1. What are the main features of the Nam Theun 2 project?
   
   
2. What is the GOL's participation in the project?
   
   
3. Why has GOL prioritized development of the hydropower sector ?
   
   
4. What is being done to mitigate the social and environmental impacts of the Nam Theun 2 project ?
   
   
5. What consultations have taken place with local people in project-affected areas?
   
   
6. What are the alternatives to Nam Theun 2?
   
   
7. What domestic use will be made of power from Nam Theun 2?
   
   
8. When and how will resettlement take place?
   
   
9. Is the market for Nam Theun 2's power assured?
   
   
10. What are the Poverty Reduction Fund and the National Growth and Poverty Eradication Strategy ?

Q01: What are the main features of the Nam Theun 2 project ?

A: NT2 is a trans-basin hydroelectric project located on the Theun river, which flows across the Nakai Plateau in Khammouane province of central Laos . [ click here to see a map of the project area ]

The dam itself is comparatively small; only 48 metres high. The project area benefits from a heavy and reliable annual rainfall (on average around 2800 mm ), most of which can be trapped by the dam and stored in the reservoir on the Nakai Plateau. The height of the plateau escarpment and other natural physical features means that, by placing the power plant 40 kms upstream from the dam, a head of almost 350 metres can be achieved without the need for a large dam. This allows the project to have a generation capacity of 1,070 megawatts (MW) - 995 MW are to be exported, 75 MW will feed into the domestic grid. The geography of the project is one of its great strengths and gives it distinct economic advantages. Other features include a 138 km long double-circuit 500 kV transmission line that will connect to the Thai national grid, and a 78 km long single-circuit 115 kV transmission line for domestic supply purposes.

The catchment area is still largely covered with primary forest and forms part of the Nakai-Nam Theun National Biodiversity Conservation Area (NBCA). Funds from the project will help to conserve this gobally important 4,000 km 2 area of outstanding natural beauty.

The project has an estimated base cost of approximately US$1.25 billion and is being developed by the Nam Theun Power Company (NTPC), a consortium that comprises Electricité de France International (EDFI), Lao Holding State Enterprise (LHSE) and the Electricity Generating Public Company (EGCO) and Ital-Thai Development Company (ITD) from Thailand .

Work on the project power hose formally began on 16 th May, 2005, and some 1,400 people are currently involved in construction and other related activities. As construction progresses, an additional 3,500 jobs are to be created for local people. This will make the project one of the largest employers in the Lao PDR. Nam Theun 2 is scheduled for completion in 2009.

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Q02: What is the GOL's participation in the project?

A: The Government of Laos (GOL) holds a 25% equity stake in NTPC and is representing by Lao Holding State Enterprise (LHSE), a company fully owned by the Government. In April 2005 the Government, represented by the Ministry of Finance, formally signed financing documents for loans and grants of approximately US$ 100 million to fund its participation in project. The loans include US$ 20 million from the Asian Development Bank (ADB) and US$ 55 million from the European Development Bank (EIB), while the grants include US$ 20 million from the International Development Agency (IDA) and 5 million Euros from the Agence Française de Développement (AFD) and. The loan and grant resources are to be retroceded to LHSE. The Government will subsequently retrocede these financial resources to the that replaces Electricité du Laos (EDL) as the 25% Government shareholder in the Nam Theun 2 Power Company Limited ( NTPC ).

At the end of the 25-year concession, Nam Theun 2 will be transferred to the GOL free of charge with all revenuse then accruing to the government.

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Q03: Why has GOL prioritized development of the hydropower sector?

A: The Lao PDR is a very poor, land-locked country faced with severe development challenges [ click here to see key development statistics ] . It is heavily dependent on Official Development Assistance (ODA). Most of the population of 5.6 million lives in the countryside and many survive on less than one US dollar a day. Annual per capita income is approximately US$330 . The combination of geography, small population, poverty and little industry means the country has few viable options to fund socio-economic development.

It is widely recognized that the mountainous geography of Laos , and its abundance of rivers, means the country has significant hydropower potential. In the case of Nam Theun 2, which has been accorded highest priority in the national Power Sector Strategy, revenue flows to the GOL over the first 25 years of operation have been estimated at more than US$1.8 billion, of which royalties form US$ 776 million, income tax US$ 423 million and dividends US$622 million.

The GOL accepts that large hydropower projects will impact upon the environment and local communities. In more developed countries there may be other, more appropriate, alternatives for revenue generation. However, in the Lao context, the GOL firmly believes that the positive benefits of the Nam Theun 2 project outweigh the negative impacts. Hence, in April 2002, the National Assembly of the Lao PDR unanimously endorsed the Nam Theun 2 Project during the Fifth Legislature.

Revenues from NT2 will increase GDP and will play a central role in funding the national development framework, detailed in the National Growth and Poverty Eradication Strategy (NGPES) [ click here for more information on the NGPES ].

The NGPES is central to the GOL's core long-term objective of freeing Laos from the status of least-developed country (LDC) by 2020. The NGPES forms a comprehensive framework for growth and development, with a particular focus on poverty alleviation in the country's poorest districts, and is designed to accelerate the current trend in reducing poverty in Laos .

The project will directly benefit the local area via improved roads, provision of electricity and health and education services, the development of agro-forestry and potential dry-season irrigation, as well as skills development and job creation.

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Q04: What is being done to mitigate the social and environmental impacts of the Nam Theun 2 project ?

A: The GOL is of the view that, while certain impacts are unavoidable, all reasonable steps must be taken to assess and mitigate these for the project to be considered a true success. The main direct impacts of the project are resettlement of approximately 6,200 people , changes to the hydrology of the Theun and Xe Bang Fai rivers (altered flow rates will affect some riparian activities and riverine flora and fauna), and loss of habitat in the reservoir area on the Nakai Plateau from inundation . The size of the reservoir will vary annually from a dry season low of 80 km 2 to a wet season high of approximately 450 km 2 . The Nakai Plateau forms part of the broader Nakai-Nam Theun National Biodiversity Conservation Area (NBCA).

The potential impacts of Nam Theun 2 have been the subject of numerous studies carried out over more than a decade by the project developers, the GOL, domestic and international NGOs, independent consultants and multilateral development institutions. The involvment of the World Bank means that the project must meet or exceed the requirements of the 10 World Bank safeguard policies (covering Environmental Assessment, Cultural Property; Disputed Areas; Forestry; Indigenous Peoples; International Waterways; Involuntary Resettlement; Natural Habitats; Pest Management; and Safety of Dams). [click here for more information]

The GOL accepts that the current shortage of properly trained and funded personnel limits its efforts to conserve the existing forest and wildlife resources in the project area. But regardless of the project, population pressures are already having considerable impacts. The GOL therefore sees the implementation of Nam Theun 2 as a way to promote not just development, but also environmental protection and conservation. Practical steps have already been taken to translate theory into practice. The government has set up a Watershed Management Protection Authority (WMPA), under the direct authority of the Prime Minister's Office, with the specific remit of managing conservation in the watershed area. The WMPA will receive funding of US$ 1 million annually from Nam Theun 2 revenues, as well as an additional US$ 6.5 million to be contributed during the construction phase. Detailed conservation plans are provided in the Social and Environmental Management Framework and Operational Plan (SEMFOP).

The SEMFOP has been prepared for the government by independent experts. It contains information from the preliminary biodiversity area management plan prepared by the New York based NGO Wildlife Conservation Society (WCS), as well as from the Environmental and Social Management Plan (ESMP) - the original study prepared by the International Union for the Conservation of Nature (IUCN) for the watershed and Nakai-Nam Theun NBCA.

At the same time, the NTPC has developed comprehensive strategies, working with the GOL, to address resettlement and management of the downstream impacts of the project.

An Environmental Assessment and Management Plan (EAMP) has been prepared following highly detailed geological and hydrological studies. .

The Social Development Plan (SDP) combines the original Resettlement Action Plan (RAP) and the Ethnic Minorities Development Plan for the Project Area (EMDP), both of which were prepared by external consultants. The SDP considers the impacts identified in the EAMP, anticipates how these will affect the livelihoods of local people, and provides a detailed compensation plan.

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Q05: What consultations have taken place with local people in project-affected areas ?

A: The consultative process has been active for many years, with initial public consultations held in Vientiane in May 1997 to discuss the Resettlement Action Plan (RAP). Additional consultation on the RAP took place in Vientiane in 1999. More recently, in 2004, a series of detailed local consultations have been held in villages on the Nakai Plateau, along the Xe Bang Fai river, in the watershed area, and in the project lands and peripheral impact zone. The findings of these consultations were discussed with the broader regional and international audience through a series of workshops held in Vientiane , Bangkok , Paris , Washington and Tokyo in August and September 2004. [ click here to see the workshop schedule ].

An economic analysis workshop was held in Bangkok in November 2004 [click here to download the Nam Theun 2 Project Economics Interim Summary Report in PDF format]. In December, a further workshop was held, in Laos, to discuss the Xe Bang Fai downstream compensation framework.

In addition, the Summary Environmental and Social Impact Assesment and other key safeguard documents ( SEMFOP, EAMP, SDP and CIA) have been posted online on this web site and on the Nam Theun 2 Power Company web site at www.namtheun2.com. The documents extend to many thousands of pages. Each has evolved over time to reflect feedback from the consultative process and other relevant inputs, and each represents many thousands of hours of expert study and review.

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Q06: What are the alternatives to Nam Theun 2?

A: The Lao PDR's main exports are wood and wood products; gold and copper, garments, coffee and electricity - with electricity sales to Thailand currently representing about 30% of total export revenues. Mining is becoming increasingly important, and tourism also makes an important contribution to the national economy. But total GDP is little more than US$2 billion - just over 48 hours net sales for Wal-Mart. Agriculture represents 50% of GDP; industry a little over a quarter. Exports in 2003 were worth around US$330 million (in 2003, the value of manufactured exports from the state of Minnesota alone was US$10.5 billion).

The Government of Laos wants to see the domestic manufacturing and service sectors assume a greater role in national development, and progress is being made in this respect. But the best efforts of the government and the people are hampered by the realities of a small, unskilled and ethnically diverse population; under-developed transport and communications infrastructure; and mountainous, land-locked terrain. The lack of Normal Trade Relations (NTR) status with the United States also effectively denies Lao goods access to this important market ( Laos , Cuba and North Korea are the only countries in the world without NTR status).

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Q07: What domestic use will be made of power from Nam Theun 2?

A: 75 MW of power from Nam Theun 2 will be supplied to Electricite du Laos for domestic distribution. At present, total installed capacity in Laos is just 642 MW, of which 627 MW is generated by hydropower (the remaining 15 MW is generated using expensive imported diesel). The majority of power produced is exported to Thailand . Domestic distribution in Laos is currently achieved through four separate stand-alone grid systems, each covering a different area of the country. Power from Nam Theun 2 will feed in the Central-2 grid, which is forecast to show the greatest increase in demand as rural electrification projects progress. Energy consumption of the main economic sectors is increasing by approximately 10% annually and around 40% of all households now have access to electricity (although only 10% of all rural areas are provided with grid electricity). The GOL is working towards a goal of ensuring that 70% of households have electricity by 2010; Nam Theun 2 will help achieve this, complemented by mini-developments of micro-hydro, solar and wind energy projects for off-grid supply in remote areas.

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Q09: Is the market for Nam Theun 2's power assured?

A: Yes. Energy demand in Thailand , the principle market for electricity from Nam Theun 2, is growing fast. Peak demand has risen from roughly 14,000 MW in 1998 to more than 19,500 MW in 2004. Demand is forecast to exceed 30,000 MW by 2011, and 40,000 MW by 2016. Nam Theun 2 now forms an integral component of the Electricity Generating Authority of Thailand (EGAT) Power Development Plan (PDP 2004), which details power generation capacity increases to take place through to 2015 in order to supply an extra 22,000 MW of power to the Thai grid.