Nam Theun 2 >> Background


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Project Rationale
The Nam Theun 2 project is an outstanding example of how the Government of the Lao PDR is working with the private sector and multilateral organisations to develop a model of sustainable development with strong economic, social, and environment fundamentals. The Project has long been recognised by independent experts as being the one project amongst all the potential hydroelectric power projects in Laos as having the greatest potential to achieve the country's development objectives.
With the export of 995 MW of generating capacity and electrical energy to the Electricity Generating Authority of Thailand ("EGAT") at a very competitive tariff and the supply of 75 MW of generating capacity and electrical energy to Electricité du Laos ("EDL"), the Project is forecast to generate average annual revenues of USD 80 million to Laos in the form of taxes, royalty charges and dividends over the life of the concession. At the end of the concession, the Project will be transferred to the Government free of charge with all revenues thereafter accruing to the Government. The Project will be, by far, the largest single source of foreign exchange income to Laos, and its largest single contributor to the Gross Domestic Product and fiscal revenues.
	To optimise the use of these revenues, the World Bank, other multilateral institutions and the Government are working together to establish and ensure that the Project's revenues to the Government will effectively serve the long-term development of the country. The Project is recognized as an essential part of the country's development framework and the Project's implementation is likely to be the first real possibility for the Lao PDR to reduce gradually its dependence on Official Development Assistance.
The Government has agreed with the World Bank to implement a Poverty Reduction Fund that is being initially sourced from International Development Agency ("IDA") funds, and then from the Government's taxes, royalties and dividend revenues once the Project commences operation. Special administrative units are being established to deal with both the implementation of the Project and the effective management and allocation of the financial resources gained from the Project. At the local levels, the Project will allow both the considerable improvement of living standards for the impacted population, and the long-term protection of the watershed and its 4,000 km2 world-class biodiversity and primary forest heritage. In a statement issued by the World Bank following a visit to Vientiane and the Project in May 2003, Shengman Zhang, the World Bank's Managing Director, said in Vientiane in May 2003: " We see Nam Theun 2 not as a project per se, but as a vehicle through which to make a considerable progress in the effort of poverty reduction. "