New Hydro Plant to Provide Clean Energy for Thailand, Cut Poverty in Lao PDR

News Release | 3 November 2011

MANILA, PHILIPPINES - The Asian Development Bank (ADB) will provide approximately $465 million to support the construction of a 440-megawatt hydropower plant that will supply power to energy-hungry Thailand and provide much-needed revenue to fund poverty reduction programs in the Lao People's Democratic Republic (Lao PDR).

"Earnings from clean energy exports are vital to poverty reduction efforts in landlocked Lao PDR, where one in every three people survive on less than $1.25 a day," said Christopher Thieme, Director in ADB's Private Sector Operations Department.

The new plant is expected to generate upwards of $770 million for Lao PDR, of which more than $200 million is specifically earmarked for poverty reduction and environmental protection programs.

The public-private Nam Ngum 3 power plant, on the Nam Ngum River in northern Lao PDR, will provide 2,072 gigawatt hours of clean energy annually for export to neighboring Thailand.

Approximately half of Thailand's greenhouse gas emissions come from power generation, and most of its electricity is generated by power plants using fossil fuels, primarily natural gas.

"By using hydropower instead of fossil fuels, Thailand will avoid an average one million tons of carbon dioxide emissions every year - the equivalent of taking 175,000 vehicles off the road," said Anthony Jude, Director in ADB's Southeast Asia Department.

The Nam Ngum 3 project will comprise a 220-meter-high dam that will create a 27.5 square kilometer reservoir.

Seasonal flooding from the new reservoir will necessitate the move of 144 households located near the planned reservoir. All eligible families can receive permanent housing and title to their new residential and agricultural land - a first in this area of the country.

Around 45 more households located along the upgraded national road and the transmission line may also lose housing and parcels of land, and will be fully compensated for their losses.

"Many families in these impoverished communities have lived in relative isolation with only limited healthcare and social service access," said Mr. Jude. "Villages most affected by the project will receive higher quality healthcare, improved education opportunities, access to electricity and all-weather road access."

ADB's stringent environmental and social safeguards will ensure that any environmental and social impacts will be minimized and mitigated, and the livelihoods and standards of living of all those directly affected by the project will be better than they are now.

ADB is also actively supporting efforts to assess and address any cumulative impacts from the various hydropower plants in the river basin, including through the newly formed Nam Ngum River Basin Committee.

The plant, estimated to cost around $1 billion, will be built and operated for 27 years by the Nam Ngum 3 Power Company (NN3PC), which is owned by three private sector companies: Thailand's GMS Lao Company Ltd. and Ratchaburi Electricity Generating Holding PCL, together with Axia Power Holdings, a wholly owned subsidiary of Japan's Marubeni Corporation. The Government of Lao PDR will also hold a stake through the Lao Holding State Enterprises (LHSE).

ADB will lend up to $350 million to NN3PC. Under a risk participation agreement, commercial financial firms will assume the risk on up to $150 million of that. Thai banks and other international financial institutions will also provide loans to the project. ADB is also lending approximately $115 million to the Lao PDR government to finance LHSE's equity stake in NN3PC.

The Nam Ngum 3 plant, expected to be operational in 2017, will be located upstream of two existing hydropower plants, and downstream from another plant that is currently under construction. The Nam Ngum 4 A and B plants are also planned upstream of Nam Ngum 3.