introduction of nt2 and its progress - world...

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First High Level Forum First High Level Forum on Laoon Lao--Thai PartnershipThai Partnership

in Sustainable Hydropower Developmentin Sustainable Hydropower Development

Introduction of Introduction of NT2NT2And Its ProgressAnd Its Progress

Presented by: Dr. Somboune MANOLOMGeneral ManagerLao Holding State EnterpriseMinistry of Energy and Mines, Lao PDR

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NAM THEUN 2 PROJECTNAM THEUN 2 PROJECT

• NT2 is not just a hydro-electric

power project

• It is not just an Industrial project

• It is a Development Project

• NT2 is a large-scale project in

terms of financing (1250 MUSD)

and installed capacity (1080 MW)

• It is a largest project on tributaries

of Mekong in Lao PDR

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The Industrial project

• a project spread over a verylarge territory (200 km by 50 km)

• 14 construction sites• 300 km of linear construction zones (channel, roads, transmission lines)

• a project which covers 3 provinces:

•Bholikhamsay (dam area)

•Khammouane (reservoir, power plant, channel, roads)

• Savannakhet (transmission line to Thailand)

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The Industrial Project

• Catchment area: 4,013 km2 – Average annual runoff: 7,527 million m3 –Live volume: 3,530 million m3

• Small dam creating a reservoir of 450 km2 at full supply level, 70 km2 at minimum operating level• Optimum use of a unique topographical situation - Water from reservoir drops ~350 m through tunnel

to power station at the bottom of Nakai escarpment• 6 turbines generated ~6,000 GWh of electricity per year• Regulating pond receives the water diverted before release into a 27 km downstream channel to the Xe

Bang Fai River • 138 km 500 kV line to the Thai-Lao border - 28 km 115 kV line to the Lao grid

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Nakai dam

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Power Station, Substation & Transmission LinesPower Station, Substation & Transmission LinesDescription :

– Power Station, including: • 4 Francis units of 250MW,

for Thailand • 2 Pelton units of 42MW, for

Laos

– 500kV – 115kV – 22kV Substation

– About 6,000 GWh generated each year

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Power Station

8Downstream channel

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Progress of NT2 as of 31Progress of NT2 as of 31stst July 2007July 2007

• Progress of NT2 (Construction & E&S) is on schedule

• Half way between Financial close (June 05) and COD (December 09):– No delay

– No Costs Over-run

– No major difficulty anticipated

– Overall Work construction Progress achieved: 61.8%

• Total workforce: 6929 persons, 70% of them are Lao people

• Progress of EGAT Construction of T/L & Substation facilities achieved: 40.93% ( 1.8% ahead of schedule)

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The Development Project

protection of the 4,000 km2 catchment area (NBCA)resettlement of 1,200 families on the Plateaua “development program” for 200 villages in the downstream areas

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Protection of the 4,000 km2 catchment Area

A unique environmental offset

• 4,000 km2 of unique biodiversity and primary forest

• 6,000 ethnic minority villagers

• USD 8.5 million during the Project construction

• USD 1 million per year contributed by NTPC during the entire concession period for development conservation activities by a GOL entity (WMPA)

12Village Conservation Monitoring Unit (VCMU) members with

wire snares, hides and horns retrieved from NPA forests

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Salamander first discovered in Laos by a WMPA patrol team –possibly an undescribed species

Photo by Bryan Stuart

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Villagers / Project-affected Persons•Consultations

•Direct involvement

Villagelevel

Steering Committee / Resettlement Committee

RMU – EMU / District Working Group

•Coordination of implementation

•Monitoring

Lao PDR administration

level

NTPC – NGOs - Technical Assistance – Contractors•Funding

•Infrastructure

•Technical Assistance

Companylevel

Programs to be

implemented

E & S measures are jointly implemented E & S measures are jointly implemented by villagers, by GOL and by NTPCby villagers, by GOL and by NTPC

15Health awareness event on resettled village

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House in new Bouama village

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Pasture grasses inter-planted with trees

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Wood and furniture for houses

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Forest nursery Medicinal plants seedlings

Orchid cultivation Charcoal

20Fish pond developed under project lands livelihood program

21Environmental education in a resettlement school

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Extensive Project MonitoringExtensive Project MonitoringIn the period from FC to August 07 there have been 40 external monitoring / review missions:

• LE (10)•GOL’E (6)•POE (5)•DSRP(3)•IAG(2)•IFI (launch workshop +5 review missions+11 IFI technical missions+5 Top Management Visits)•Insurers (4)

Plus Shareholders & Lenders (7) GOL Officials (14)Thai Officials (3)EGAT (7)Lao Organizations (10)Foreign Organizations (12)Journalists (8)NGOs (4)

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Large Public DisclosureLarge Public DisclosureMain documents available to public through NTPC, GOL, and WB & ADB web sites:

Safeguards documents:- Summary Environment and Social Impact Assessment (SESIA)- Environmental Assessment and Management Plan (EAMP)- Social Development Plan (SDP)- SEMFOP (watershed management)- Cumulative Impact Assessment

Contract documents- Summary of EGAT Power Purchase Agreement- Summary of Concession Agreement- Full abstract of CA covering E&S obligations

NT2 Project progress reports- Semi-annual Progress Reports - Quarterly Progress Newsletters and news releases

External monitoring reports- POE Reports- WB-ADB Annual Progress Report - IAG Reports

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Press and Media Press and Media -- Site Visits Site Visits –– Public SymposiumsPublic Symposiums

NTPC is providing support, for their site visit, to journalists and media representatives who wish to report on NT2 project:

• This support includes access to all areas, subject to safety / work progress issues on construction areas

Many media and journalists already reported on NT2 project: • Since 2000, 6 different media have produced film or taken footage on NT2 project• Since 2000, more than 45 journalists visited the site• 15 journalists from western newspapers and 20 Thai journalists visited since 2005

Many visits by Governments representatives and organizations:• Embassies, MRC, Universities,…

Several international symposium or workshop:• 2002 : Vientiane : “window for the future”• 2004 : Bangkok, Tokyo, Paris, Washington, Vientiane : “International Stakeholders Workshop”• 2006 : Annual Stakeholder Forum in Thakek• 2007 : Annual Stakeholder Forum in Thakek

Site visits organized for the public:• “Open week” mid November 05• May 2006 and June 2007 site visits

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Capacity Building in Lao PDRCapacity Building in Lao PDRNTPC with Government of Lao PDR :

- Joint work, training, technical assistance- At provincial, district, and village levels- In health, social, livelihood, and environmental areas

Project at village level:-Professional training and experience for 3 to 4,000 Lao workers during the 5 years of project construction (50% coming from villages close to project areas)

- development of schools, health programs,…

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Nam Theun 2 : a cornerstone for reduction of poverty in Laos

High priority project in NGPES

A major source of fund for GOL poverty reduction programs Direct benefits for local people:

• 140 km of roads built or upgraded

• Major improvement in living condition for the 6,000 people resettled

• USD 16 million development program for 200 villages in the downstream areas

• Employment for 3,000 to 4,000 Lao workers during 5 years

• USD 1 million per year, paid by the project, for the protection of the NBCA (from Financial Close till end of concession = USD 31 million in total)

• UXO clearance

Major revenues to GOL during project operation • Royalties, taxes and dividends increasing from USD 25

million to 140 million per year, with a total of USD 2,000 million over the 25 years concession period (representing 7-9% of the country budget )

• Revenues to be used for “poverty reduction in Laos” within a “GOL revenue management scheme”

• Project transferred free of charge to Government of Laos after 25 years of operation by NTPCNakai District Hospital

Bridge on Nam Theun

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First High Level Forum First High Level Forum on Laoon Lao--Thai PartnershipThai Partnership

in Sustainable Hydropower Developmentin Sustainable Hydropower Development

ExperienceExperience from from NT2NT2

Prepared & presented by: Dr. Somboune MANOLOMGeneral ManagerLao Holding State EnterpriseMinistry of Energy and Mines, Lao PDR

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PublicPublic--Private Partnership Private Partnership in Hydropower Developmentin Hydropower Development

• Hydropower projects require significant financing, which

public sector alone may not be able to mobilize

• Large scale hydropower projects involve resettlement,

which private sector alone is not able implement

• Watershed of HP projects belong to Government & need

proper protection by Government Authority

• PPP in HP development is essential

• NT2 is an obvious example

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NT 2 Lessons LearnedNT 2 Lessons Learned• On Macro-Economic:

– Exchange of reforms in many economic sectors with getting support to NT2 from IFIs

– IFIs identify GOL weaknesses & problems to be solved (Reform State-own Enterprises, Reform State Commercial Banks, External Public Debt,..)

– Agreement with IFIs to strengthen GOL system before Revenue comes (Revenue Management, Public Expenditure Management,..)

– GOL NT2 Revenue links directly with National Growth and Poverty Eradication Strategy (NGPES) up to 2020

– Strict control and many constrains in spending budget come from GOL NT2 Revenue

– GOL may feel not comfortable with these strict arrangements and dependency

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NT 2 Lessons LearnedNT 2 Lessons Learned• On Financial:

– NT2 will generate sustainable and significant revenue to GOL, which contribute about 7-9% of National budget annually from 2010 onwards

– GOL total financial benefits about 2000 million USD over 25 years of concession period

– NT2 help improve credibility of Lao PDR in front of IFIs, banking community, lenders and export credit agencies

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Lessons LearnedLessons Learned• On Legal Framework:

– NT2 accelerates drafting & enforcing of certain Regulations & Laws, such as Environmental Law, Resettlement Policy

– Certain existing Laws have been improved, such as STL (Secured Transaction Law)

– World Commercial Banking community and IFIs become familiar with current legal system and existing Laws of Lao PDR

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Lessons LearnedLessons Learned• On Environment:

– NT2 attracted & increased level of GOL environmental awareness

– NT2 increased awareness of central & provincial Government on

environmental-social impacts that can be caused by development

projects

– NT2 introduced new principle for a development projects to allocate

dedicated budget enough for environmental & social mitigation

purposes

– NT2 is a model project in providing sustainable budget for protection

and management of Watershed, which is a National Protected Area

(NPA), such as WMPA

– Responsibilities of NT2 include Compensatory reforestation (It is a new

benchmark in hydropower development)

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Lessons LearnedLessons Learned• On Public and International Consultations:

– NT2 have been making Lao PDR more & more familiar with

Public Participatory Process (Public Workshops/Public Hearing)

– NT2 is a pioneer in conducting Public Consultation Workshops at

community level, provincial level and National level

– NT2 introduce unprecedented practice, such as International

Workshops outside Lao PDR

– Riparian Countries Notifications (Thailand, Vietnam & Cambodia)

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Lessons LearnedLessons Learned

• On Communication – Due to NT2 the GOL is more familiar with

communication with NGOs

– It is a new culture to GOL to communicate with NGOs, although some of them are non-constructive

– NT2 build up communication skill for many GOL Agencies

– Many websites and information centers opened up

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• On GOL Commitments with IFIs:

– Development Grant Agreement (DGA) is unique in

WB practice

– Excessive commitments may put country at risks

– It should not be a model or repeated for other

development projects

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• Benefits to Project Affected People (PAP):– Livelihood of PAP shall be better off and sustainable

– Family income target has been defined for PAP and become contractual obligation of NT2 (NTPC)

– Infrastructure development

– Regional development

– Capacity building

– Employment opportunity

– Health care and Education

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• GOL Agencies Capacity:– Various Agencies of GOL have been building-up capacity to

handle & monitor large-scale hydropower projects

– NT2 has made significant contribution in facilitating capacity

building to GOL Agencies

– Provincial Authorities and Central GOL Agencies are getting

experiences & lessons from NT2

– Need to further strengthen capacity of GOL Agencies

– Need to keep consistency in application of Law & Regulations

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• Securing GOL Benefits:

– Only good CA and PPA can protect equitable

interests of GOL and other parties

– Use international Legal & Financial Advisors

– DSRP & POE help protect interests of GOL

– It is expensive when need to put International

Advisors and various panels in place

– Not every project can afford

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Lessons LearnedLessons Learned• PPA with EGAT:

– Fixing Tariffs for very long-term may disadvantage one of the parties

– PPA of NT2 is too complicated and very difficult to understand and manage

– EGAT’s system avoided costs based on long-term assumptions on fuel costs do not provide any chance to revise the fixed tariffs

– Capacity Benefits from hydropower projects need reconsiderations and proper attention

– More favorable considerations are needed for local power supply in Laos

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Lessons LearnedLessons Learned• Points to be considered:

– IFIs already involved, but no certainty on project support/approval

– IFIs perfectionism & anticipation of full compliance by Least Developed Country is a big challenge

– Linking a Project to entire Country System (Country Economy)

– Lengthy & costly process of Project preparation– Introducing unprecedented conditions in DGA– Impractical Procedures on Procurements– Inconsistency in requirements (IMA, Salvage logging)

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ConclusionsConclusions• Big development projects can be implemented in

Lao PDR without major problems or difficulties

• NT2 is an obvious example

• NT2 lift-up country credibility

• Political stability & macro-economic environment of Lao PDR can ensure the success of any large-scale development project and should encourage IFIs, banking & lenders communities to further support investments in this country

introduction of nt2 and its progress - world...

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