76163 CASE STUDY 33: LAOS – NAM THEUN 2 PROJECT Barriers n/a Instrument Partial risk guarantee, political risk guarantee, export credit support Application n/a Amount Total base project costs US$1.25 billion plus US$200 million contingency PROJECT BACKGROUND AND OBJECTIVES Government of Lao PDR. This revenue would be an important source of funding for the Government's The Nam Theun 2 Hydroelectric Project, or NT2, is an efforts to sustain economic development based on its industrial and development investment owned by National Growth and Poverty Eradication Strategy and private shareholders and the Lao Government, backed reduce poverty in Lao PDR. by commercial lenders and international financial institutions. The project is jointly implemented by the INSTRUMENTS USED Nam Theun 2 Power Company and the Government of The financing arrangements reflect the Project Lao PDR and supported by financing from 27 parties economics: just as NTPC will receive payment for the including the World Bank and Asian Development Bank. electricity it generates in a US dollar/Thai baht split, so A total of US$1.45 billion equivalent (excluding bonding its credit is arranged in a half dollar-half baht facilities) in US dollars and Thai Baht has been arrangement. This increases the financial stability of the committed by the various financing partners to fund the arrangement. base project cost of US$1.25 billion, plus an additional US$200 million for contingencies. The US$ senior debt facilities include political risk guarantees from the Asian Development Bank (ADB), The NT2 includes the development, construction, and the World Bank and the Multilateral Investment operation of Guarantee Agency (MIGA), export credit agency support - a 1,070-megawatt trans-basin diversion power plant from COFACE of France, EKN of Sweden and GIEK of on the Nam Theun River Norway, and direct loans from a number of multilateral - a 450-square kilometer (km2) reservoir on the Nakai and bilateral development agencies including the ADB, Plateau Nordic Investment Bank, Agence Française de Développement (AFD), PROPARCO and the Export- - a 39-meter-high dam northwest of the plateau Import Bank of Thailand. - a powerhouse 350 meters below the plateau Nine international commercial banks (ANZ, BNP Paribas, - a regulating pond below the powerhouse BOTM, Calyon, Fortis Bank, ING, KBC, SG and Standard Chartered) and seven Thai commercial banks (Bangkok - a 27-kilometer (km) channel from the regulating pond Bank, Bank of Ayudhya, Kasikornbank, Krung Thai Bank, to the Xe Bang Fai River Basin, also a tributary of the Siam City Bank, Siam Commercial Bank and Thai Military Mekong river. Bank) are providing long term loans to NTPC. The plant would sell most of its production to Thailand, In addition to senior loans facilities, shareholders generating a secure, long-term flow of revenue for the complete the Project financing by contributing equity 1 | R E F I N e www.worldbank.org/energy/refine pro-rata their respective participation in NTPC. The INSTITUTIONAL ARRANGEMENTS equity contribution of LHSE is financed by means of The Nam Theun 2 Power Company Limited (NTPC) will loans, grants and other financing from institutions develop the project on a build-own-operate-transfer including the AFD, ADB, European Investment Bank and (BOOT) basis with a concession period of 31 years, of the World Bank. which the operating period is 25 years. The project will The World Bank Group’s financial support consists of: be transferred to the Government of Lao PDR free of - a US$42 million IDA Partial Risk Guarantee, charge at the end of the concession period. - a US$20 million IDA Grant for NTSEP (Nam Theun 2 NTPC is owned by a consortium comprising: Social and Environment Project, which finances a part of - Electricity de France International (EdFI) - 35% the GoL’s equity in the project to be used for - Electricity Generating Company (EGCO) of Thailand - management of environmental and social impacts and 25% independent monitoring and evaluation of the NT2 project), and - Italian Thai Development Company Limited (ITD) of Thailand - 15%, and - US$91 million in MIGA Guarantees. - Government of Lao PDR - 25% ADB supported the project through: OUTCOMES - a US$20 million public sector loan to the Government of Lao PDR to help fund its purchase of equity in NTPC The NT2 began commercial export of electricity in March 2010, and agreed an official commercial - a US$50 million private sector loan directly to NTPC operations date of April 30 with its main customer, the - a US$50 million political risk guarantee to NTPC. Electricity Generating Authority of Thailand. It also supplies around 20% of peak Lao demand electricity. The NT2 was officially inaugurated in December 2010. Further reading Nam Theun 2 website – click here World Bank, Nam Theun 2 Project Overview and Description – click here ADB, Nam Theun 2 Hydroelectric Project – click here 2 | R E F I N e www.worldbank.org/energy/refine