Laos: Correspondence with the World Bank about Nam Theun 2

25 Mar

How the World Bank avoids giving straight answers to straight questions.

Date: 01 Mar 2001
From: Chris Lang
To: hschafferATworldbank.org
Subject: Proposed Nam Theun 2 Hydroelectric Dam Project, Lao PDR

Helmut Schaffer,
World Bank Executive Director, Germany
Room MC11-125
The World Bank
1818 H Street, N.W.
Washington, DC 20433 U.S.A.

1 March 2001

Dear Mr. Schaffer,

Proposed Nam Theun 2 Hydroelectric Dam Project, Lao PDR

As you know, the World Bank is currently involved in negotiations regarding the Bank’s potential partial risk guarantee which would cover commercial loans to the proposed 1069 MW Nam Theun 2 hydroelectric dam project in Lao PDR.

There have recently been several new developments related to the project, and we believe that the World Bank may be approaching a decision on whether or not to move the project to appraisal stage.

We would therefore be very grateful if you could provide us with the following information:

1. What is the status of the proposed Nam Theun 2 hydroelectric dam project within the World Bank? When will the Bank decide whether or not to move the project to appraisal stage?

2. What is the Bank’s proposed process following the signing of a Power Purchase Agreement between the Electricity Generating Authority of Thailand (EGAT) and the proposed dam’s developers, the Nam Theun 2 Electricity Consortium (NTEC)? When does the Bank anticipate that a Power Purchase Agreement will be signed?

3. Could you please describe the exact nature of the World Bank’s proposed partial risk guarantee? What will it cover? How and when would the guarantee be called? If the Bank decides to go ahead with the guarantee, will the terms of the agreement be made public?

4. Which commercial banks are involved in negotiations with the project developers? Are these banks also involved in any negotiations with the World Bank?

5. In addition to the partial risk guarantee, is the Bank considering any other loans to the Government of Laos related to the proposed Nam Theun 2 project, for example concessional loans through the International Development Association?

6. According to the Panel of Expert’s fifth report, the Bank funded the NT2 Environmental and Social Management Operational Plan (May 2000), through a Population and Human Resources Development IDA grant to the Government of Laos. How much was this grant for? Was it in fact a grant?

7. The World Bank has funded two IUCN projects related to the proposed Nam Theun 2 project, through the Population and Human Resources Programme. Could you please provide the details of these loans.

8. What is the total sum of World Bank funding to projects related to the proposed Nam Theun 2 hydroelectric dam project so far? Are any further Bank-funded projects in the pipeline?

9. Who pays for the Panel of Experts’ studies? How much has so far been spent so far on these studies? Is the Panel of Experts expected to produce any further reports? How, and when, was the Panel of Experts selected? What is the status of the Panel of Experts’ reports within the Bank?

10. Thailand is the only market for the electricity generated by the proposed project. What does the World Bank propose to do if the Electricity Generating Authority of Thailand (EGAT) finds it does not need, or want, the electricity from the proposed Nam Theun 2 dam? Does the Bank know whether the proposed Nam Theun 2 project would be competitive under the Government of Thailand’s proposed “power pool” system?

11. The existing Theun Hinboun dam, downstream of the proposed Nam Theun 2 dam site relies on water in the Theun river to generate electricity. The proposed Nam Theun 2 hydroelectric dam would generate electricity by diverting water from the Theun River into the Xe Bang Fai. If the Nam Theun 2 dam is constructed, it will reduce the generating capacity of the Theun Hinboun dam. The operation of the Nam Theun 2 dam will determine how much water flows into the reservoir behind the Theun Hinboun dam. How will such potential conflicts be reflected in the Bank’s guarantee mechanism. Could the guarantee be called if water is realeased from the Nam Theun 2 dam to ensure that the Theun Hinboun continues operation? Would such operational decisions be made with the free prior informed consent of all the affected people on the Theun River, the Nam Kading River, the Hinboun River, the Mekong River and the Xe Bang Fai River?

12. The World Commission on Dams case study of the Pak Mun dam – the last dam that the World Bank funded in the Mekong region – confirms that local people’s livelihoods and environment, especially in terms of fisheries, have been massively affected. Does the World Bank see any lessons to be learnt from its involvement in the planning, funding and construction of the Pak Mun dam?

13. The World Bank-funded Louis Berger study found that to ensure economic returns for the Government of Laos the price for the electricity generated by the proposed dam should be at least 5.7 US cents per kilowatt hour (c/kWh). Under the current Memorandum of Agreement signed on 26 May 2000, EGAT would buy electricity from the project at an average tarrif of 4.219 US c/kWh. Will the Bank therefore reassess the economics of the project? Will the Bank be accountable to the Government of Laos if the project generates less revenue than anticipated? What figure is the World Bank currently working on for the anticipated cost of the project? How was this figure reached? Is the Bank planning to include a figure for potential cost overruns in its economic calculations?

14. Since the proposed size of the dam has increased from 680 MW to 900 MW, and most recently to 1069 MW (and may be increased still further: see question 15 below), the studies produced so far on the proposed dam project (with the exception of the recently “updated” Environmental and Social Management Study) are out-of-date. Does the Bank have any plans to commission new studies, and if so how will these studies be funded?

15. According to the Panel of Experts fifth report, “The Dam Safety Panel of Experts notes that the installed power generating capacity is planned to be 1048MW rising later to 1088MW.” The Panel of Experts report asks “Will that increase have environmental implications?” The Panel of Experts’ report does not provide the answer. Considering that the Bank has already commissioned two Environmental and Social Management reports, which have apparently not answered this question, how will the World Bank decide whether this increase will have environmental implications? What is the latest proposed capacity of the dam?

16. Some time last year, the International Finance Corporation decided not to have any involvement in the proposed Nam Theun 2 hydroelectric dam project. What were the reasons for this decision?

17. The Australian company Transfield has also pulled out of the NTEC consortium. What reasons did they give the World Bank for pulling out?

18. In February last year, AFP reported that Jean-Michel Severino, World Bank Vice President for East Asia and the Pacific, said the Bank was waiting for “clear signals” from the Government of Laos of commitment to significant political and economic reforms. In this context, what constitutes a “clear signal”? Will the Bank continue to push the Government of Laos to introduce economic and political reform? Will the Bank provide the guarantee without such reform?

19. Since 1993, the Bholisat Phattana Khed Phou Doi (BPKP – the Mountain Region Development Company) has been logging the Nakai Plateau in order to clear the reservoir area before dam construction starts. If the project does not go ahead, who does the Bank consider to be responsible for the damage caused by the logging and BPKP relocation of people out of the reservoir area? When does the World Bank propose to assess the Resettlement Action Plan?

20. The World Bank, together with Sweden’s Sida and Finland’s DIDC, is currently funding a review of logging in Laos. Is this review completed yet? Will there be any consideration of the logging associated with the proposed Nam Theun 2 project in this review? The proposed reservoir area is approximately 450 square kilometres, and several timber processing operations have been established specifically to process the timber removed from the reservoir area. How does the Bank anticipate that the demand for this timber processing industry will be met once the reservoir area is logged? How much money has BPKP so far earned from logging the 450 square kilometre reservoir area, and what has it done with this money?

We look forward to your urgent attention to these questions.

Yours sincerely,

Chris Lang

Heffa Schuecking, Urgewald

Miriam Walther, WEED

Date: 27 Mar 2001 17:12 GMT
From: Chris Lang
To: hschafferATworldbank.org
Subject: Proposed Nam Theun 2 Hydroelectric Dam Project, Lao PDR

Dear Sir,

On 1 March 2001, I sent you the following letter regarding the World Bank and the proposed Nam Theun 2 hydroelectric dam project in Laos. I also sent a copy of the letter by post.

As I have not yet received a reply, I would be very grateful if you could confirm you have received the e-mail and if you could provide the relevant information as soon as possible.

I look forward to your response.

Yours faithfully,

Chris Lang

Absender: CkampenATworldbank.org
Betreff: Re: Proposed Nam Theun 2 Hydroelectric Dam Project, Lao PDR
Datum: 29. Mär 2001
Empfänger: Chris Lang
Kopie-Empfänger: hschafferwATorldbank.org , ebiskupATworldbank.org

Dear Mr. Lang,

thank you very much for your email of March 1 and 27, 2001. As Mr. Schaffer is on an official mission in Germany, he asked me to respond to you email/fax on his behalf. First of all he would like to appologize for the late reply and would like to thank you for your interest in World Bank activities.

In the meantime we had talks with staff and management about the issues and questions raised in your mail and would like to let you know that the World Bank management has not yet made a decision whether to proceed to an appraisal of the project.

Importantly, management is aware of the complexities surrounding this project and has emphasised that a decision to proceed to the next stage of project pre-appraisal will only be taken after a close review of the key issues and risks associated with the project. If indeed a decision to move ahead is taken by Bank management, it is unlikely that the project could be considered by the Board (assuming a satisfactory appraisal and negotiations process), before the second half of calender 2002. In this context, it may be more appropriate to address the detailed questions being raised if Bank management decides to move to the next stage of project pre-appraisal.

As has been the case so far, the Bank is committed to being transparent, and making public the relevant studies being done concerning the project. Many of the questions asked have already been answered in detail at public consultations and in publicly available documents, and it would be useful to examine these as a first source of information.

Regarding the ongoing work, it should be clarified that the Population and Human Resources Development (PHRD) Grant is made available by the Government of Japan and not IDA, for supporting work and capacity building type initiatives related to preparing a new project. The NT2 Environmental and Social Management Operational Plan and the IUCN studies, referred to in the Fifth Report of the Panel of Experts, have been funded from the Japan funded PHRD Grants.

I know that this does not answer your very detailed questions directly. As mentioned above, it may be more appropriate to address these questions in the next stage of project pre-appraisal.

Yours sincerely,
Christian Kampen
(Advisor to the German ED)

Date: 23 Apr 01
From: Chris Lang
To: HschafferATWorldbank.Org
cc: EbiskupATWorldbank.Org, CkampenATWorldbank.Org
Subject: Proposed Nam Theun 2 dam and the World Bank

Dear Mr. Schaffer,

I have received an e-mail from your advisor Christian Kampen, dated 29 March 2001, in reply to my questions (e-mail 1 March 2001) regarding the World Bank’s involvement in the proposed Nam Theun 2 hydropower project in Laos. However, the reply fails to answer most of the questions asked and raises its own questions specifically regarding the Bank’s role in this project.

I would be very grateful if you could therefore clarify the following points:

1. Mr. Kampen’s e-mail (29 March 2001) states that “a decision to proceed to the next stage of project pre-appraisal will only be taken after a close review of the key issues and risks associated with the project”. Mr Kampen’s e-mail makes several references to “the next stage of project pre-appraisal”. Could you please explain at what stage of project pre-appraisal the project currently is, what is the next stage of pre-appraisal, and what are the further stages before the project reaches appraisal stage. Having reached appraisal stage, please describe the process of “appraisal and negotiations” that the Bank proposes to carry out before the project is considered by the Board.

2. The Panel of Experts’ reports urge the Bank to go straight to appraisal and to bypass pre-appraisal. Under what circumstances could Bank management do this?

3. Mr. Kampen’s e-mail states that the World Bank management intends to carry out a “close review of the key issues and risks associated with the project”. When does management anticipate completing the review? Will the review be made public? What does the Bank management identify as the “key issues and risks” associated with the project?

4. Mr. Kampen’s e-mail states: “Many of the questions asked have already been answered in detail at public consultations and in publicly available documents, and it would be useful to examine these as a first source of information”. Could you please therefore send me a list of all the documents produced for the project, and tell me from where I can request copies of these documents.

For all studies and other documents produced with World Bank funding, please indicate through which Bank mechanism the work was funded, how much was the funding, and which consultants carried out the work.

5. In addition, I would be very grateful if you could let me know from which department in the World Bank I can obtain copies of the five Panel of Experts’ reports, including terms of reference and all appendices. Could you also please answer my previous questions regarding the Panel of Experts:

– Who pays for the Panel of Experts’ studies?
– How much has so far been spent so far on these studies?
– Is the Panel of Experts expected to produce any further reports?
– How, and when, was the Panel of Experts selected?
– What is the status of the Panel of Experts’ reports within the Bank?

Questions 14 and 15 from my previous e-mail (1 March 2001 to Mr. Schaffer) are not dealt with in any manner by the existing studies on the dam, as the size of the dam has increased since the studies were carried out. I would therefore be grateful if you could answer these questions:

6. Since the proposed size of the dam has increased from 680 MW to 900 MW, and most recently to 1069 MW (and may be increased still further: see question 7 below), the studies produced so far on the proposed dam project (with the exception of the recently “updated” Environmental and Social Management Study) are out-of-date. Does the Bank have any plans to commission new studies, and if so how will these studies be funded?

7. According to the Panel of Experts fifth report, “The Dam Safety Panel of Experts notes that the installed power generating capacity is planned to be 1048MW rising later to 1088MW.” The Panel of Experts report asks “Will that increase have environmental implications?” The Panel of Experts’ report does not provide the answer. Considering that the Bank has already commissioned two Environmental and Social Management reports, which have apparently not answered this question, how will the World Bank decide whether this increase will have environmental implications? What is the latest proposed capacity of the dam?

Most of the other questions from my e-mail (1 March 2001 to Mr. Schaffer) have not been satisfactorily answered, and I can see no benefit to anyone in postponing the replies, partlicularly since Mr. Kampen says “the Bank is committed to being transparent”. I therefore look forward to your response to these and the above questions.

Yours sincerely,

Chris Lang

Subject: Re: Proposed Nam Theun 2 dam and the World Bank
To: Chris Lang
Cc: RraturiATworldbank.org
From: CkampenATworldbank.org
Date: Mon, 23 Apr 2001

Dear Mr. Lang,
thanks again for the detailed questions about the proposed Nam Theun 2 damproject in Laos. As I am not familiar with the details of the project and the process of the project preparation, I would like to advise you to get directly the task team leader.

His name is:

Mr. Rahul Raturi
Title: Lead Economist
E-mail: RraturiATworldbank.org
Location: Washington, DC (IBRD)

Regards,
Christian Kampen

Date: 01 May 2001
From: Chris Lang
To: RraturiATworldbank.org
Subject: Proposed Nam Theun 2 hydropower project

Dear Mr. Raturi,

I have recently written two letters to the German ED, Helmut Schaffer, about the proposed Nam Theun 2 hydropower dam in Laos, in particular regarding the role of the World Bank in the project.

On 23 April 2001, Christian Kampen, an adviser to Mr. Schaffer, replied explaining that he is “not familiar with the details of the project and the process of the project preparation”. He therefore recommended that I contact you directly. Neither Mr. Schaffer nor Mr. Kampen have provided me with the information that I requested on this project.

My questions to Mr. Schaffer were on a range of issues concerning the project. However, I would first like to clarify the role of the “Panel of Experts” consisting of Timothy Whitmore, Thayer Scudder and Lee Talbot. The Panel has so far produced five reports on the proposed hydropower project.

I would be very grateful if you could provide the following information regarding the role and funding of the Panel.

1. From which department in the World Bank can I obtain copies of the five Panel of Experts’ reports, including terms of reference and all appendices?

2. How is the Panel of Experts funded? Did the decision to fund the Panel of Experts require Board approval? If not how was the decision reached?

3. Please provide a breakdown of the costs of the Panel of Experts’ studies. How much has been spent so far on the Panel of Experts studies? What is the total amount budgeted for the Panel of Experts? How much are the members of the Panel paid?

4. Is the Panel of Experts expected to produce any further reports?

5. How, and when, were the people on the Panel of Experts selected?

6. What is the status of the Panel of Experts’ reports within the Bank? To whom does the Panel report within the Bank?

7. The Panel of Experts’ reports urge the Bank to go straight to appraisal and to bypass pre-appraisal. Under what circumstances could Bank management do this?

8. According to the Panel of Experts fifth report, “The Dam Safety Panel of Experts notes that the installed power generating capacity is planned to be 1048MW rising later to 1088MW.” The Panel of Experts report asks “Will that increase have environmental implications?” The Panel of Experts’ report does not provide the answer. Considering that the Bank has already commissioned two Environmental and Social Management reports, which have apparently not answered this question, how will the World Bank decide whether this increase will have environmental implications? What is the latest proposed capacity of the dam?

In his e-mail reply dated 29 March 2001, Christian Kampen told me “Many of the questions asked have already been answered in detail at public consultations and in publicly available documents, and it would be useful to examine these as a first source of information”. Could you please therefore send me a list of all the documents produced for the project, and tell me from where I can request copies of these documents. For all studies and other documents produced with World Bank funding, please indicate through which Bank mechanism the work was funded, how much was the funding, and which consultants carried out the work.

I look forward to receiving this information as soon as possible.

Yours sincerely,

Chris Lang

Date: 21 May 2001 12:10 GMT
From: Chris Lang
To: hschafferATworldbank.org, ebiskupATworldbank.org, CkampenATworldbank.org
Cc: Rraturi@worldbank.org
Subject: Proposed Nam Theun 2 hydropower project

Dear Mr. Schaffer,

On 1 May 2001, I wrote to Mr. Raturi as you suggested, with some questions regarding the Panel of Experts and the proposed Nam Theun 2 hydropower project in Laos. On 10 May 2001, I received a phone call from Laure de Peticille of the World Bank office in Paris. Although she did not answer any of the questions, she informed me that I would soon receive a reply from the Bank. So far I have received no reply. I first wrote to you regarding this project, with several questions regarding the Panel of Experts on 1 March 2001, more than 12 weeks ago, and so far have received no answers.

Copies of my letters regarding the Panel of Experts are below. I would be very grateful if you could ensure that Mr. Raturi responds to my letter as a matter of urgency.

Yours sincerely,

Chris Lang

Subject: Re: your letter on the proposed Nam Theun 2 hydropower project
To: Chris Lang
Cc: RraturiATworldbank.org
From: JwilkinsATworldbank.org
Date: Wed, 23 May 2001

Dear Mr. Lang:

Thank you for your email dated May 1, 2001 regarding the proposed Nam Theun 2 hydroelectric power project in Lao PDR. Mr. Rahul Raturi asked me to respond on his behalf to the questions you raise in your note about the International Panel of Environmental and Social Experts (POE) and its work associated with Nam Theun 2.

Firstly, let me address the origins of the Panel of Experts. When the Government of Lao PDR initially asked for World Bank support for the proposed Nam Theun 2 project, the Bank suggested, among other things, that it would be necessary for the Government to get the best technical guidance available, to support the project preparation work, particularly in technical areas such as the environment, social aspects, finance and the legal framework. It was in response to this suggestion that the Panel of Experts was established. Following on that recommendation, the Government asked the Bank, among others, to supply a list of possible candidates for this panel. The Bank advised the Government that the POE would be most effective if it had representation from the social sectors, environmental sectors, and specifically expertise on SE Asian tropical forests. Based on the various inputs the Government received from the Bank and others, it selected the panel.

Concerning your question regarding project preparation, it is important to point out that project preparation is the primary responsibility of the borrower, for which the borrower can access financing from a variety of sources. In this case, support for project preparation (excluding the Bank’s own staff/budgetary resources), including the work of the POE, has come through donor trust funds, IDA Credits, the Government’s own resources, and most importantly, from the resources put up by the developers. Given that the Panel was recruited by and is responsible to the Government, it is paid by the Government. Consequently, we do not have the cost breakdowns you are looking for readily available. If you would like this information, please request it directly from Dr. Maydom Chanthanasinh, Project Director, NT2 Project Office, Ministry of Industry and Handicrafts, Vientiane. His telephone number: 856 21 415469; fax number: 856 21 415468 and email address for the Government: golnt2ATlox1.loxinfo.co.th.

Thirdly, and in accordance with the above, the Panel reports directly to the Government. It does however provide copies of its reports to the Bank at the same time that these are sent to the Government. In line with the procedures agreed with the POE and the Government, all Panel reports are made public shortly after they are provided to the Bank. These reports form part of the larger body of technical work done as part of project preparation, which the Bank’s management will be considering in making its decision on whether or not to move to the next phase of project processing — project pre-appraisal. Even if management agrees to proceed to this next phase, it does not imply that Bank support for the project is certain.

You had asked whether the Panel is expected to produce any further reports. The Panel continues to advise the Government on project preparation and produces a report for the Government following every visit to the country. If any further reports are produced, the same procedures described above would apply.

Finally, you asked a couple of questions about obtaining project-related documents. All of the POE reports are available in the World Bank Infoshop. You can contact the Infoshop on-line at: http://www.worldbank.org/html/pic/PIC.html or by phone: (202) 458-4500. There is a draft Environmental Assessment Management Plan (EAMP) which has been prepared and on which public consultations were held in Lao PDR. This should address your questions about the proposed energy capacity of the project. If the Bank’s management authorizes the next stage of project processing, the Bank would be exploring these issues further during pre-appraisal and appraisal. The EAMP is still in draft (and hence it is not yet lodged in the Infoshop), but you may be able to get a copy directly from the developers if you are interested. You can contact Jean-Christophe Delvallet, NTEC Project Director, 26 Khun Road, PO Box 5862, Vientiane. His telephone number: 856 – 21 – 217421; fax number: 856 21 217420; and email address for the developers: ntecvte@loxinfo.co.th. In addition to the Project Director and the Project Developers as sources of information, there is also a Public Information Library in Vientiane (as well as in the project area) where all project-related public documents are available. Project-related documents should include the information you are looking for regarding the names and contact information of the consultants who carried out the work.

Hope this is helpful.

Best regards,
Jill Wilkins

________________________________
Jill Wilkins
East Asia & Pacific External Affairs
The World Bank
1818 H Street, NW
Washington, DC 20433

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