1. Project Location
The Nam Theun 2 Project is on the Nam Theun River, a tributary of the Mekong River, at Keng None in Bolikhamxay Province in central part of the Lao PDR. The catchment area for the Project is in the Annamite Mountains that run along the border with the Socialist Republic of Vietnam. The catchment area is approximately 4,013 km2. Most of the components of the Project including the dam, reservoir and power station are in Bolikhamxay Province and Khammouane Province, with the transmission line passing through the Savannakhet and Khammouane Provinces.
The Project area will cover approximately 40% of the Nakai Plateau with about 90% of its watershed being formed by the Nam Theun watershed conservation area.
It is estimated that 85-90% of the total watershed is currently covered by forest whereas the reservoir area, because of its ease of access that has allowed extensive logging for many years, is about 33% forested. The mountains which form the vast majority of the watershed are heavily forested and in near pristine condition.
The conservation value of this unique area (the Nakai Nam Theun National Biodiversity Conservation Area or “Nakai-Nam Theun NBCA”) has long been globally recognised. It is an integral part of the Project’s commitment to its ongoing environmental mitigation and protection policy to maintain the integrity of this unique area.
The Nakai Plateau incorporates wetlands, both permanent and seasonal freshwater lakes, ponds and marshes. There are also agricultural and forestry activities along the river and these activities, as well as logging and associated road construction, have had a significant detrimental impact on forests and wildlife. Recent studies confirm that the area’s wildlife is severely diminished and under severe threat. While some natural habitat on the plateau remain unspoilt, increasing demand for fuel and meat, and opportunities to export illegal wildlife products have had significant impacts on the indigenous wildlife communities.
The GOL has recognised that it does not have adequate personnel or monetary resources to control the potential future degradation of the forest and wildlife resources in the Project area. Already, shifting cultivation patterns, fire and logging has degraded parts of the forest and has severely affected the main valley floor, the area to be inundated under the reservoir. It is evident that without the Project’s revenue and environmental mitigation plans, the existing level of degradation of the forest areas of the Nakai-Nam Theun NBCA may continue indefinitely and may deteriorate further.
2. Project Rationale
The Lao PDR is one of the world’s poorest countries with almost half of its population living under the poverty line with the average GDP per capita per annum below USD 500. Studies by institutions such as the World Bank have identified two main options for economic growth the export of tropical timber products and the export of hydropower. However, as the large scale exploitation of tropical timber products is viewed as non sustainable and environmentally degrading, this option is not acceptable to the GOL.
One of the few readily available and sustainable resources available to the GOL to achieve its stated objective of economic and social development is hydropower as neighbouring Thailand represents a long term viable customer for power generated from Lao PDR. The Memorandum of Understanding (as amended) between the two governments provides for an export potential of 3,000 MW to Thailand by the year 2008, of which only 340 MW had been provided by late 2002. Of all the projects identified by the GOL, the Project has been recognised as having the greatest potential to achieve the development objectives of Lao PDR. It is estimated that over the life of the Concession Agreement, the GOL will receive about USD 2,000 million from the Project and, following the transfer of the Project at the end of the Concession Agreement, all revenues thereafter. The payments received by the GOL will be used to alleviate poverty and promote economic and social development though programmes approved by the World Bank.
3. Project History
The potential of the Nam Theun River on the Nakai Plateau for hydroelectric power was identified as early as 1927, but it was not until the mid-1970s that detailed studies of the feasibility of a project began. In the late 1980s the Lao government targeted Nam Theun 2 as a key vehicle for the economic and social development of the nation, and invited the World Bank to participate in the Project. The government and various private investors set up a company and named “Nam Theun 2 Electricity Consortium (NTEC)” to research and develop the scheme. In 1994 Electricité de France and the Italian-Thai Development Company of Thailand joined the Project, and Nam Theun 2 moved from a conceptual to a development phase. The design and preparation of a complete set of economic, environmental and social safeguards took more than ten years, during which time NTEC became the Nam Theun 2 Power Company Limited, or NTPC. Project financing was gradually put in place and full construction activities commenced in June 2005.
The flows of the Nam Theun River have been measured, either directly or indirectly, since 1950 and records show an average flow of 7.5 billion cubic metres of water each year. The reservoir capacity is 3.9 billion m3 and, based on the long-term average, could be filled easily in the wet season. Indeed, based on the statistics available, the water flows of the Nam Theun were greater than the reservoir’s total capacity in 49 out of the 50 years since records began, meaning that the water flows of the Nam Theun would have filled the reservoir’s “live capacity” (i.e. the water volume that can be used for generating purposes) in just one year. Such statistics allowed the project partners to design and develop the NT2 scheme, and to confidently negotiate a long-term Power Purchase Agreement (PPA). Nevertheless, as the ability of NTPC to supply energy to EGAT depends on, inter alia, hydrological conditions, the PPA incorporates a mechanism that stabilises the Company’s cash flow by dampening the effects of hydrological variation from one year to the other.
5. Dam & Reservoir
The Project reservoir has inundated 40% of the Nakai Plateau by creating a shallow reservoir (on average 7 m deep) with a surface area of 450 km2 at full supply level. This will reduce in size to a surface area of a little as 70 km2 at the end of the dry season. The reservoir has been formed by construction of a 39-m high gravity dam with a crest length of 325 m across the Nam Theun, plus 13 small earthwork saddle dams along the west bank of the reservoir. A spillway and stilling basin have been specially designed for the purpose of reservoir level control.