Laos to Start Building Mekong Dam This Year, Testing Neighbors

Laos plans to start construction this year on the $3.8 billion Thai-financed Xayaburi hydropower plant on the Mekong River after changing the design to placate neighboring countries opposed to the project.

Laos completed a review of the dam initiated in April to ease concerns that it would harm rice production and fish catches downstream, said Viraphonh Viravong, director-general of the ministry of energy and mines’ Department of Electricity. Vietnam earlier recommended a 10-year delay for all hydropower projects on the river, which also runs through Myanmar, Thailand and Cambodia from its source in China’s Tibetan plateau.

“We want to explain, and make the other countries comfortable,” Viraphonh said in an interview in Hanoi yesterday. “If they are still very negative about it, of course we will spend some more time on it.”

The hydropower plant is the first among eight that Laos plans to build on the Mekong to expand Southeast Asia’s smallest economy by selling electricity to neighboring countries. The landlocked nation may have about 38,000 megawatts of installed capacity supply by 2020, about 15 times greater than its domestic needs, according to a presentation by state-owned Electricite du Laos at a conference in Hanoi yesterday.

Laos presented the project review conducted by Switzerland- based Poyry Energy AG to Vietnam and plans to meet separately with Thai and Cambodian officials to discuss recommendations, Viraphonh said. The government can decide whether to proceed with the project at any point.

Thai Buyers

Thailand agreed in December to buy 95 percent of the electricity from the plant, which will have a capacity of 1,285 megawatts. Ch. Karnchang Pcl, Thailand’s third-biggest construction company by market value, owns a 57.5 percent stake in Xayaburi.

PTT Pcl (PTT), Thailand’s biggest energy company, has a 25 percent stake, while Bangkok-based Electricity Generating Pcl owns 12.5 percent, according to company filings. The 115 billion baht ($3.8 billion) project is expected to start commercial operations in January 2019, PTT told the Thai stock exchange on March 1.

The proposed alterations would slightly increase the cost of the project, Viraphonh said, without providing figures. The plant would be able to meet its target completion date if work started later this year, he said.

Clinton Concern

The Mekong and its tributaries provide food, water and transportation to about 60 million people in the four countries. In a July meeting with counterparts from Mekong nations in Bali, U.S. Secretary of State Hillary Clinton called for a pause in construction of dams on the river “until we are all able to do a better assessment of the likely consequences.”

Vietnam officials in January recommended delaying the project and moving it to a Mekong tributary because it would affect “the safety of water sources and food security for Vietnam as well as for the whole world,” according to notes of the meetings. Thailand and Cambodia also favored more studies on the dam, the notes show.

A technical review in March by the Mekong River Commission, an intergovernmental body, found that the dam may lead to the extinction of species like the Mekong giant catfish and “gaps in knowledge” mean the full extent of the downstream impact on fisheries is hard to estimate. The dam “will not materially affect” the quantity and timing of river flows to Cambodia and Vietnam, it said.

Laos has about six million people and a gross domestic product of $5.6 billion, according to statistics from the Association of Southeast Asian Nations. Hydropower and mining projects are set to underpin GDP growth that may reach 7.7 percent this year, the Asian Development Bank said in an April 7 report.

To contact the reporters on this story: Nick Heath in Hanoi at nheath2@bloomberg.net; Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net