Bloomberg News

Thai Lawsuit Threatens to Derail Laos Plans for Mekong River Dam

August 07, 2012

A group of Thai villagers moved to block a state-run company from buying electricity generated by a hydropower dam in Laos in a bid to halt the $3.6 billion project on the Mekong River that is opposed by downstream nations.

The 37 villagers filed a lawsuit in the Administrative Court today to cancel an agreement for the Electricity Generating Authority of Thailand to buy almost all the power from the 1,285-megawatt dam. Ch. Karnchang Pcl (CK), PTT Pcl and Electricity Generating Pcl (EGCO) are among major shareholders of Xayaburi Power Co., the dam’s operator.

“EGAT signed a contract without the process of consulting or giving information to stakeholders,” said Teerapong Pomun, a member of Living River Siam, one of the groups that assisted the villagers. “The dam construction in Laos will cause an impact in Thailand, and Thai authorities have not done any activity according to the constitution to study the impact.”

The case threatens to derail a project that Laos is depending on to bolster the smallest economy in the 10-member Association of Southeast Asian Nations. Since 2006, Thailand’s Administrative Court has blocked EGAT’s plans for an initial public offering, halted 76 government-approved industrial projects and delayed a sale of high-speed mobile-phone licenses.

Thailand’s constitution prohibits projects or activities that may harm the environment without public consultation, impact studies and opinions from independent organizations. It also gives people the right to sue state enterprises.

EGAT Targeted

The villagers filed the lawsuit against five Thai government entities including EGAT, according to documents distributed to reporters at the court by the Thai People’s Network of Eight Mekong Provinces, an activist group.

“We haven’t been informed that the NGO will file a lawsuit against EGAT,” EGAT’s legal affairs bureau said in an e-mailed statement today. “However, in the event that we are sued by the NGO with respect to this matter, we are ready to make any clarification to the court.”

Laos, a landlocked nation of 6 million people bordering China, plans to expand its generating capacity and sell electricity to its neighbors. Xayaburi’s approval may clear the way for seven other dams that Laos plans to build on the Mekong.

“I don’t think Vietnam or China want to buy power from Xayaburi dam because it’s too far and it would cost a lot to build a power line,” Teerapong said. “Thailand is the only country that would be a buyer.”

Rice, Fish

Hydropower’s contribution to the Laos government’s revenue will more than double to 1 percent of gross domestic product compared with two years ago, according to the World Bank. The pipeline of hydropower and mining projects combined with increased electricity demand in neighboring countries will probably keep economic growth at 8 percent a year through 2015, the International Monetary Fund said in a report last year.

Vietnam has recommended a 10-year delay for all hydropower projects on the Mekong, which winds through Myanmar, Thailand and Cambodia from its source in China’s Tibetan plateau. About 60 million people depend on the river and its tributaries for food, water and transportation, according to the Mekong River Commission. Neighboring countries are concerned the dam will disrupt fisheries and rice production.

Laos has aimed to convince its neighbors by showing them studies it commissioned from Compagnie Nationale du Rhône and Switzerland-based Poyry Energy AG. CNR recommended additional studies to improve the project, the company said on Aug. 2.

The issue of sediment transport “is one of the most important for the Xayaburi dam,” the company said. Solutions “need to be developed and their costs evaluated,” it said.

Hillary Clinton

Secretary of State Hillary Clinton pushed for more studies on the dam during a visit to Laos last month, the first by the top U.S. diplomat in 57 years. Laotian Prime Minister Thongsing Thammavong assured Clinton that the Xayaburi project wouldn’t proceed without approval from neighboring countries, according to a State Department official who wasn’t authorized to speak on the record.

Ch. Karnchang, Thailand’s third-biggest construction company by market value, owns a 50 percent stake in Xayaburi, according to a presentation on its website. PTT (PTT), Thailand’s biggest company, has a 25 percent stake and Electricity Generating owns 12.5 percent.

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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


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