Performance of Nam Theun 2 Hydropower Cross-Border PPP

The Nam Thuen 2 (NT2) hydropower project was a major undertaking in Lao PDR, to primarily supply electricity to bordering Thailand. The 1,070MW project was designed as a public-private partnership at a time when the hydropower industry in the country was nascent and there was limited private participation in the energy sector in general. The aim was to be catalytic, and kick-start the development of Lao PDR’s substantially unexploited hydropower potential in an environmentally and socially sustainable way in order to boost economic growth and contribute to alleviating poverty. The nearly $1.5 billion investment achieved financial closure in 2005 and was commissioned in 2010. It has been producing electricity since. In 2019, an evaluation of the performance of NT2 was undertaken with the following key conclusions:

  • The project was successfully developed within cost estimates and with minimal delays. There was strong that the NT2 HPP played a catalytic role in helping increase hydropower development in Lao PDR, where the industry is now a mainstay, with its PPP structure being replicated in several other investments.
  • The expansion of hydropower is fuelling export-led economic growth in Lao PDR, as envisaged in the government’s development plans. The revenue from NT2 is being transparently accrued to the government, although similar mechanisms were not applied in other hydropower investments.
  • The NT2 project establish ambitious environment and social objectives, but it was not matched with commensurate implementation capacity for two critical activities – protection of the biodiversity offset and implementation of the livelihood improvement activities. The NT2 E&S activities heavily influenced government policies, although they were inconsistently applied in subsequent hydropower projects.
  • A robust planning process undertaken in preparing NT2 was not adequately continued for subsequent hydropower developments, and the government also fell short of capitalizing on the growing scale of the industry and market orientation to leverage more efficient sector outcomes. Together, it could place the sustained expansion of the sector at risk.
  • The various skills and expertise developed from the NT2 HPP experiences have resulted in a skilled group of specialists in Lao PDR who have flourished in the growing hydropower sector that followed.

The assessment was carried out by a team that included Migara Jayawardena and Stan Peabody from AMALA. Jamil Sopher was a former Team Leader that conceptualized the approach to developing the hydropower project, and Srilal Perera who was Counsel that helped underwrite the MIGA guarantee for the investment.

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