sure that WB’s staff comply with the bank’s policies and procedures. Nonetheless, performance gaps between policy guidelines and program implementation remain an issue. For


example, the WB imposed a “green conditionality” on loans related to Narmada Sardar Sarovar dam project. The Indian government preferred to reject the remaining World Bank loans as they felt their sovereignty threatened (Kardam, 1993; WCD, 2001). ECAs social and environmental guidelines are diverse and their application remains irregular. Nonetheless, the Export Credit Group46 from the OECD has the mandate to develop common guiding principles to address resettlement and environmental problems (WCD, 2001). The private sector is increasingly concerned with the necessity to apply sustainable policies in financing dams. Many commercial banks have committed to international standards such as Equator Principles, HSAF Protocol, UNPRI, WCD standards, IFC Performance Standards, WB safeguard policies (Oxfam, 2010). Many regional private banks are also gradually establishing Corporate Social Responsibility (CSR) and Corporate Governance policies as guidelines for their financing activities. The Equator Principles were established in 2004 by an international group of financial institutions. They include a set of rules and guidelines that support banks identifying and managing a collective and reliable assessment of social and environmental concerns across industries and regions. These principles are in line with similar policies from the ADB, the EIB and OECD ECA. 67 financial institutions have adopted the Equator Principles, which commit them to abandon a loan if the borrower cannot comply with these principles. Using such standards, members can reduce their exposure to reputational risks and get greater access to finance projects (IR, 2009; ANZ, 2010; Allen & Overy, 2010). International commercial banks such as HSBC, ING or Bank of Nova Scotia have agreed with Equator Principles. But still they bypass international sustainable financing agreements by investing in important regional commercial banks, which afterwards invest in dams. For instance, ING is a strategic investor in Thai Military Bank, which was involved in Nam Ngum and NTPC financing (Middleton, 2011; see Chapter 3). Regional commercial banks such as Thai banks are increasingly keen to invest in dam building in the Mekong Basin. However, they are gradually perceiving the necessity to apply sustainable policies to avoid dam project abandonment due to rising criticism. CSR can represent a first step toward better financing practices. CSR is a business model that contributes to the social and economic development of stakeholders (ANZ, 2010). Although Thai commercial banks refer more and more to CSR in their reports, they still need to implement thorough reforms in that sense. Sustainable banking can be a mean to minimize risk and thus create new investment opportunities (Middleton, 2011). Social or environmental risk can become a financial risk. For instance, serious impact on the environment must be cleaned up and can compromise future project opportunities. It can also affect the reputation of a bank. Reputational risk is a rising concern for banks.

46 The full title of this group is « Working Party on Export Credit and Credit Guarantees » (OECD, 2012b).


Even though financial actors tend to improve their financing policy, there are a numbers of contradictions to international commitments.

5.4 Implication for hydropower development This section seeks to analyse the linkages between the leverage of influence described previously and the actual consequences on hydropower development. This investigation does not pretend to depict all implications; rather it gives directions for further research. This investigation presents the following findings. Financial actors have an influence on diverse aspects of a hydropower project. Three concepts have been identified for this study: (i) the feasibility, (ii) the quality and (iii) the performance. The feasibility of a project determines whether a project can be achieved economically, technically and environmentally. The quality of a hydropower project is defined by the least possible impacts on local communities and environment. The performance of the project encompasses technical and financial attainment. The variance of these outputs can be determined at different stages of the project cycle: (i) negotiation, (ii) planning and design, (iii) construction and operation and (iv) monitoring and reporting. Several dynamics allow financial actors to drive a project in one direction or another. These are (i) the availability of capital, (ii) the weighting of objectives and (iii) the bargaining power by clustering and advising. Financial actors can influence the feasibility of a project by overestimating commercial benefit of large dams. They usually praise hydropower as a clean and cheap energy without considering costs related to siltation47 (especially in tropical countries) and decommissioning. Above all, the high cost of dramatic ecosystem changes is repeatedly underestimated. Expected energy demand is also often overestimated (Usher, 1997). By ignoring or underestimating the costs, financial actors can reduce long‐term commercial risks. Furthermore, as private actors have a shorter perspective than recipient governments, they matter less about long‐term financial efficiency of a project (WCD, 2001). The financial viability of a project can also be biased as specialized banks advise the power company for setting up the financing plan. The study of the NTPC case described these aspects (costs underestimation, benefits overestimation and biased financial viability) (see 3.3.). Financial and technical performance is optimized to insure highest returns with minimum risks. For instance, financiers can influence the choice of the construction company to avoid possible problems during the construction. They logically prefer that experienced firms carry out civil work to minimize this risk. Public equity tenders might be biased. IFIs can still influence the social and environmental quality by imposing mitigation and compensation requirements (see 3.2). Nonetheless, their role in hydropower 47 Siltation is the phenomenon by which a dam reservoir fills up with silt and loses production capacity.


financing seems to have decreased. Commercial banks have the ability to influence clients to comply with sustainability objectives as they play a central role in financing transactions (ANZ, 2010). Therefore, they can also ignore sustainable policy compliance.

Along the project cycle, financial actors use diverse leverage of influence. During negotiations, limited cost‐benefit analysis (purely economic, without considering social and environmental costs) promotes and justifies the choice of one option over other alternatives. In addition, international banks advise financing scheme (ANZ, 2010) and public benefits are usually overestimated, while public costs are often underestimated. During the planning and design stage, feasibility studies and safeguard documents can be biased as they are commissioned and financed by proponents and investors of the project. Terms of key contractual arrangements (CA, PPA, HCC, SA) may be adjusted in favour of the financiers. For instance, to maximize their returns, financial players tend to influence release rights in the Concession Agreement in order to optimize hydroelectricity production and make higher profits (see 3.2.) ‐ even though this can result in intolerable and hazardous cycles of downstream flows (WCD, 2001). During the construction and operation phases, financial actors may control the level of impact mitigation as they advise the power company financing scheme. During monitoring and reporting, financial actors can achieve the overall evaluation of the project. It is in their own interests to prove the viability of their model in order to promote future similar development. For instance, NTPC received six awards of best finance deal (see Chapter 3). At the end of the concession, BOOT mechanisms raise questions about the financial capacity of host countries to bear the costs of equipment replacement or siltation (WB, 2000). As described, financial actors play a significant role in hydropower development. They exert different types of influence at diverse levels of a project. Due to large opacity of hydropower financing, these dynamics are not simple to discern. However, they indubitably have major implications for the course of a hydropower project. The final subsequent section presents the conclusions and recommendations drawn from this investigation.


6 Conclusion and recommendations This thesis sought to analyse the role of financial actors in hydropower development. The main objectives were to map out the financial actors and dynamics, to identify leverage of influence and to characterize how hydropower investments translate into claims over the landscape. To a limited extend, this investigation enabled an understanding of the dynamics behind hydropower financing and the analysis of the leverages of influence exerted by financial actors. The main findings of this report are summarized hereafter:

⇒ Capital accumulation needs spatial fix Large dams require substantial investments. While large capital reserves need to be invested in physic assets. Large hydropower projects represent suitable infrastructures to fill the appetite of commercial lenders (Sinha, 2007b). Additionally, the source of funds is changing and tends to scale‐up and speed‐up hydropower development within a path dependency. As a result, large dams close doors to alternative energy sources (Smits, 2010) and remain destructive for the environment and local communities. Therefore, whether devaluation is to be avoided, means must be found to absorb the surplus capital. This can be achieved in various manners. The most relevant for this research is “the making use of pre‐existing hitherto untapped markets or the creation of new markets” (Ahlers, 2005:236). Hydropower infrastructure investment is one of such spatial fix. ⇒ Electrification as an externality

The normative and instrumental objectives in terms of poverty alleviation and environmental protection are negligible compared to the overall economic purpose of a large dam. Although electricity poverty is a central argument of large dam proponents (WB, 2009a; IHA, 2011), the main goals of governments and financial actors are to create foreign currency for the recipient country and supply the regional power demands of urban or industrial centres (Usher, 1997; IR, 2012). Financiers overestimate public benefits to promote dam building. Except local mitigation impacts usually assumed by the power company, the revenues earned by the host government should provide national spill over benefits (IR, 2012). The ethical argument of “electricity for the poor” made by dam proponents to explain the renewed interest in hydropower (WB, 2009a; IHA, 2011) is misleading. Other demand‐side alternatives exist and work efficiently. Local communities would be better served by investments in cheaper and cleaner off‐grid technologies (Smits, 2010; IR, 2012). In many rural areas in Lao PDR and Cambodia, micro hydro and photovoltaic represent a least‐cost strategy for rural electrification (Probe, 2004).

⇒ Principle of sustainability legitimize hydropower

Sustainable hydropower financing is increasingly a central concern for investors. Best financing practices apparently aim at improving the quality of a project. The adoption of WCD recommendations may increase the up‐front costs, but it can also reduce financial and reputational risks for investors. As the project may be better accepted, it will be easier to finance (WCD, 2000). As a lead dams specialist from the


World Bank explained at a MRC conference, a well‐prepared project with appropriate risk management, stakeholder involvement, attention to socio‐environmental concerns and competent developers firms will find finance (Palmieri, 2010). Therefore, if financiers adopt more ethical standards, while setting up trivial compensation measures, they may have more opportunity to invest in large projects. Sustainable hydropower financing is a double‐edged sword: higher quality projects will be better accepted and thus financed, while large dams have inevitable adverse impacts. This point raises the question of the definition of sustainability. ⇒ Threatened sovereignty over natural resources

Recipient countries with weak regulations and institutions may lose the control over their landscape48. Also power sector deregulation transferred resources’ control from public to private donors, whose commercial priorities tend to prefer certain form of energy production (WB, 2000), e.g. large dams. First, hydropower loans are generally conditioned by national policy reforms (for instance, expenditure management policy for NTPC). Then, the sovereignty of the host country may be threatened by foreign direct investment and the type of financing mechanism used which might not respect national laws (Usher, 1997). Hydropower owners have extensive rights, but also obligations, reflected in the CA. For instance they can be in charge of the full water management of the basin (see Chapter 3). By giving concession to private companies, recipient countries can lose the actual control over their natural resources. It is a disguised type of neoliberal colonization translated into water grabbing (Kay, 2012). In other words, the capitalist rationale, that argues that resources would be better allocated by market forces, rather than wasted by incompetent public sector (Ahlers, 2010), also dispossesses communities of essential river water services. We assist to a rapid transformation of landscape through a intense capitalist accumulation by dispossession and enclosure of water resources (Ahlers, 2010). Finally, host countries even reduce their sovereign rights with incentive measures to encourage foreign investment in their country. In that sense, they indirectly sell off their natural resources to investors through hydropower investments. In 2001, the WCD recommended host governments to keep control over the project set‐ups to guarantee the projects return economic benefits to the country coherent with acceptability at the local level (WCD, 2001). A set of secondary conclusions is recapitulated as follows:

Reputational objective in terms of scale and complexity The notion of financial reputation may have great consequences over the future development of large‐scale projects. In that sense, financial actors do not based their financing activities on the quality of the energy product, but instead on the financial product. They promote the success of dealing with extensive and complex investment, involving great numbers of investors. Thus, they learn lessons to overcome development obstacles that can consequently be used in similar large‐

48 In the Mekong basin, this is applicable to Lao PDR and Cambodia (and maybe Myanmar).


scale project in the region. They sell their expertise. Money may be made primarily through the financial transaction and power generation may even be secondary.

Obscurity in hydropower financing Details on financing arrangements are unclear (IR, 2009). For instance, borrowing plans and concession arrangements for NTPC are not transparent (see Chapter 3). The approval of large dam projects can be so ambiguous that even policy‐makers are not sure of the limits of the arrangements (Usher, 1997). Without doubt, hydropower financing is nebulous. This investigation has experienced countless data accessibility deadlocks, such as interest rate dynamics, conditionality over expenditure management, private loan and sponsor equity funding arrangements. Details on financing schemes and relationships between dam proponents are difficult to excavate due to this lack of public information, despite substantial capital involved and the huge temporal and scalar dimensions of these projects. For instance in the case study excavation, specified data on the Concession Agreements (e.g. extensive water rights, obligations of host country), private loans conditions (e.g. evolution of interest rates), level of competitiveness (e.g. contract awarding not fully transparent), sponsors’ involvement (e.g. origins of funds and conditionality) or untied aid (e.g. relations with French aid agency and French dam industry) are not fully accessible.

Private sector involvement decreases public accountability Since the 1990’s, worldwide private sector investments in infrastructure building have substantially increased (WCD, 2001; ADB, 2002). With an important financing capacity and ability to raise capital rapidly, private actors tend to play a determining role in hydropower development. For instance, they usually advise the power company on how to set up a financing scheme and thus determine the financial feasibility of a project and the level of their interest rates. Increasing investment from the private sector decreases the level of accountability and transparency in the financing process. Also with complicated financial schemes such as NTPC, it is difficult to understand exactly what happens. Under the BOOT system, it is more difficult to monitor social and environmental impacts because foreign private investors have neither a mandate to reduce poverty nor public institutions to which they are officially accountable (Usher, 1997). Therefore, private sector involvement does not enhance the accountability or the quality of a project.

IFIs are gradually changing role Multilateral and bilateral financial institutions are no longer in the driver’s seat, even though they still remain essential as catalysts for drawing in as well as covering other investors. On the one hand, IFIs have gradually reduced their direct participation in dam building. They now facilitate other investors. On the other hand, the emergence of new sources of funding has disrupted the traditional hydropower financing approach of the 20th century. For instance in financing NTPC, Thai commercial banks’ direct loans accounted for one third of the project’s total costs without financial guarantees. Powerful regional investors are increasingly involved in hydropower projects with no need of the conventional support of the international community.


The forthcoming hydropower development will confirm the accuracy of this outcome. Globally, this research has gathered and collated a large quantity of information that gives a global picture of hydropower financing processes. It has raised number of critical questions that would need further excavation. Policy recommendations and scientific research proposals are given hereafter: Policy recommendations

‐ Feasibility studies and Safeguard documents should be in charge of host government and Include all costs;

‐ All public deals should be fully transparent (e.g. concession, public tender) and Improve accountability of private sector by setting stricter rules;

‐ Governments should foster the implementation of small‐scale off‐grid alternatives by providing incentives to attract new forms of investment;

Scientific research recommendations ‐ Decision‐making legitimacy of hydropower PPP/IPP; ‐ Implication of extensive water rights and national sovereignty; ‐ Feasibility and effectiveness of demand‐side alternative solutions; ‐ Extent of public capital managed by private sector; ‐ Link between water grabbing and land grabbing.

To conclude, a new large‐dam era is rising, in which financiers are decisive players motivated by their necessity to find untapped market prospects. Following an improper model of development, benefits remain in few hands while dramatic costs are borne by the public. The poorest people are subsidizing the lifestyle of the richest. If completed, future large dams will damage substantially biophysical systems affecting livelihoods of millions of people.


Bibliography

ADB (2002): “Volume II: Regional issues and emerging trends: environmental, socio‐economic and institutional”. Stockholm Environment Institute.

ADB (2005): “Report and recommendation of the president to the board of directors on a proposed loan to the Lao People’s Democratic Republic for the Greater Mekong Subregion: Nam Theun 2 hydroelectric project”. Retrieved, 5th May 2012, http://www2.adb.org/Documents/RRPs/LAO/rrp‐lao‐37734.pdf.

ADB (2012): “Greater Mekong Subregion”. Website consulted the 13th May, 2012, on http://www.adb.org/countries/gms/main

Agostino, M. (2008): “World Bank Conditional Loans and Private Investment in Recipient Countries”. World Development Vol. 36, No. 10, pp. 1692–1708.

Ahlers R. (2005): “Stickiness of territory and fluidity of water: entitlement structures to water in the age of contemporary globalisation. The case of neo‐liberal water reforms in Mexico.” PhD Dissertation, Cornell University, Ithaca.

Ahlers, R. (2010): “Fixing and nixing: The politics of water privatization”. Review of Radical Political Economics 42(2), pp. 213 –230.

Ahlers, R. (2011): “Temples of modernity: the technological fix of the 20th century”. Paper presented at the Association for American Geographers Annual Meeting, April 14‐16 2011, Seattle, Washington.

ANZ (2010): “Sustainable planning and financing ‐ The Equator Principles”. Presentation at the MRC Summit 2010 by the Australian and New Zealand Banking group Ltd. Retrieved, 6th Juy, 2012, from http://www.mrcsummit2010.org/Presentations/3‐2_Ian‐Mathews‐equator‐principles.pdf.

ASEAN (2010): “Overview”. Retrieved, 13th May 2012, from http://www.aseansec.org/about_ASEAN.html.

Baghel, R. and Nüsser, M. (2010): “Discussing large dams in Asia after the World Commission on Dams: Is a political ecology approach the way forward?”. Water Alternatives, 3 (2), pp. 231‐48.

Baird, I. G. (2011): “Turning land into capital, turning people into labour: primitive accumulation and the arrival of large‐scale economic land concessions in the Lao People’s Democratic Republic”. New Proposals: Journal of Marxism and Interdisciplinary Inquiry, Vol. 5, No. 1 (November 2011), pp. 10‐26.

Bakker, K. (1999): “The politics of hydropower: developing the Mekong”. Political Geography 18 (1999), pp. 209‐232.

Barnett, A. (1992): “The financing of electric power projects in developing countries”. Energy Policy April 1992, pp. 326‐334.


Baumüller, H. (2009): “Sustainable development impacts of investment incentives in Southeast Asia”. International Institute for Sustainable Development (IISD). Retrieved from http://www.iisd.org/tkn/pdf/competing_business_southeast_asia.pdf.

Bosshard, P. (2010): “The dam industry, the World Commission on Dams and the HSAF process”. Water Alternatives 3(2), pp. 58‐70.

Briscoe, J. (1998): “The financing of hydropower, irrigation and water supply infrastructure in developing countries”. A background paper for the UN Commission on Sustainable Development. Retrieved, 19th April 2012, from http://siteresources.worldbank.org/INTWRD/926910‐1112690201445/20434194/TheFinancingofHydroPowerforUNCommission.pdf.

Callender, T. (2007): “Environmental Impacts of Trade Liberalization in the Hydropower, Mining and Construction Materials Sectors of the Lao PDR”. Rapid trade and environment assessment. IUCN Lao PDR. Retrieved, 20th April 2012, from http://www.iisd.org/pdf/2008/rtea_lao_hydro_mining_construction.pdf.

CA (2009): “Nam Theun 2 hydroelectric project ‐ Summary of the concession agreement between the government of the Lao PDR and Nam Theun 2 power company limited”. Retrieved, 20th June 2012, from http://siteresources.worldbank.org/INTLAOPRD/Resources/2935821092106399982/492430‐1092106479653/SummaryofCA.pdf.

Cucherousset, H. (1927): “Les Forces hydrauliques de la Nam Theune (Laos)”. L’Eveil Economique de l’Indochine, Dimanche 1er Mai 1927, Numéro 516, pp. 1‐2. Retrieved, 10th May 2012, from http://gallica.bnf.fr/ark:/12148/bpt6k5561716f/f9.image.r=sauvage

Cullather, N. (2002): “Damming Afghanistan: Modernization in a Buffer State”. The Journal of American History, Vol. 89, No. 2, History and September 11: A Special Issue (Sep., 2002), pp. 512‐537.

Delina, L., L. (2011): “Asian development Bank’s support for clean energy”. Climate Policy 11, pp. 1350‐1366.

Doig, A. and Marquette, H. (2005): “Corruption and democratisation: the litmus test of international donor agency intentions?”. Futures 37, pp. 199–213.

Dreher, A. (2006): “IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality”. World Development Vol. 34, No. 5, pp. 769–788.

ECA (2009): “The potential of regional power sector integration ‐ Nam Theun 2 ‐ Generation Case study”. Economic Consulting Associates. Retrieved, 10th June 2012, from http://www.esmap.org/esmap/sites/esmap.org/files/BN004‐10_REISP CD_Nam%20Theun%202‐Generation.pdf.

EDF (2010): “Rapport financier 2010”. Groupe Electricité de France. Retrieved, 27th June 2012, from http://www.edf.com/html/RA2010/pdf/EDF2010_fin_full_vf.pdf


EGCO (2010): “Press released”. Retrieved, 16th May 2012, from http://www.egco.com/en/corperate_com_press_detail.asp?press_id=151&iYear=2010.

Equator Principles (2012): “Members and Reporting”. Retrieved, 18th July 2012, from http://www.equator‐principles.com/index.php/members‐reporting/members‐and‐reporting.

Furuoka, F. (2005): “Human Rights Conditionality and Aid Allocation: Case Study of Japanese Foreign Aid Policy”. Perspectives on Global Development and Technology, Volume 4, issue 2, pp. 125‐146.

González, A. (2003): “La controverse mondiale a propos des grands barrages: d’une réalité hétéropique a la construction d’un espace restraint de representation (la World Commission on Dams)”. Regards Sociologiques, n°25/26.

Grumbine, R., E. and Xu, J. (2011): “Mekong hydropower development”. Science magazine, 332, pp. 178‐179.

Grumbine, R., E., Dore, J. and Xu, J. (2012): “Mekong hydropower: drivers of change and governance challenges”. Frontiers in Ecology and the Environment 2012; 10(2), pp. 91–98.

Hillman, A., L. (2004): “Corruption and public finance: an IMF perspective”. European Journal of Political Economy Vol. 20, pp. 1067–1077.

Hirsch, P. and Jensen, K., M. (2006): “National Interests and Transboundary Water Governance in the Mekong”. Australian Mekong resource centre. Retrieved, 18th May 2012, from http://sydney.edu.au/mekong/documents/mekwatgov_mainreport.pdf.

Hirsch, P. (2001): “Globalisation, regionalisation and local voices: the Asian Development Bank and re‐scaled politics of environment in the Mekong region”. Singapore Journal of Tropical Geography, 22(3), pp. 237‐251.

Hirsch, P. (2010): “The changing political dynamics of dam building on the Mekong”. Water Alternatives, 3 (2), pp. 312‐23.

Ingco, S., P. (1996): “Structural changes in the power sector in Asia – Improving profitability”. Energy Policy, 24(8), pp. 723‐733.

IEA (2010): “Renewable energy essentials: Hydropower”. International Energy Agency. Retrieved, 14th June, 2012, from http://www.iea.org/papers/2010/Hydropower_Essentials.pdf

IEC (2010): “A world of opportunity – Hydro energy around the Globe”. International Electrotechnical Commission. Retrieved, 19th April, 2012, from http://www.iec.ch/etech/2010/pdf/etech_2010‐12_LR.pdf.

IHA (2011): “Advancing Sustainable Hydropower”. 2011 Activity Report of the International Hydropower Association. Retrieved, 19th April, 2012, from http://www.hydropower.org/downloads/ActivityReports/2011‐12_Activity_Report‐web.pdf.


IR (2008a): “The new great walls – A guide to China’s overseas dam industry”. International Rivers. Retrieved, 3rd April, 2012, from http://www.internationalrivers.org/files/attached‐files/new_great_walls_report.pdf.

IR (2008b): “Nam Theun 2 hydropower project: Risky business for Laos”. International Rivers. Retrieved, 10th April, 2012, from http://www.internationalrivers.org/files/attached‐files/ir_nt2_factsheet_june08lowres.pdf.

IR (2008c): “New financiers and the environment ‐ Ten perspectives on how financial institutions can protect the environment”. International Rivers. Retrieved, 4th June, 2012, from http://www.banktrack.org/download/new_financiers_and_the_environment/newfinanciers_english.pdf.

IR (2012): “Infraestructura para quién? Una critica de las estrategias de infraestructura del grupo de los 20 y el Banco Mundial”. International Rivers. Retrieved, 4th August, 2012, from http://www.internationalrivers.org/files/attached‐files/infraestructura_para_quien.pdf.

Kardam, N. (1993): “Development Approaches and the Role of Policy Advocacy: The Case of the World Bank”. World Development, Vol. 21, No. 11, pp. 1773‐1786.

Karki, S., K., Mann, M., D. and Salehfar, H. (2005): “Energy and environment in the ASEAN: challenges and opportunities”. Energy Policy 33, 499‐509.

Kasikornbank (2010): “Risk assessment in hydropower financing”. Presentation at Centara Grand, Bangkok, Thailand, on 24th of September 2010. Retrieved, 7th July, 2012, from http://wwf.panda.org/what_we_do/where_we_work/greatermekong/our_solutions/hydropower_roads/sustainable_hydropower_financing/

Kay, S. and Franco, J. (2012): “The global water grab – a primer”. Transnational Institute (TNI), The Netherlands. Retrieved, 4th April, 2012, from http://www.tni.org/primer/global‐water‐grab‐primer.

Kilby, C. (2009): “The political economy of conditionality: An empirical analysis of World Bank loan disbursements”. Journal of Development Economics 89, pp. 51–61.

Krongkaew, M. (2004): “The development of the Greater Mekong Sub‐region (GMS): real promise or false hope?”. Journal of Asian Economics 15, 977‐998.

Krungsri (2012): “Investor Relations ‐ Major shareholders structure”. Retrieved, 4th July, 2012, from http://www.krungsri.com/en/investor‐relation.aspx?cid=44.

Lee, G. and Scurrah, N. (2009): “Power and responsibility ‐ The Mekong River Commission and Lower Mekong mainstream dams”. A joint report of the Australian Mekong Resource Centre, University of Sydney and Oxfam Australia. Retrieved from http://sydney.edu.au/mekong/documents/power_and_responsibility_fullreport_2009.pdf

Li, Z., He, D. and Feng, Y. (2011): “Regional hydropolitics of the transboundary impacts of the Lancang cascade dams”. Water International, 36:3, 328‐339.


Liebman, A. (2005): “Trickle‐down hegemony? China’s “Peaceful rise” and dam building on the Mekong”. Contemporary Southeast Asia 27, no. 2, 281‐304.

Makim, A. (2002): “The Changing Face of Mekong Resource Politics in the Post‐Cold War Era: re‐negotiating arrangements for water resource management in the Lower Mekong River Basin (1991‐1995)”. Working Paper No. 6, Australian Mekong Resource Centre University of Sydney.

Matthews, N. (2012): “An analysis of the winners and losers of Thailand’s hydropower development in Lao PDR”. Water Alternatives, Vol.5, Issue 2, pp. 392‐411 .

Mehtonen, K. (2008): “Do the downstream countries oppose the upstream dams?”. Kummu, M., Keskinen, M. & Varis, O. (eds.): Modern Myths of the Mekong, pp. 161‐173.

Middleton, C. (2011): “Regional banks, regional investments and regional responsibilities: Strengths, shortcomings and trends of Thai commercial banks’ corporate governance and CSR policies”. Presentation at “Know your power” MEE Net Conference, Thursday 19th January 2011. Retrieved, 5th July, 2012, from http://www.meenet.org/images/power/81329728151_file.pdf.

MIGA (2006): “Hydropower in Asia: the Nam Theun 2 project”. Multilateral Investment Guarantee Agency. Retrieved, 4th May, 2012, from http://www.miga.org/documents/NT206.pdf.

Mills, A., J., Durepos, G. and Wiebe, E. (2010): “Encyclopedia of case study research”. Thousand Oaks (CA): SAGE Publications.

Morgera, E. (2011): “Mekong River”. Max Plank Encyclopedia of Public International Law. Retrieved, 5th April, 2012, from www.mpepil.com.

MRC (1995): “Agreement on the cooperation for the sustainable development of the Mekong River Basin 5 April 1995”. Retrieved, 20th May, 2012, from http://ns1.mrcmekong.org/agreement_95/agreement_95.htm.

MRC (2003): “Biodiversity and fisheries in the Mekong River Basin”. Mekong development Series n° 2. Retrieved, 2nd June, 2012, from http://www.mrcmekong.org/assets/Publications/report‐management‐develop/Mek‐Dev‐No2‐Mek‐River‐Biodiversityfiisheries‐in.pdf.

MRC (2010a): “State of the basin report 2010”. Retrieved, 5th April, 2012, from http://www.mrcmekong.org/assets/Publications/basin‐reports/MRC‐SOB‐report‐2010full‐report.pdf.

MRC (2010b): “Strategic environmental assessment of hydropower on the Mekong mainstream – Summary of the final report”. Retrieved, 5th April, 2012, from http://www.mrcmekong.org/assets/Publications/Consultations/SEA‐Hydropower/SEA‐FR‐summary‐13oct.pdf.

MRC (2010c): “Overview of hydropower development in the Mekong”. Presentation by Haas, L. J. M., MRC Initiative on Sustainable Hydropower at SPLASH meeting, 14‐15 August 2010,


Vientiane, Lao PDR. Retrieved from http://www.splash‐era.net/downloads/mekong_workshop/Pres02_Haas_Hydropower_Status.pdf.

Nüsser, M. (2003): “Political ecology of large dams: a critical review”. Petermanns GeographischeMitteilungen, 147, pp. 20‐27.

OECD (2012a): “Untying Aid: the right to choose”. Retrieved, the 20th July 2012, from http://www.oecd.org/dac/untyingaidtherighttochoose.htm#definition.

OECD (2012b): “Working Party on Export Credit and Credit Guarantees”. Retrieved, the 20th July 2012, http://www.escr‐net.org/docs/i/427906.

Palmieri, A. (2010): “Water infrastructure risk management”. Presentation at Sustainable hydropower financing in the Mekong River Basin, 23‐24 of September 2010, by a lead dams specialist from the World Bank. Retrieved, 14th July, 2012, from http://wwf.panda.org/what_we_do/where_we_work/greatermekong/our_solutions/hydropower_roads/sustainable_hydropower_financing/.

Powering Progress (2012): “Legislation and Financial incentives”. Retrieved, 6th July, 2012, http://www.poweringprogress.com/index.php?option=com_content&view=article&id=51&Itemid=54.%20Consulted%20the%2013th%20of%20June,%202012.

Probe International (2004): “Ten reasons why the World Bank should not finance the Nam Theun 2 power company in Lao PDR” by Ryder, G. Retrieved, 17th April, 2012, from http://journal.probeinternational.org/?s=Ten+reasons+why+the+World+Bank+should+not+finance+the+Nam+Theun+2+power+company+in+Lao+PDR+

Proparco (2010): “Promoting Sustainable Private Sector Development ‐ Financing tools presentation”. Retrieved, 28th July, 2012, from http://www.afd.fr/webdav/site/afd/shared/PORTAILS/PAYS/LAOS/Breve%20Seminaire%20Nov%202011/Proparco%20Seminaire%20LaoV2.pdf.

Proparco (2012): “Actionnariat ‐ Une plateforme Nord/Sud d’investisseurs pour le développement”. Retrieved, 19th July, 2012, from http://www.proparco.fr/Accueil_PROPARCO/PROPARCO/Actionnaires.

Ramamurti, R. and Doh, J., P. (2004): “Rethinking foreign infrastructure investment in developing countries”. Journal of World Business 39, pp. 151–167.

Sinha, S. (2007a): “Nam Theun 2 (NT2) Hydroelectric Project”. Prepared for the Indian Institute of Management. Retrieved, 20th April, 2012, from http://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/Cross‐Border‐Infrastructure‐Toolkit/Cross‐Border%20Compilation%20ver%2029%20Jan%2007/Resources/Sinha%20‐%20Case%20Study%20Nam%20Theun.pdf.

Sinha, S. (2007b): “Project finance Structuring: Case study – Nam Theun 2”. PowerPoint presentation prepared for the Indian Institute of Management. Retrieved, 20th April 2012, from www.ppiaf.org.

Smits, M. and Bush, S., R. (2010): “A light left in the dark: The practice and politics of pico‐hydropower in the Lao PDR”. Energy Policy 38, pp. 116–127.


Sneddon, C. and Fox, C. (2005): “Rethinking transboundary waters: A critical hydropolitics of the Mekong basin”. Political Geography 25, pp. 181‐202.

Stone, R. (2011): “Mayhem on the Mekong”. Science Magazine, Vol. 333, pp. 814‐818. Retrieved, 18th April, 2012, from www.sciencemag.org.

Strickland, C. and Sturm, R. (1998): “Energy efficiency in World Bank power sector policy and lending New opportunities”. Energy Policy, Vol. 26, No. 11, pp. 873—883.

Swyngedouw, E. (2007): “Technonatural revolutions: the scalar politics of Franco’s hydro‐social dream for Spain, 1939‐1975”. Transactions of the Institute of British Geographers, NS 32, pp. 9‐28.

Temple, J., R., W. (2010): “Aid and Conditionality”. Handbook of Development Economics, Volume 5, pp. 4415‐4523.

TMB (2012): “Share information ‐ Major shareholders”. Retrieved, 19th July 2012, from http://www.tmbbank.com/ir/share‐info/major‐shareholders‐en.php.

Tractebel (2005): “Financing hydropower development in emerging power markets ‐ Lessons of experience of Brazil”. The World Bank Group ‐ Energy lecture series 2005, Jan, 24th 2005. Retrieved, 19th June, 2012, from http://www.globalclearinghouse.org/infradev/assets%5C10/documents/Tractebel%20(Baehr,%20Biebuyck)%20%20Financing%20Hydropower%20Development%20in%20Emerging%20Power%20Markets_Lessons%20from%20Brazil%20(2005).pdf.

UNEP, Snidvongs, A. and S‐K. Teng (2006): Mekong River, GIWA Regional assessment 55. University of Kalmar, Kalmar, Sweden.

UNEP‐DDP (2004): “Financing dams and sustainable development – Proceedings and submissions”. Issue‐based Workshop no. 3, London, UK.

Usher, A. D. (1997): “Dams as aid: a political anatomy of Nordic development thinking.” London: Routledge.

Vaidyanathan, G. (2011): “Remaking the Mekong”. Nature, 20th October 2011, Vol. 478, pp. 305‐307.

Ward, M (2010): “The main report of the private sector investment project”. Retrieved, 2nd July, 2012, from http://www.gtriplec.co.nz/assets/Uploads/papers/psi_final_of_main_report_full_version_31_may.pdf.

Williams, J., H. and Ghanadan, R. (2006): “Electricity reform in developing and transition countries: A reappraisal”. Energy 31, pp. 815–844.

World Bank, Head, C. (2000): “Financing of private hydropower projects”. Energy Mining Network, Washington DC. Retrieved, 5th April, 2012, from http://www.chrishead.co.uk/pdfs/3‐Financing‐of‐Private‐HydropowerProjects.pdf.


World Bank (2005): “Project finance and guarantees – IDA guarantees paves renewed interest in private hydropower – the Nam Theun 2 Project”. Retrieved, 4th April, 2012, from http://siteresources.worldbank.org/INTGUARANTEES/Resources/Lao_NamTheun2_Note.pdf

World Bank (2009a): “Directions in hydropower”. Retrieved, 27th June, 2012, from http://siteresources.worldbank.org/INTWAT/Resources/Directions_in_Hydropower_FINAL.pdf.

World Bank (2009b): “Directions in hydropower: scaling up for development”. Water Working Note, n° 21, June 2009. Retrieved, 27th June, 2012, from http://www‐wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/06/22/000333038_20090622001502/Rendered/PDF/490170NWP0Box31directionshydropower.pdf

World Bank (2010): “Overview”. Retrieved, 7th April, 2012, from http://siteresources.worldbank.org/INTLAOPRD/Resources/293582‐1092106399982/492430‐1092106479653/nt2_projectbrief_09‐23‐10.pdf.

World Commission on Dams (2000): “Dams and Development – A new framework for decision‐making”. The report of the WCD. Earthscan Publications Ltd, London and Sterling.

World Commission on Dams (2001): “Trends in the financing of water and energy resources projects”. Thematic Review, Economic and Financial Issues III.2. Retrieved, 6th April, 2012, fromhttp://www2.wii.gov.in/eianew/eia/dams%20and%20development/kbase/thematic/tr32main.pdf.

WWF (2003): “Policies and practices in financing large dams”. Research paper II prepared for WWF International Living Waters Programme. Retrieved, 4th April, 2012, from www.profundo.nl/files/download/WWF0304.pdf.

WWF (2010): Link to the conference presentations Retrieved, 14th July, 2012, from http://wwf.panda.org/what_we_do/where_we_work/greatermekong/our_solutions/hydropower_roads/sustainable_hydropower_financing/.

Yu, X. (2002): “Regional cooperation and energy development in the Greater Mekong Sub‐region”. Energy Policy 31, pp. 1221‐1234.


Appendixes • Appendix I: Boundaries of the Mekong River Basin (UNEP, 2006)


• Appendix II: Greater Mekong Sub‐region Economic Corridors49

49 Source from http://www.amchamvietnam.com/1621, consulted 19th of May, 2012.


• Appendix III: Main changes in the power utilities of MRB riparian’s countries ‐ Thailand ‐ There are three state‐owned power agencies: the Electricity Generating

Authority of Thailand (EGAT) established in 1969, the Metropolitan Electricity Administration (MEA) and the Provincial Electricity Authority (PEA). The EGAT is in charge of the majority of electricity supply. The MEA is in charge for the distribution in Bangkok and the PEA for the rest of the country. The main changes with the reform are the promotion of independent power producers (IPP) in a competitive energy market (with the IPP Law in 1996) and easier access to the transmission system (Williams, 2006). The EGAT remained the main authority with the responsibility for hydropower production and transmission and for national and international power purchases. The MEA and the PEA have also been restructured, notably in smaller subsidiary companies. The Government planned to split policy from regulatory functions.

‐ Vietnam – Electricity of Vietnam (EVN) was created in 1995. It is a state‐owned entity in charge of all electricity services in the country. It regulates three old, fully‐integrated electricity utilities. Since 2004, the Vietnamese government has started a process of partial distribution facility privatization (IR, 2008b).

‐ Lao PDR – Electricité du Lao (EDL) was created in 1961 (1959 on EDL website!!). It is a state‐owned utility in charge of national power supply. Due to insufficient power infrastructure, its supply is limited to the capital Vientiane and main provincial municipalities. The utility facilitates and coordinates transmission for IPP projects. EDL was planning to create a separate company specialized in power export projects, in particular to Thailand and Vietnam. In 2005, the Lao Holding State Enterprise was established to hold part of IPP project. In addition, the government has adopted legislation to enhance BOT and BOO projects.

‐ Cambodia – Electricité du Cambodge (EDC) was created in 195850 as a state entity. It is responsible for national electricity supply (although limited to the capital city and the main provincial towns). Since the end of the 1990s, IPPs have been encouraged to get involved in power generation. In 2001, the government established a separate body in charge of regulating generation and supply facilities: the Electricity Authority of Cambodia (EAC).

‐ Myanmar – Myanmar Electric Power Enterprise (MEPE) was created in 198951 as a state entity. It was a fully integrated power utility for the whole country. Since 1994, the government has encouraged private investments by taking over existing facilities or by investing in greenfield projects under BOT or joint venture agreements.

‐ Yunnan Province – The Yunnan Provincial Power Corporation (YPEPC) is in charge of all electricity services in the province. The Provincial Government holds it. As in other parts of China, the Yunnan province has unlocked its power sector to use foreign capital and technology through the establishment of joint ventures and partnerships mechanisms.

50 Consulted, the 24th of May, on http://www.edc.com.kh/about.html 51 Consulted, the 28th of May, on http://www.eac.gov.kh/index.php.

• Appendix IV: Existing, under construction, licensed and planned dam in the Lower Mekong basin (adapted from the MRC DB, 2009)

Project Name

Commission Year

Ref Year

Construction

Period

Condition Code

Purpose Code Province Country Installed

Capacity Dam Height

Live Storage

Budget (US$

million)

Persons

Resettled

X_UTM Y_UTM

Nam Pung 1965 1965 1.80 EG PARFC Sakon Nakhon Thailand 6.30 41.00 0.16 4.40 391049 1876352 Ubol Ratana 1966 1960 2.70 EG PARFC Khon Kaen Thailand 25.20 35.10 1.70 17.42 247321 1855420 Xelabam 1969 1968 2.00 EG P Champasak Lao PDR 5.00 3.70 0.80 2.00 0 598517 1689753 Nam Dong 1970 1970 1.00 EG P Luangprabang Lao PDR 1.00 10.00 0.01 0.35 0 196250 2194403 Nam Ngum 1 1971 1971 3.00 EG P Vientiane Lao PDR 148.70 75.00 4,700.00 97.00 240971 2050802 Sirindhorn 1971 1966 3.40 EG PARFC Ubon Ratchathani Thailand 36.00 42.00 1.13 13.60 545091 1680985 Chulabhorn 1972 1969 2.80 EG PARFC Chaiyaphum Thailand 40.00 70.00 0.14 14.60 141996 1831085 Huai Kum 1982 1978 4.00 EG PARF Chaiyaphum Thailand 1.18 35.60 0.02 7.28 157490 1816184 Dray Hlinh 1 1990 1990 3.00 EG P Dak Lak Viet Nam 12.00 7.00 1.50 0.00 815988 1403385 O Chum 2 1992 1993 3.00 EG P Ratana Kiri Cambodia 1.00 10.00 0.12 3.60 712152 1525754 Xeset 1 1994 1990 3.00 EG P Saravane Lao PDR 45.00 18.00 0.30 51.00 0 642177 1742990 Pak Mun 1994 1994 4.40 EG PARF Ubon Ratchathani Thailand 136.00 17.00 0.13 248.08 2000 550440 1690214 Nam Ko 1996 1996 2.00 EG P Oudomxay Lao PDR 1.50 6.00 0.00 6.70 0 199081 2301087 Theun‐Hinboun 1998 1994 4.00 EM P Borikhamxay Lao PDR 210.00 27.00 15.00 240.00 0 453188 2018984 Houayho 1999 1993 4.00 EM P Attapeu Lao PDR 150.00 76.50 649.00 166.00 0 678784 1647357 Nam Leuk 2000 2000 4.00 EG P Vientiane Lao PDR 60.00 46.50 228.20 84.50 0 287487 2037096 Lam Ta Khong P.S. 2001 1994 5.80 EG P Nakhon Rachasima Thailand 500.00 40.30 0.29 613.60 128247 1639777 Yali 2001 1992 7.00 EG PAFN Gia Lai Viet Nam 720.00 71.00 779.02 456.12 8475 800970 1574365 Nam Ngay 2002 2000 2.00 EG P Phongsaly Lao PDR 1.20 26.93 0.67 9.00 0 207913 2413272 Nam Mang 3 2004 2004 4.00 EG PA Vientiane Lao PDR 40.00 28.00 45.00 63.00 1200 267483 2030962 Se San 3 2006 2003 5.00 EG P Gia Lai Viet Nam 260.00 69.50 3.80 236.32 0 790936 1573571 Se San 3A 2007 2003 4.00 EM P Gia Lai Viet Nam 96.00 35.00 4.00 101.34 607 786216 1561278 Dray Hlinh 2 2007 2003 3.00 EM P Dak Lak Viet Nam 16.00 7.00 1.50 16.57 153 815988 1403385 Plei Krong 2008 2003 5.00 EG PAF Kon Tum Viet Nam 100.00 71.00 948.00 178.77 5851 808070 1594998 Se San 4A 2008 2005 2.00 EG P Gia Lai Viet Nam 0.00 31.50 7.50 14.00 0 766031 1541933


Nam Theun 2 2009 2002 5.00 CM ‐‐> E PA Khammuane Lao PDR 1,075.00 45.00 3,378.40 1,250.00 5500 494867 1990103 Xekaman 3 2009 2004 4.00 CM ‐‐> E P Sekong Lao PDR 250.00 99.00 108.54 266.00 0 750291 1708110 Xeset 2 2009 2005 4.00 CG ‐‐> E P Saravane Lao PDR 76.00 26.00 9.30 135.00 0 636051 1708688 Se San 4 2009 2004 5.00 CG ‐‐> E PFA Gia Lai Viet Nam 360.00 74.13 264.16 335.76 0 769635 1545660 Buon Tua Srah 2009 2004 4.00 CG ‐‐> E PAF Dak Lak Viet Nam 86.00 83.00 522.60 135.96 2215 831096 1360187 Buon Kuop 2009 2003 5.00 CG ‐‐> E PAF Dak Lak Viet Nam 280.00 34.00 14.74 299.88 96 818133 1386524 Sre Pok 3 2009 2005 4.00 CG ‐‐> E PF Dak Lak Viet Nam 220.00 52.50 62.58 266.89 899 810242 1411871 Sre Pok 4 2009 2005 3.00 CI ‐‐> E P Dak Lak Viet Nam 70.00 25.00 10.11 49.44 354 801321 1424936 Sre Pok 4A 2009 2009 5.00 CG ‐‐> E P Dak Lak Viet Nam 64.00 0.10 105.82 859472 1427862 Nam Ngum 2 2010 2005 5.00 CM ‐‐> E P Vientiane Lao PDR 615.00 181.00 2,994.00 760.00 5759 265206 2075154 Nam Lik 2 2010 2005 4.00 CM ‐‐> E P Vientiane Lao PDR 100.00 101.40 826.00 149.00 0 196112 2080852 Nam Ngum 5 2011 2005 4.00 CM P Luangprabang Lao PDR 120.00 104.50 251.00 196.50 994 249766 2142163 Xekaman 1 2011 2007 4.00 CM P Attapeu Lao PDR 290.00 110.00 1,683.00 343.60 1094 730948 1655582 Xekaman‐Sanxay 2011 2007 4.00 CM PAR Attapeu Lao PDR 32.00 28.00 0.00 39.80 0 727564 1647618 Upper Kontum 2011 2008 4.00 LM P Kon Tum Viet Nam 250.00 73.00 122.70 327.82 1363 848214 1629069 Theun‐Hinboun expansion 2012 2007 4.00 LM P Borikhamxay Lao PDR 222.00 27.00 15.00 185.00 0 453188 2018984 Theun‐Hinboun exp. (NG8) 2012 2007 4.00 LM P Borikhamxay Lao PDR 60.00 67.00 2,262.00 163.00 0 461120 2021271 Xe Kong 3up 2012 2007 3.00 PP PAR Sekong Lao PDR 144.60 41.50 95.09 168.27 1080 690508 1700928 Xe Kong 3d 2012 2007 3.00 PP PAR Sekong Lao PDR 91.10 25.90 168.38 112.90 240 705804 1611734 Nam Tha 1 2013 2007 4.00 LM P Bokeo Lao PDR 168.00 93.65 675.50 333.62 8249 70336 2244561 Nam Long 2013 2007 2.50 LM P Luangnamtha Lao PDR 5.00 12.00 0.13 11.87 0 74732 2319984 Xepian‐Xenamnoy 2013 2007 5.00 LM P Attapeu Lao PDR 390.00 75.00 885.00 607.13 800 672158 1661999 Xe Katam 2013 2006 2.50 LM P Champasak Lao PDR 60.80 41.40 115.00 120.24 0 675367 1672841 Don sahong 2013 2007 4.00 LM P Champasak Lao PDR 360.00 10.60 115.00 673.30 66 603648 1543250 Nam Ou 1 2013 2007 3.00 LM P Luangprabang Lao PDR 180.00 65.00 10.00 247.11 3080 217672 2227927 Nam Ou 3 2013 2007 4.00 LM P Luangprabang Lao PDR 300.00 72.00 13.50 330.21 560 256774 2292709 Nam Ou 5 2013 2007 3.00 LM P Phongsaly Lao PDR 108.00 55.00 11.20 175.37 910 224515 2371738 Nam Ngum 3 2014 2006 5.00 LM P Vientiane Lao PDR 440.00 220.00 979.00 684.70 523 276369 2111554 Nam Theun1 2014 2007 4.00 LM P Borikhamxay Lao PDR 523.00 177.00 2,549.20 816.00 6844 409606 2030017 Xekong 4 2014 2007 6.00 LM PC Sekong Lao PDR 300.00 169.00 3,100.00 815.40 4458 691304 1716150 Nam Kong 1 2014 2007 4.00 LM P Attapeu Lao PDR 75.00 86.90 505.00 159.14 1612 686555 1607769


Nam Ou 2 2014 2007 3.00 LM P Luangprabang Lao PDR 90.00 55.00 8.40 145.43 700 233512 2256507 Nam Ou 4 2014 2007 3.00 LM P Phongsaly Lao PDR 75.00 47.00 9.20 105.64 630 238715 2339225 Nam Ou 6 2014 2007 3.75 LM P Phongsaly Lao PDR 210.00 108.00 363.00 311.99 210 209572 2411148 Nam Lik 1 2014 2007 3.00 LM P Vientiane Lao PDR 54.00 36.50 6.80 96.10 0 223505 2060585 Nam San 3 2014 2008 4.00 LM P Xiengkhuang Lao PDR 48.00 75.00 121.70 152.50 2832 359692 2117342 Nam Beng 2014 2008 3.50 PP P Oudomxay Lao PDR 30.00 37.70 97.90 59.60 104944 2210529 NamNgiep 1 2015 2001 5.00 LM P Borikhamxay Lao PDR 260.00 151.00 1,191.80 366.20 1609 343657 2062533 Nam Ngiep‐regulating dam 2015 2001 3.00 LM PR Borikhamxay Lao PDR 16.80 21.00 4.70 29.70 0 348964 2062613

Nam Ou 7 2015 2007 4.60 LM P Phongsaly Lao PDR 180.00 147.00 1,134.00 419.74 490 216712 2445277 Nam Feuang 1 2015 2007 3.50 PP P Vientiane Lao PDR 28.00 77.00 30.00 67.20 0 168940 2093777 Nam Feuang 2 2015 2007 3.00 PH P Vientiane Lao PDR 25.00 5.00 65.00 0 178626 2120230 Nam Feuang 3 2015 2007 3.00 PH P Vientiane Lao PDR 20.00 4.80 54.00 0 194173 2131966 Lower Se San2 + Lower Sre Pok 2 2016 2008 6.00 PH PCF Stung Treng Cambodia 480.00 45.00 379.40 773.45 4809 271652 1416151 Xe Kong 5 2016 2007 5.00 PP P Sekong Lao PDR 248.00 213.70 1,355.50 417.00 440 706157 1767309 Nam Pha 2016 2008 5.00 PP P Luangnamtha Lao PDR 147.20 139.10 2,738.00 257.00 480 44775 2310201 Nam suang 1 2016 2008 4.00 PP P Luangprabang Lao PDR 40.00 47.30 87.60 82.50 220154 2219579 Nam Suang 2 2016 2008 5.00 PP P Luangprabang Lao PDR 134.00 145.00 2,014.70 284.30 253265 2229786 Mekong at Pakbeng 2016 2008 5.00 PP PN Oudomxay Lao PDR 1,230.00 62.10 442.40 1,338.90 1670 95886 2202818

Mekong at Luangprabang 2016 2008 5.00 PP PN Luangprabang Lao PDR 1,410.00 68.00 734.00 1,705.00 6580 203961 2223354

Mekong at Xayabuly 2016 2008 5.00 PP PN Xayabury Lao PDR 1,260.00 53.00 224.70 1,405.70 1720 164624 2131869 Mekong at Paklay 2016 2008 5.00 PP PN Xayabury Lao PDR 1,320.00 54.50 383.50 1,359.80 1780 132334 2029715 Mekong at Sanakham 2016 2008 5.00 PP PN Vientiane Lao PDR 1,200.00 38.00 106.10 1,194.00 1650 119928 1989035 Nam Nga 2017 2008 4.00 PH P Luangprabang Lao PDR 97.84 4.72 1,565.10 177.30 207876 2245168 Mekong at Sangthong‐Pakchom 2017 2008 5.00 PH PNA Vientiane Lao PDR 1,079.00 55.00 217.23 1,619.06 642 187571 2015292 Mekong at Ban Kum 2017 2008 5.00 PP PNA Champasak Lao PDR 1,872.00 53.00 402.90 2,804.36 1122 562424 1704775 Mekong at Latsua 2018 2008 5.00 PH PNA Champasak Lao PDR 686.00 22.00 530.00 1,200.00 0 565674 1694030 Xe Pon 3 2018 2007 4.00 PH P Saravane Lao PDR 75.00 35.00 368.00 145.70 600 698398 1803788 Xe Kaman 2A 2018 2007 4.00 PH P Attapeu Lao PDR 64.00 63.50 3.70 104.30 0 761536 1683972 Xe Kaman 2B 2018 2007 4.00 PH P Attapeu Lao PDR 100.00 85.00 216.80 158.00 0 762667 1690442 Xe Kaman 4A 2018 2007 4.00 PH P Attapeu Lao PDR 96.00 60.00 16.50 145.00 0 770908 1684909


Xe Kaman 4B 2018 2007 4.00 PH P Attapeu Lao PDR 74.00 61.40 21.20 115.70 0 771792 1698512 Dak E Mule 2018 2008 5.00 PH P Sekong Lao PDR 105.00 103.20 154.00 251.00 0 721665 1720974 Nam Khan 2 2018 2007 4.00 PH P Luangprabang Lao PDR 140.00 155.00 528.00 218.50 220377 2178775 Nam Khan 3 2018 2007 4.00 PH P Luangprabang Lao PDR 47.00 90.00 860.50 97.50 3353 268616 2189158 Nam Ngum 4A 2018 2007 4.00 PH P Xiengkhuang Lao PDR 54.00 65.00 332.30 96.11 0 289577 2151654 Nam Ngum 4B 2018 2007 3.50 PH P Xiengkhuang Lao PDR 54.00 25.00 1.70 118.40 0 274131 2148487 Nam Ngum, Lower dam 2018 2008 3.50 PH PAR Vientiane Lao PDR 90.00 17.20 243.00 242.00 0 288794 2005872 Nam Pot 2018 2007 3.00 PH P Xiengkhuang Lao PDR 22.00 30.00 45.10 55.00 0 317227 2116054 Nam Phak 2018 2007 3.00 PH P Oudomxay Lao PDR 5.10 25.00 1.90 26.70 0 190221 2327320 Xe Lanong 2 2018 2007 4.00 PP P Saravane Lao PDR 20.00 65.00 79.20 66.23 0 678874 1773681 Nam Phak 2018 2008 4.00 PP P Champasak Lao PDR 75.00 40.00 34.97 102.00 0 617721 1673557 Houay Lamphan 2018 2007 4.00 PH P Champasak Lao PDR 60.00 55.00 128.20 147.70 600 660379 1698887 Nam Khan 1 2019 2007 4.00 PH P Luangprabang Lao PDR 101.77 64.10 805.00 166.00 214298 2185025 Nam Pay 2019 2008 4.00 PH P Vientiane Lao PDR 62.00 56.70 52.30 76.00 200 263335 2114638 Nam Mang 1 2019 2007 4.00 PH P Borikhamxay Lao PDR 51.00 81.40 551.40 196.40 0 344093 2051340 Nam Pouy 2019 2008 4.00 PH P Xayabury Lao PDR 43.73 102.60 498.60 71.00 0 157605 2099061 Nam Poun 2019 2008 4.00 PH P Xayabury Lao PDR 84.87 76.00 339.00 138.30 126667 2045311 Nam Ngao 2019 2008 3.00 PH PA Oudomxay Lao PDR 20.00 69.00 434.00 53.10 150982 2232492 Nam Chian 2019 2008 4.00 PH P Xiengkhuang Lao PDR 148.00 68.80 8.30 180.00 0 346530 2119292 Nam Hinboun 2 2019 2007 3.00 PH P Khammuane Lao PDR 13.00 33.00 25.60 48.20 0 463880 2004764 Xe Bang Fai 2019 2007 4.00 PH PR Khammuane Lao PDR 107.00 28.00 228.00 600 510207 1906002 Sambor 2020 2005 10.00 PP PCN Kratie Cambodia 3,300.00 35.00 2,000.00 3,940.00 5120 629939 1500324 Nam Ngieu 2020 2008 3.00 PH P Xiengkhuang Lao PDR 30.40 31.20 18.80 42.40 0 348744 2122563 Nam San 3B 2020 2007 3.00 PH P Xiengkhuang Lao PDR 38.00 45.00 11.70 80.90 0 352777 2111463 Nam San 2 2020 2007 3.00 PH P Borikhamxay Lao PDR 60.00 60.00 1,946.40 122.30 2930 374443 2077643 Nam Pok 2020 2007 3.00 PH P Phongsaly Lao PDR 2.60 22.30 5.10 17.20 0 221660 2366770 Nam Hinboun 1 2020 2008 4.00 PH PR Khammuane Lao PDR 45.00 38.00 1,224.00 82.00 1200 447780 1972133 Xe Neua 2020 2008 4.00 PH P Khammuane Lao PDR 60.00 28.00 624.00 144.00 800 595778 1917440 Nam Theun 4 2020 2008 3.00 PH P Borikhamxay Lao PDR 30.00 122.00 806.50 140.00 0 476023 2065224 Nam Mouan 2020 2007 4.00 PH P Borikhamxay Lao PDR 110.00 128.00 1,960.00 274.00 1200 422140 2075018 Xe Bang Hieng 2 2020 2007 3.00 PH P Savannakhet Lao PDR 16.00 55.00 642.90 74.00 2700 638174 1863376


Xe Set 3 2020 2007 3.00 PH P Saravane Lao PDR 20.00 12.00 3.54 26.40 0 636671 1703621 Xedon 2 2021 2007 4.00 PH PA Saravane Lao PDR 54.00 46.00 1,743.00 298.00 613849 1737298 Xe Bang Nouan 2021 2007 4.00 PH P Savannakhet Lao PDR 18.00 65.00 1,477.00 88.60 860 601324 1756197 Xe Lanong 1 2021 2007 4.00 PH P Savannakhet Lao PDR 30.00 75.00 373.74 123.40 0 667357 1797995

Nam Kong 2 2021 2007 4.00 PH P Attapeu Lao PDR 74.00 72.10 139.60 124.50 0 733880 1627388

Xe Nam Noy 5 2022 2007 3.00 PH P Sekong Lao PDR 20.00 55.00 8.80 52.60 0 678826 1677323 Xe Xou 2022 2007 4.00 PH P Attapeu Lao PDR 63.39 62.10 1,714.00 121.40 733880 1627388 Battambang 1 ? 2005 5.00 PH PCAF Battambang Cambodia 24.00 49.50 1,040.00 56.69 4350 271327 1375582 Battambang 2 ? 2005 4.00 PH PC Battambang Cambodia 22.00 50.00 110.00 72.20 609991 1391481 Stung Treng ? 1995 8.00 PH PCN Stung Treng Cambodia 980.00 22.00 70.00 2,280.00 9160 602356 1498360 Pursat 1 ? 2007 3.00 PP PCAF Pursat Cambodia 100.00 51.50 690.00 188.25 234 312883 1356846 Pursat 2 ? 1995 3.00 PH PC Pursat Cambodia 10.00 40.00 295.00 59.60 349147 1358482 Lower Se San 3 ? 1995 6.00 PH PCF Ratana Kiri Cambodia 243.00 75.00 3,120.00 704.00 706486 1557981 Prek Liang 1 ? 1995 4.00 PH P Ratana Kiri Cambodia 35.00 90.00 110.00 146.00 742352 1573055 Prek Liang 2 ? 1995 4.00 PH P Ratana Kiri Cambodia 25.00 90.00 180.00 124.00 744072 1580450 Lower Sre Pok 3 ? 1995 6.00 PH PCF Ratana Kiri Cambodia 204.00 50.00 5,310.00 812.00 721546 1481202 Lower Sre Pok 4 ? 1995 6.00 PH PC Mondul Kiri Cambodia 143.00 70.00 2,700.00 504.00 765258 1442862 Stung Sen ? 1995 4.00 PH PCA Preah Vihear Cambodia 23.00 38.00 2,890.00 80.00 526652 1470529 Duc Xuyen ? 2002 4.00 P AFP Dak Lak Viet Nam 49.00 88.00 413.41 82.63 755 837025 1344475

LEGEND Characters in red have been modified from the original table

General / Commission Indicate the actual or expected year of commissioning of the first generating unit of the project

General / Condition Indicate the status of the project with a two letter code as follows: First Letter E existing project under operation C project under construction


L project not under construction but licensed for development P planned project Second Letter when the first letter is E, C or L. Define ownership as follows: G project owner is government, public electric utility or state company I project owner is independent power producer M project owner is a partnership of government and IPP Second Letter when the first letter is P. Define level of study as follows: H project is at a level of hydroelectric master plan or inventory (cursory study only) P project is at a level of prefeasibility (preliminary investigations, rough drawings) General / Purpose Use a string of letters separated by / to express, in order of priority, the purposes for which the project is conceived: P power production A agriculture / irrigation W water supply to local municipalities or local population C flood control N navigation R recreation F fisheries development Cost / Reference Project Budget

The budget for all engineering, procurement and construction (EPC) activities related to the project. This budget normally does not include a number of items that are listed in the following columns. If included these will be noted in the appropriate columns.

Units: millions of United States dollars at the price reference level

• Appendix V: Location map of hydropower project in the LMB


• Appendix VI: Nam Theun 2 hydroelectric project overall map (ADB, 2005)

• Appendix VII: Schematic representation of the NT2 power facility (WB, 2010)


• Appendix VIII: Contractual structure of NT2 (MIGA, 2006)

• Appendix IX: Key informants

‐ Policy Officer, Development Strategies Department of the French Ministry of Foreign Affairs, Paris, France;

‐ Database Manager, at the Mekong River Commission Secretariat, Information and Knowledge Management Program Technical Support Division, Phnom Penh, Kingdom of Cambodia;

‐ Program Officer, at the Mekong River Commission Secretariat, Information Management Initiative on Sustainable Hydropower, Vientiane, Lao PDR;

‐ PhD researcher at University of Sydney, on Energy Transitions in Thailand and the Lao PDR, Sydney, Australia;

‐ PhD researcher at King’s College of London, on the water and energy nexus focuses on hydropower decision making in the Mekong Basin, London, UK;

‐ Junior researcher at UNESCO‐IHE and Policy officer at Ministry of Foreign Affairs, Delft, The Netherlands;

‐ Professor at the UNESCO‐IHE and Lead water Resource Specialist at International Bank for Reconstruction and Development (World Bank), Delft, The Netherlands.

Turning water into capital: Political ecology of financing ......Turning water into capital:...

Documents

Transcript of Turning water into capital: Political ecology of financing ......Turning water into capital:...