平成９年１０月０６日
最近，ラオスのナムテン2計画に関する世界銀行の決断の日が迫った，との認識のもとに，NGOからの一層の働きかけと，世界銀行の動きが伝えられている。今回の議論の特徴的なことは，NGOからプロジェクトの採算性が論じられていることである。それには，タイの金融危機が大きく影響している。そもそも採算性は，企業主の問題としてNGOからは問題は投げかけられてこなかったが，今回の場合は，ラオス国民の将来を左右するラオス政府がプロジェクトの採算性に大きな役割をになっているところから，このような議論が出てくるのであろう。しかし，ナムテン２計画に関する限り，採算性には問題はない。至近の財政的な見通しからは，タイの買電単価と絡んで，さまざまな議論が出てくるが，水力は開発までの時間と耐用年数の長さから，「世界のエネルギー」としての観点からは，目前の経済情勢の変化には影響されない。バーツの変化はタイの火力発電所の経費の増大となって現れ，これを代替として考えるナムテン２は，当然それに見合って価値が増大するわけで，売電交渉の値がこれを正確に反映する限り，長い目で見れば適正な取り引きに落ち着いてくるはずである。それはナムテン２の地
点特性が良いことを基礎においた考え方である。
環境に関する議論は，独立した絶対的な環境問題として論ずるグループの存在はやむを得ないわけで，あとはこれと開発の価値を天秤に掛けて総合判断する人であり，機関の価値観なのであろう。その際には，ラオスのおかれている発展過程がまず考慮の中心に置かれるべきで，大規模経済開発を基礎に発展してきた先進国の今の基準で計るべきではない，と言う点を主張したい。しかし，プロジェクトが，環境保護のためのあらゆる手段をその工事費の中に反映していることが重要である。
ラオス水力のIPP計画に関する全般的な流れと論点
ラオスは水力資源に恵まれており，一説にはその包蔵は３千万KWに達するものと言われている。隣国タイの急激な経済成長に伴う電源の不足によって，この包蔵水力が大きな関心を呼んできたが，国境を隔てた電力の国際融通の問題と，ラオス政府の開発資金の問題から，その開発の具体化は進まなかった。ラオスは，日本等のODA資金による開発を求めていたが，ラオス自国の経済規模の問題からこれも進まず，１９９２年に至って，折りからの東南アジアにおける民間資金の活用の機運に乗って，ラオス政府は，その水力資源のBOT等による民間開発に踏み切ることとなった。このラオス政府の政策に沿って，多くの民間資金がその開発の意思を表明し，現在多くのBOTまたはジョイントベンチャー方式の計画が進行中である。しかし，この水力民間開発の方式は，多くの問題点を有しており，一部を除いて，ラオス政府は大きな試練に曝されている。
ナムテン川の上流に計画されているナムテン第２計画（６０万KW）は，当初UNDPの資金によってFS調査が行われたが，ラオス政府の民間開発の呼び掛けに応じて，オーストラリアの資本を中心に開発すべく現在準備が進んでいる。しかし，ラオス政府が一定の資本の持ち分を主張したために，世界銀行がこれを支援することとなったが，世銀は独自の立場から更に環境に対する影響の調査が必要であるとし，その支援がサスペンドされている。この世銀の姿勢は，他の資金を負担する民間銀行の姿勢にも影響を与え，これらのプレッシャーがすべてラオス政府に向けられ，政府は苦しい立場に立たされている。更に，これを買電することに同意しているタイのEGATは，その買電単価の交渉で強い立場にあり，また，同意された発電開始の年度に間に合わない場合は，この計画のキャンセルも匂わせるに至り，今後の世銀の態度の決定が大きな関心を呼んでいる。
ナムテン下流のナムヒンブン計画（約２０万KW）は，貯水池がなく環境問題が少ないところから，ADBの支援を受けたラオス政府と，スウェーデンを主体とした民間資金の協力で，工事は順調に進んでいるとの情報であり，１９９８年にも運転開始の目処が立っている。セコン流域のボロベン高原付近の中規模計画が，やはり韓国等の資本で調査が進められており，今のところ順調に推移している。既設ナムグムダムの上流の第２，第３計画は，タイの資本を中心に計画が進められているが，政府の持ち分への資本は，関係する民間資本がこれを準備することとなっており，今後の推移を見守る必要がある。これらの現在進行中の計画は，何れもナムテン２計画を環境のスケープゴートにした格好となって，自然環境団体もそれらに対する具体的な反対運動は起こしていない。しかし，何れも多額の資金を必要としていることと，個々の民間資本が独自に計画を進めているために統一したタイへの送電手段が計画されていないことから，今後のラオス政府の主導的な役割が期待されている。
公的資金の全面的な支援が得られなかったために，ラオス政府は民間開発に踏み切ったわけであるが，この民間開発が齎すラオスの便益とは何か，という問題が一時議論を呼んだ。結局ラオス政府は，ある一定の持ち分を主張するに至ったわけであるが，これが公的資金の介入（具体的にはナムテン２の世銀）を必要としたために，深刻な環境に関する議論を呼んだ。本来は，ラオス政府は民間開発に関する法制度を完備して，必要な住民に対する補償の主導権を取り，地域開発並びに環境保護への強力な主導権を取るべきであった，と主張する識者は少なくない。過去の日本においても，北陸や木曽川の電力主導の開発が河川の環境問題を惹起して，電源三法等の法制度の整備によって電源地元の環境整備を義務付けた日本の経験から見て，今後ラオスにおける環境を中心とした法整備の必要が叫ばれている。
個々の民間開発がそれぞれ別個のタイへの送電構想を持って計画を進めているわけで，これらを統一した構想の下に送電会社として総合的に送電線の建設を進めようと言う主張は，メコン川委員会が中心となって議論が進められている。一方で，ADB主導による汎メコン開発構想がある。これは，従来政治的な環境からその一体性を阻害されてきたメコン上流域各国，ミャンマー及び中国雲南省を巻き込んで，下流のラオス・タイ・カンボディア・ベトナムとともに，運輸交通貿易観光を中心とした一大広域経済圏を構築しようとするもので，これには電力セクターの広域送電網構想が重要な役割を果たすことになる。この構想の中には，同じく豊富な水力電源を有するベトナム北部や雲南省に属する中国ランチャン川の水力電源の開発構想が絡んでくる。この送電網構想は，地理的にはラオスのその要となるものであり，今後，ベトナムのホーチミン，カンボディアのプノンペン，雲南省の昆明等の大都市群の経済発展がその前提となっている。
ラオスの水力民間開発への日本企業の出足は誠に鈍い。これは，当時不況による民間資本の冷え込みに加えて，償却期間の長い水力の民間開発が経済的に可能かどうかの議論をめぐって，内部審査機能の発達した日本企業にとっては，極めて取っ付き難い難題であったといえる。通産省の主唱するアジアのエネルギー戦略に支えられて，漸く日本の電力資本もその重い腰を上げようとしているわけであるが，経済性の良い素材は既に外国資本によって押さえられており，前途は必ずしも楽観的ではない。特に，常に環境問題に悩ませられる水力開発への進出には，まだ大きな躊躇いを持っているのが本音であろう。今後の日本のラオスへの公的資金の出動の可能性と，開発調査を含めた公的資金の強い支援を期待しているものと思われる。
大規模水力の輸出に目をむけて，ラオス政府の国内の僻地に対する農村電化の努力は，忘れられ勝ちである。しかし，広域送電線網構想と同時に，ラオスの識者の間では，農村電化の必要性が漸く議論の俎上に載ってきた。大規模開発が招く国土の荒廃を心配し，国土の整備を主張するグループが確実に育ってきている，それは当然国内電力供給網の整備と一体である。これは，ナムグム上流を中心とした中小水力による国内電化率の向上が，まずその突破口となる可能性が強い。今後の日本の協力の大きな柱になることを期待する専門家は多い。
人的資源に恵まれないラオスが，世界屈指の大規模電源開発構想に取り組んでいるわけで，早晩，その人的資源の育成や法律を含めた組織の整備が問題となることは，自然の成り行きである。UNDPを始め，多くの国機関が，この問題に向けて動き始めている。我が国も，JICAの開発協力の調査団が送り込まれて，この命題を中心とした協力を示唆しているが，各国入り乱れての問題の投げかけに対して，ラオス政府は，必ずしも適切に対応しているとは言えない。今のラオス政府にとって最も重要と彼らが考えている問題は開発資金であり，開発の基礎となるこれらの条件整備への努力の必要を説得するには，更に時間が必要と思われる。以上
Bretton Woods Project
International Rivers Network
Media Release!
Hong Kong, 22 September 1997
Bank urged to quit Lao dam following Thai crash and critical independent
review
Non-government organisations today called on the World Bank to reconsider
its plan to support the Nam Theun 2 dam in Laos.
1 Following recent events in Thailand - the proposed export market for
the power produced by the dam - and a critical independent economic review
of the project, NGOs say it represents an unacceptable risk for Laos, one
of the world's poorest countries. The World Bank is due to decide in the
next few weeks whether to move forward with preparing loan, equity and
risk guarantee backing for the project.
The project consortium - led by Australian company Transfield - are not
able to build the $1.5 billion dam without guarantees from the Bank to
insure their investment against actions that might be taken by the Lao
Government. An independent review of the World Bank's Economic Impact Study
for the project found that the study systematically underestimates the
risks that the project will fail to produce net benefits to the Lao economy.
2 Dr. Wayne White of Foresight Associates finds that there is a "very
real possibility of the project ... subjecting the GoL [Government of Lao]
to loss of its total investment while incurring environmental, social and
opportunity costs." Dr White found that the Berger study's worst case
scenario excludes any consideration of sedimentation in the reservoir,
limits its potential construction cost overrun to 20%, and does not consider
the possibility of construction delays.
According to Dr White, "familiarity with international hydropower
projects demonstrates that these factors are not only pessimistically possible,
they are typical." Even the World Bank's own studies show cost overruns
on hydropower projects average 27%. The project's viability was already
under question due to the recent economic crisis in Thailand, which is
expected to drastically cut previous projections of Thai energy demand
growth. As a result, Nam Theun 2 could be left without a buyer for its
power, or with a price too low to sustain the huge construction costs.
Ms Aviva Imhof, spokesperson for International Rivers Network, says: "Dr
White's review confirms that the economic viability of Nam Theun 2 is highly
marginal. This project is too risky for a poor, indebted country like Laos.
The recent collapse of the financing package for the Bakun dam in Malaysia
shows that even in a relatively powerful economy, large hydropower projects
are simply not attractive to investors."
Alex Wilks, spokesperson for the Bretton Woods Project, a network of 27
groups in the United Kingdom working on the World Bank and IMF, says: "The
Bank should admit that it would be unwise to proceed with such a large
and potentially destructive project when there is no buyer in place and
such huge uncertainty in predicting Thai economic growth and currency movements.
This dam would set a very dubious precendent for the Bank's new poor country
guarantee facility and would show that the Bank is more interested in minimising
the risks to private companies than those of its shareholder government."
Other independent reviews by US experts have criticised the competence
of the World Bank's environmental studies of the project. Dr Guy Lanza,
Professor and Director of the Environmental Sciences Program at the University
of Massachusetts, concluded that the project "will produce major irreversible
ecological, cultural and economic damage to the region."
Copyright 1997 Reuters Ltd. All rights reserved. The following news report
may not be republished or redistributed, in whole or in part, without the
prior written consent of Reuters Ltd.
By Adam Entous WASHINGTON,
Sept 24 (Reuter) - The World Bank said on Wednesday it would press ahead
with controversial dam projects in poor countries while an independent
commission reporting to its board assesses their social and environmental
costs. The international lending agency has come under intense pressure
in recent years from environmental and human rights groups who have demanded
curbs on the construction of large dams around the world.
"We are not putting a moratorium on the current projects in the pipeline,"
Ismail Serageldin, a World Bank vice president, told a news conference.
He said, however, that the bank might adjust its lending policies based
on the findings of the independent dam commission, which will begin its
work in November.
Activists argue that large dams supported by the bank and other lenders
hurt the environment and displace families, and assert there are cheaper
and more environmentally friendly ways to spur economic development. Recent
clashes between dam proponents and critics and controversies surrounding
the Narmada Dam in India and the Three Gorges Dam in China have fueled
the controversy.
To address the debate, the World Bank said it has set up a commission to
carry out a two-year independent review of the costs and benefits of large
dam projects. The World Commission on Dams, chaired by South African cabinet
minister Kader Asmal, will develop standards and guidelines for countries
and investors, bank officials said. "We're not only looking at how
to make dams more effective, but at alternatives," said George Greene,
assistant director general of the World Conservation Union, which will
advise the commission.
Asmal told reporters large dam projects need to be assessed on a case-by-case
basis and cautioned against dismissing all dam projects as bad. "I
do not think we want to start off on the basis of confrontation,"
he said.
The World Bank has directly or indirectly helped finance 600 large dams,
providing electric power, and water for agriculture and growing towns and
cities. Since 1986, the bank has approved more than 39 dam projects, lending
more than $7.4 billion. It takes on as many as four new dam projects each
year, and is currently considering 11 to 12 additional projects. Bank officials
say the projects benefit millions of poor people but also acknowledge that
many resettlement programs have been inadequately managed.
Environmental groups commended the establishment of the dam commission,
but some activists said the World Bank should freeze funding of dam projects
during the review. "A moratorium is called for," said Larry Williams,
director of the Sierra Club's international program.
REUTER
Copyright 1997 Reuters Ltd. All rights reserved. The following news report
may not be republished or redistributed, in whole or in part, without the
prior written consent of Reuters Ltd.
HONG KONG, Sept 24 (Reuter) - Laos said on Wednesday that while it hoped
to generate significant revenue from hydropower exports to neighbouring
Thailand, it was determined to stimulate rural development as a long-term
solution to economic growth.
Finance Minister Saysomphone Phomvihane told the World Bank/International
Monetary Fund annual meeting that a dip in growth in 1996 had been compounded
this year by poor harvests, Southeast Asia's financial crisis and removal
of garment export privileges to Europe.
"Although the prospects for growing revenue from hydropower exports
are reassuring in the medium term, the garment industry is important as
the government is aware that building a non-hydropower sector in the economy
is essential to ensure sustained growth and to generate employment for
a fast-growing population," he said.
He did not give figures for expected earnings from hydropower. Thailand
agreed in 1996 to buy 3,000 megawatts of power from several major dam projects
due to come on stream by 2006. Since then Thailand has been hit with an
economic crisis that has seen its currency plummet and raised doubts about
the future of its economy.
The international community has pledged more than $1.2 billion to Laos
until 2000, Saysomphone said.
REUTER
Ｔhe Nation (Bangkok)
Wednesday, Sept. 24, 1997
Malee Traisawasdichai
"Local NGO adds to pressure on World Bank"
Non-government organisations have demanded that the World Bank address
fundamental questions regarding the proposed Nam Theun 2 (NT2) dam before
it goes ahead with the next stage of the US $1.5 billion project in central
Laos.
In a letter to bank president James Wolfensohn endorsed by local and international
NGO's Witoon Permpongsacharoen, the director of TERRA, an NGO which monitors
economic development in the Mekong region, questioned the banks legitimacy
as a development institution as it continues to provide political and technical
support for the proposed hydroelectric dam.
NGOs focusing on environmental and rural development have questioned whether
the NT2 dam will truly be the "future source of revenue for the Lao
government" claimed by the bank. "This strategy is even less
valid given Thailand's economic slowdown and the resulting decline in the
demand for new sources of electricity," the letter stated. The economic
downturn in Thailand has seen the expiration of the power purchase agreement
with the Electricity Generating Authority of Thailand (EGAT), the only
customer of the proposed 900 megawatt NT2 dam.
The cost of generating electricity within Thailand is becoming more competitive,
Witoon said, adding that inflation which has had a severe impact on the
value of the Lao currency, will increase the project's construction costs.
These factors, he contended, call into question the market competitiveness
of the project. In the past five years, the estimated cost to build NT2
has almost doubled from US $800 to $1.5 billion while the predicted annual
revenue for the government of Laos has declined by 85 percent, from $250
million to $38 million.
Due to these economic risks, private commercial banks have refused to lend
money to the project. Consequently, the World Bank has created a new financial
instrument called an "enclave guarantee" which is designed to
allow it to insure the investments of private commercial banks lending
to companies. "We're concerned that the bank is helping the Nam Theun
Electric Consortium transfer risks which they should rightfully bear by
themselves to the people and the government of Laos," Witoon said.
NGOs have also expressed concern about the impact of the dam on the environment
of one of the world's poorest countries, its people and the Mekong region.
If constructed, NT2 would flood more than 450 square kilometres of forest,
wetland and riverine habitat unique to the Nam Theun river basin. This
area is relied upon by the vast majority of people in the Mekong region
for their livelihood, security, and income. Even worse, NGOs claim the
World Bank's involvement in the project paved the way for the logging of
more than 200 square kilometres of Nakai Plateau forest before the project
was even approved by the bank for appraisal.
Bank staff, they say, have consistently played down this destruction and
have instead promoted the establishment of a conservation forest adjacent
to NT2 as a "benefit".
.
26 September 1997
Mr. Somphone Phanousith
Director of Cabinet Science
Technology and Environment Organization
Dear Mr Somphone
Review of Louis Berger Economic Impact Study
Following please find a revised version of Dr Wayne White's review of the
Louis Berger Economic Impact Study for Nam Theun 2. This version includes
consideration of the revised edition of the Louis Berger report, dated
28 July 1997, and comments from Mr Scott Thomas, Team Leader of the Economic
Impact Study.
Dr White's review of the June report asserted that the "pessimistic"
or "nightmare" scenario for the project would be significantly
worse than presented if the Study team had addressed all the legitimate
project risks. The July report appears to reinforce this.
IRN's understanding of Dr White's revised review is that Louis Berger's
assessments of rate of return and net present value to Government of Lao
were maintained by making some radical and arbitrary cuts in valuation
of both lost forestry earnings and the Land Opportunity Cost. According
to Dr White, "The July version of the study has lower project benefits
in terms of project revenues, yet presents a higher net present value and
rate of return, especially for the Lao government. It is able to do so
because it greatly reduced its tabulation of land opportunity cost including
forestry, which increases the doubt as to the appropriateness of the calculation."
In the July version of the study, the land opportunity cost in the nominal
dollar calculation of cost/benefit was reduced from $311.4 million to $134.5
million, despite the change in interest rate which should have resulted
in an increase in land opportunity cost. Also attached is a response from
Dr White to NTEC's comments on his review. Dr White refutes a number of
NTEC's assertions, including the claim that the Turnkey Contractor would
assume all the risks associated with construction cost overruns and construction
delays.
According to Dr White, "turnkey international contracts do vary in
actual risk exposure, and they are not immune to problems caused by cost
overruns or construction delays." I hope that you find this information
useful. Please contact myself or Patrick McCully if you have any queries
on Dr. White's or IRN's work.
Yours sincerely
. __________________________
Review of Economic Impact Study:
Nam Theun 2 Hydroelectric Project
Wayne C. White, Ph.D.
Foresight Associates Note:
The original version of this review was issued 1 August 1997.
Subsequently Louis Berger International issued a revised edition of the
report dated 28 July 1997, and Mr. Scott Thomas, Team Leader of the Economic
Impact Study, issued a letter in response to our review.
This revised version of the review includes consideration of the revisions
to the Study, and Mr Thomas' letter. All original content has been retained,
superseded items are set off in brackets, additions and changes are given
in italicized type.
I. Overview
The scope of this report, in accordance with its terms of reference, is
to critically review the Economic Impact Study of Nam Theun 2 Dam Project
prepared by Louis Berger International, Inc. dated June 12, 1997, revised
and reissued dated July 28, 1997. This review finds the Berger study, while
in many ways adequate in its application of conventional analytical methods,
has shortcomings which affect the legitimacy and utility of its conclusions.
In contrast, an economic analysis that accurately reflects the full range
of issues surrounding hydropower development as a means of poverty alleviation
and sustainable development, would have best served the Lao people. A significant
weakness of the Berger study is in fulfilling its charge to, as part of
the project evaluation, construct "realistic scenarios for...pessimistic
conditions." The Berger study presents what it alternately terms a
"pessimistic" or "nightmare" scenario, yet this economic
calculation, for example, excludes any consideration of sedimentation in
the reservoir, limits its worst case construction cost overrun to 20 %
[15%], and does not consider single or multi-year construction delays.
Familiarity with international hydropower projects demonstrates that these
factors are not only pessimistically possible, they are typical. For this
reason, the statement contained in the study: "Sensitivity analysis
of the model indicates that the net present value of the project remains
positive under all but the most pessimistic of scenarios" may be technically
correct, but is fundamentally misleading. The study is relatively even
more selective in calculating project benefit to the Lao government than
it is in calculating overall project return.
As the report states (Annex 1, para. 48) "the flow of benefits to
the GOL is distributed more heavily to the later periods in project life."
The later periods of project life are precisely when sedimentation effects
will be felt in diminished production and/or need for capital reinvestment
to maintain operation. The later periods of project life also carry a greater
risk of Thailand turning to cheaper alternate sources of power. [By using
a lower discount rate for GOL analysis (7%) than project analysis (9%),
and given the high distribution to the government in later periods, the
Berger calculation further favors an optimistic net present value for the
government. Further, the fact that the study uses a base Thai inflation
rate of 3%, and a worst case of 4%, when the present inflation rate in
Thailand is 6%, has a strong impact in bringing the supposed earnings in
later periods to a present value.] (The subsequent version of the study
does rationalize discount rates at 7%, and utilize a base inflation rate
for Thailand of 6%. More on this below.)
We also find the study to have assumptions which systematically raise the
"optimistic" and "pessimistic" case projections. The
base electrical tariff rate used is, in our opinion, high. [The Thai inflation
rate assumption also presents a systematic bias.]
II. Review of assumptions Scoping the IRR calculation.
We agree with the statement (page 3, para. 7) that cost overruns, demand
shortfalls and hydrological variations are among the most obvious sources
of risk. We cannot agree that they can be downplayed, simply because private
sector, project finance may be employed. The presumption that "market
signals" demonstrate viability, when appearing in a economic study
that should help the Lao government evaluate the developer proposals, is
tautological at best. The existence of BOT finance does not change, in
the case of hydrology, the performance of the weather. The presumption
in the "market signal" discussion by Berger seems to be that
if shortfalls do occur, the project developers, NTEC, will absorb any losses
and the government will be not only fully protected, but continue to receive
full dividend, royalty and tax payments--this is not at all a safe assumption,
not before the contracts are negotiated and signed, and quite probably
not after they have been either.
Even if losses were limited to NTEC, this affects the GOL as an equity
participant. Responsible characterization of these risks, however, would
provide invaluable background information to the Lao negotiating team as
they enter into the next round of negotiations--assuming the project proceeds
to that point.
Discount rate.
[The study uses a 9% discount rate for project analysis. It uses a 7% rate
for the GOL case, a lower rate which increases the calculated present value
of the projected GOL earnings far in the future. The study uses (Appendix
1, page 1) a discount rate of 10% for calculating the present value of
lost future forestry earnings from the Nakai Plateau, a rate higher than
the 7% or 9% decreases the calculated present value of lost sustainable
forestry earnings.] The subsequent version of the study does rationalize
the discount rate at 7%. The revised calculations, however, do not show
the present value of lost forestry earnings increasing as would be expected,
but rather decreasing! This was accomplished by lowering the unit value
of wood in the calculation. (See Annex 2, para. 40) The June version shows
the range of forestry present value from a low of $22million, to a high
of $45mil. For a period of 50 years, the present worth factor at 10% is
9.915, and at 7% is 13.801, so we would correspondingly expect the forestry
present value to be about 39% higher at the 7% discount rate, therefore
$31 mil. low, $63 mil. high. Instead the July version of the study cites
values of $20 mil. low, $38 mil. high. Similarly, the Land Opportunity
Cost used in the nominal dollar calculation of Cost/Benefit (Annex 1, pages
28, 29) fell from $311.4 million to $134.5 mil. between the two studies,
despite the change in interest rate which trended the opposite direction!
Inflation rate.
[The study uses a base rate for Thai inflation of 3%, with 2% as "rosy"
and 4% as "nightmare;" the current rate of inflation in Thailand
is 6%. As the study says (Annex 1, p.16, para. 62) "lower inflation
works to the advantage of NT2." The study does not adequately represent
the worst case for inflation.] The study now uses a base case Thai inflation
rate of 6%. The study's sensitivity test for inflation shows the project
net present value to the Lao government at the end of 30 years falling
by $51 million with inflation rate only 1percentage point higher than the
3% base case, and by $82 million when carried out to 2050. It is beyond
the scope of this review to calculate a true worst case including the higher
inflation scenario, but an inflation assumption of 5% would in itself lower
the net present value to the GOL by a further tens of millions of dollars.
The earnings to the Lao government are shown to drop in the later report,
which combines the effects of higher inflation, lower tariffs, and other
factors in the calculation.
Construction cost estimates.
We maintain that it was a positive and appropriate development for the
government to employ "an outside general engineering consultant"
(page 4, para. 10) for tasks including generating "independent cost
estimates." It is appropriate for Berger to utilize Lahmeyer cost
estimates as a construction cost basis. We do feel that Berger responsibly
should have subjected the Lahmeyer-generated base construction costs to
more realistic scenarios for cost overruns and construction delays. By
application of the [9%] 7% real discount rate to the Lahmeyer projected
construction cost schedule, we derive a construction cost of [US$995 million]
US$931 million in the first year of project operation. As a statement of
construction costs excluding construction delays and other cost overruns,
it is roughly consistent with previous estimates.
[[ Construction cost (US$millions, 1996 dollars) Expenditure Carryover
debt @ 9% real discount rate
Annual Sum
1998 $17.40 $17.40
1999 $117.55 $18.97 $136.52
2000 $231.63 $148.80 $380.43
2001 $231.63 $414.67 $646.30
2002 $120.55 $704.47 $825.02
2003 $14.00 $899.27 $913.27
2004 $995.46 $995.46 ]]
Construction cost (US$millions, 1996 dollars)
Expenditure Carryover debt @ 7% real discount rate
Annual Sum
1998 $17.40 $17.40
1999 $117.55 $18.62 $136.17
2000 $231.63 $145.70 $377.33
2001 $231.63 $403.74 $635.37
2002 $120.55 $679.85 $800.40
2003 $14.00 $856.43 $870.43
2004 $931.36 $931.36
Berger utilizes a base case with no cost overrun, and a worst economic
case of a [15%] 20% cost overrun, 30% in the financial risk calculation.
According to the 1996 World Bank Technical Paper No. 325, Estimating Construction
Costs and Schedules: Experience with Power Generation Projects in Developing
Countries, hydropower projects supported by the World Bank have an "average
cost overrun of 27 percent." Based on the experience elaborated in
that document, it would have been appropriate for Berger to have used no-cost-overrun
only for the best case scenario, a 27% cost overrun for the base case,
and a 50 to 100% cost overrun for the "nightmare" or "worst
case." As factors leading to possible construction delays and cost
overruns, we note geological uncertainty, which will affect tunnelling
operations, and possibly require structural shoring or 'plugging' of the
hills which will form the basin rim as the reservoir begins to fill.
The Berger study has noted (page 41, para. 8) "In regard to cost over-runs,
a preliminary review of the contract indicates that NTEC would be exposed
to additional costs related to ground conditions outside of a 'Defined
Work Area,' for Force Majeure events, and for lack of adequate water during
acceptance testing." We do note the relatively good transportation
access to the site, yet we feel that logistics will present a very real
challenge. The study (Annex 1, page 18,19) presents a comparison of the
projected cost of electricity from NT2 in comparison with many other Asian
hydropower projects. This information indicates that the calculated cost
for NT2 is markedly lower than the average value of projects in Laos, and
in Southeast Asia. What is not confirmed yet is whether this comparison
demonstrates that, a) NT2 is a low cost hydropower project, or b) the NT2
cost is being appreciably underestimated.
Ecosystem preservation.
The study makes its assumption clear (page 4, para. 12) to accept the argument
that project development will favor protection of a conservation area,
while failure to develop the project will mean the would-be conservation
area goes unprotected while the reservoir site gets degraded anyway. We
must note that this stance is seen as arbitrary and unsupported by some
interested parties. Arguments against this stance would point out that
it ignores the question of reversibility, that greater logging of the Nakai
Plateau to a certain point does not rule out future ecosystem recovery
while a reservoir would.
Also, it could be argued, what is the source of confidence that the watershed
of the reservoir won't be clearcut after construction, resulting in both
environmental chaos and massive sedimentation of the reservoir? Expenditures
for preservation do not ensure results. Would the regional development
company, really have an interest in the medium term of protecting the watershed
rather than cashing in on the timber? Without the reservoir, we would find
it economically rational for the government to pursue, and donors to support,
programs of sustainable forestry. The calculation of the lost future timber
harvests (Appendix 1, page 2) ignores the rising real value of timber in
international markets, especially the Tokyo Exchange, in addition to the
concerns mentioned above under 'Discount rate.' Environmental and social
cost mitigation. We would like to stress that mitigation relies not only
on the amount developers are willing to spend (page 5, para. 13) but the
efficacy of their efforts.
Annex 2 of the report provides an excellent enumeration of possible environmental
and social impacts, and makes observations that would facilitate mitigation
planning. Without careful assignment of authority and meaningful conditionality
in the contractual agreements, however, the unmitigated costs will reach
100% despite any mitigation spending. We support the study for the assumption
(page 5, para. 14) that 50% of the environmental and social costs will
not be mitigated as a factor in this economic analysis, as a more realistic
and less conservative assumption than might have been used, without in
any way endorsing the reality which this reflects. We also note the corollary
to the assumption that 50% of the environmental and social costs will not
be mitigated: that watershed degradation will lead to some heightened degree
of sedimentation, and that some citizens will experience a dimunition in
living standard, in violation of World Bank policy.
Reinvestment.
We note and find appropriate the discussion (page 5, para. 16) of the ability
of the Lao government to re-invest project earnings; the study is correct
to term NT2 an 'enclave' project. Such reinvestment is a necessary component
if development of the NT2 project is to contribute to poverty alleviation
in Laos. We believe that for net capital within the Lao economy to have
experienced a net increase at the end of service life is a key criteria
in assessing NT2 as a vehicle of sustainable development. We note, however,
that within the project analysis earnings to the GOL are taken as a proxy
for benefit to the Lao economy, functionally assuming perfect reinvestment
in that context. Although the study purports to analyze "institutional
capacity constraints" and present a "strategy for their mitigation,"
such discussion is not equivalent with implementing successfully a program
that achieves perfect reinvestment capability.
Hydrological risk.
[The calculation uses (page 9, para. 6) a monte carlo simulation to represent
hydrological constraints to power generation. Our apprehension is that
the monte carlo simulation expresses hydrological variation, but does not
adequately address the possibility of hydrological shortfall.] The monte
carlo simulation has been removed from the primary benefit/cost calculations,
which now carry constant annual generation estimates. The possibility of
any hydrological variation is now treated only within the sensitivity analysis.
The project hydrological models are built upon rainfall measurements taken
in too few locations over too short a span of time to provide a high level
of confidence. By its nature, modelling from inadequate data "inherently
results in a lower variability in the estimated flows than occurs during
the observed sequence." Limitations included "an extremely poor
network of rainfall stations." Again, generation rates of the so-called
'base case' 'most likely scenario' are now set at idealized constant levels
in the calculation.
Tariffs.
The Berger study cites (Annex 1, para. 53) the tariff given in the now
expired power purchase agreement, which was 4.55 cents/kWh escalated at
3% during construction and 35% of the rate of inflation during operation.
The study then goes on to note that Thailand's avoided cost of power is
lower than this amount and falling, therefore "the new tariff can
be expected to be lower than the previous agreement." The study then
goes on (para. 54) to use a base rate of "5.75 cents/kWh in 2004"
increasing "at 35% of inflation during operation as in the previous
agreement." Please note that an amount of 4.55 cents in 1996, raised
by 3% a year inflation for eight years, is equivalent to 5.76 cents in
2004. To summarize the previous paragraph, Berger uses a base rate tariff
in its calculations which it states (in para. 53) is artificially high.
In explaining its use of this number it cites "conversations with
NTEC and the World Bank." The study now uses a tariff of 5.70 cents
which it holds constant in nominal terms with no inflation factor.
In 1995, the average tariff at which the Lao utility exported electricty
was 3.2 cents per kWh. Raised for inflation by the referenced amount, this
is equivalent to 3.3 cents/kWh in 1996, only 72% of the referenced 4.55
cents/kWh. It is equivalent to 4.05 cents in 2003, or 71% of the 5.70 cent
tariff. Berger also recognizes a scenario in which combined cycle gas plants
in Thailand create a competitive tariff price of 4.0 cents/kWh in 2003,
or thirty percent cheaper than the assumed base case. The study (Annex
1, para. 70) notes "It is very possible that both the capital costs
of combustion turbines and the production cost of natural gas will stay
flat or decline in real terms in the near future." Yet the study marginalizes
the significance of low gas-fueled tariffs by citing natural gas scarcity.
We do not feel that the natural gas scarcity argument is conclusive, and
that the study should have given much more credence to a scenario of continued
downward tariff price pressure.
Sedimentation.
We agree that (Annex 1, para. 9) sedimentation "may pose a risk to
future NT2 generation output and therefore the revenues and benefits associated
with NT2." We do not feel that it was appropriate to perform this
study and reach conclusions without factoring in any sedimentation scenarios.
The report states that, "no comprehensive data nor studies were available
to the project team at the time of the report." SMEC made an assessment
of sediment loads in 1991; the SMEC data has also been the foundation for
an assessment of sedimentation in Nam Theun 2-Study of Alternatives by
Lahmeyer in February of this year, and A Review of Nam Theun 2 Project
Economics by White in July 1996. We feel that data exists from a variety
of reservoirs in Asia under similar geological and hydrological conditions
that could have been used to generate at least approximate assumptions
for sedimentation rates and the resulting economic impact.
Further, regional experience indicates a true worst case scenario would
consider extreme watershed degradation. If the study had generated a sedimentation
scenario for a watershed protection worst case, and carried it through
to a Lao government project return calculation, it would have provided
a valuable service in demonstrating to the Lao government its self interest
in watershed protection if the project is built.
III. Review of conclusions Returns.
The Berger study finds (page 9, para. 4) that under the "most likely"
scenarios, the economic internal rate of return for the project from a
project ('global') perspective, and GOL perspective, is not less than [14%]
16%, and the net present value of an initial $100 million GOL investment
is more than [$300 million] $345 million. It goes on to say "Sensitivity
analysis of the model indicates that the net present value of the project
remains positive under all but the most pessimistic of scenarios."
The objective of this study (page 1, para. 1) "is to provide the Government
of the Lao People's Democratic Republic (GOL) with a comprehensive and
well balanced analysis of the economic viability of the proposed Nam Theun
2 hydroelectric project."
From the indicated returns it would be logical for the GOL to perceive
that the project is not only viable but attractive, with negligible risk.
A well balanced analysis should point out the real possible downside of
project development, as disappointing and unwelcome as that news may be.
Clearly, the implications of tariff revenues being 20 to 30 percent lower
than assumed in the study, and a cost overrun of even 40 percent or less,
even if not combined with hydrological shortfall and diminished project
life, present a very real possibility of the project having a negative
NPV, subjecting the GOL to loss of it total investment while incurring
environmental, social, and opportunity costs.
The July version of the study has lower project benefits in terms of project
revenues, yet presents a higher net present value and rate of return, especially
for the Lao government. It is able to do so because it greatly reduced
its tabulation of land opportunity cost including forestry, which increases
the doubt as to the appropriateness of the calculation. As for the reasoning
that the project developers will shield the GOL from critical cost overruns
or earnings shortfalls, it is a given that the developers are not interested
in losing tens or hundreds of millions of dollars. They will, under such
conditions, find a way of passing along losses, or they will find a pretext
for abandoning the project.
Diverging outcomes.
The GOL should note (page 14, para. 19) that under the "nightmare"
scenario, which for reasons given above we do not at all consider to represent
the worst case, in the first 30 years the GOL loses [$95 million] $69 million,
while the project over all retains a positive net present value. The study
cites the current draft of the Concession Agreement (page 41, para. 9)
to point out that not only is the GOL being asked to accept diminished
royalties in the event of hydrological shortfall, but also if the developers
simply have not achieved their 'hurdle' rate of return. The discussion
further points out (para. 10) ways in which the GOL is being exposed to
greater risk than the developer, as the resource levy holiday "significantly
exposes the GOL to the risk of a renegotiated tariff structure in the later
operating phase of the project," and because the developer is seeking
"2-to-1 reimbursement of development costs" by the commercial
operation date.
Alternatives.
The Berger study does not, we believe, sufficiently present the no-build
option in its conclusions. We do not believe that the proposed Nam Theun
2 project, even were it to be of net benefit, is the only vehicle by which
the Lao PDR can pursue its national development objectives. A GOL development
strategy of sustainable forestry of the Nakai Plateau has many advantages
over the NT2 scheme. It does not require a US$100 million investment. It
could begin today. It does not carry a risk that the GOL could lose $95
million or more. It has a net present value from timber sales alone of
between $45 and $275 million. It would not carry a cost of $95 million
for combined environmental and social costs and mitigation measures, although
it would require some fraction of that for management and protection measures.
It could provide employment for Lao citizens, especially if combined with
wood products processing and ecotourism development. It does not carry
the same risks for increased prostitution and accompanying public health
concerns, nor waterborne diseases such as Schistosamiasis. It is compatible
with Lao macroeconomic development needs including enhanced rural development,
farm to market roads, agricultural extension, and education.
Wayne C. White, Ph.D
August 1, 1997 revised September 5, 1997
>Subject: World Bank to fund dams
>
>
>>04:55 PM ET 09/24/97
>>
>>
>>
>>
>> By Adam Entous
>> WASHINGTON(Reuter) - The World Bank said Wednesday it would
>>press ahead with controversial dam projects in poor countries
>>while an independent commission reporting to its board assesses
>>their social and environmental costs.
>> The international lending agency has come under intense
>>pressure in recent years from environmental and human rights
>>groups who have demanded curbs on the construction of large dams
>>around the world.
>> ``We are not putting a moratorium on the current projects in
>>the pipeline,'' Ismail Serageldin, a World Bank vice president,
>>told a news conference.
>> He said, however, that the bank might adjust its lending
>>policies based on the findings of the independent dam
>>commission, which will begin its work in November.
>> Activists argue that large dams supported by the bank and
>>other lenders hurt the environment and displace families, and
>>assert there are cheaper and more environmentally friendly ways
>>to spur economic development.
>> Recent clashes between dam proponents and critics and
>>controversies surrounding the Narmada Dam in India and the Three
>>Gorges Dam in China have fueled the controversy.
>> To address the debate, the World Bank said it has set up a
>>commission to carry out a two-year independent review of the
>>costs and benefits of large dam projects.
>> The World Commission on Dams, chaired by South African
>>cabinet minister Kader Asmal, will develop standards and
>>guidelines for countries and investors, bank officials said.
>> ``We're not only looking at how to make dams more effective,
>>but at alternatives,'' said George Greene, assistant director
>>general of the World Conservation Union, which will advise the
>>commission.
>> Asmal told reporters large dam projects need to be assessed
>>on a case-by-case basis and cautioned against dismissing all dam
>>projects as bad. ``I do not think we want to start off on the
>>basis of confrontation,'' he said.
>> The World Bank has directly or indirectly helped finance 600
>>large dams, providing electric power, and water for agriculture
>>and growing towns and cities.
>> Since 1986, the bank has approved more than 39 dam projects,
>>lending more than $7.4 billion. It takes on as many as four new
>>dam projects each year, and is currently considering 11 to 12
>>additional projects.
>> Bank officials say the projects benefit millions of poor
>>people but also acknowledge that many resettlement programs have
>>been inadequately managed.
>> Environmental groups commended the establishment of the dam
>>commission, but some activists said the World Bank should freeze
>>funding of dam projects during the review.
>> ``A moratorium is called for,'' said Larry Williams,
>>director of the Sierra Club's international program.
>>
>> ^REUTER@
> >
> By Adam Entous
> WASHINGTON(Reuter) - The World Bank said Wednesday it would
>press ahead with controversial dam projects in poor countries
>while an independent commission reporting to its board assesses
>their social and environmental costs.
> The international lending agency has come under intense
>pressure in recent years from environmental and human rights
>groups who have demanded curbs on the construction of large dams
>around the world.
> ``We are not putting a moratorium on the current projects in
>the pipeline,'' Ismail Serageldin, a World Bank vice president,
>told a news conference.
> He said, however, that the bank might adjust its lending
>policies based on the findings of the independent dam
>commission, which will begin its work in November.
> Activists argue that large dams supported by the bank and
>other lenders hurt the environment and displace families, and
>assert there are cheaper and more environmentally friendly ways
>to spur economic development.
> Recent clashes between dam proponents and critics and
>controversies surrounding the Narmada Dam in India and the Three
>Gorges Dam in China have fueled the controversy.
> To address the debate, the World Bank said it has set up a
>commission to carry out a two-year independent review of the
>costs and benefits of large dam projects.
> The World Commission on Dams, chaired by South African
>cabinet minister Kader Asmal, will develop standards and
>guidelines for countries and investors, bank officials said.
> ``We're not only looking at how to make dams more effective,
>but at alternatives,'' said George Greene, assistant director
>general of the World Conservation Union, which will advise the
>commission.
> Asmal told reporters large dam projects need to be assessed
>on a case-by-case basis and cautioned against dismissing all dam
>projects as bad. ``I do not think we want to start off on the
>basis of confrontation,'' he said.
> The World Bank has directly or indirectly helped finance 600
>large dams, providing electric power, and water for agriculture
>and growing towns and cities.
> Since 1986, the bank has approved more than 39 dam projects,
>lending more than $7.4 billion. It takes on as many as four new
>dam projects each year, and is currently considering 11 to 12
>additional projects. > Bank officials say the projects benefit
millions of poor
>people but also acknowledge that many resettlement programs have
>been inadequately managed.
> Environmental groups commended the establishment of the dam
>commission, but some activists said the World Bank should freeze
>funding of dam projects during the review.
> ``A moratorium is called for,'' said Larry Williams,
>director of the Sierra Club's international program.
>
> ^REUTER@ > >=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*=*
>> >>
WASHINGTON, DC, September 25, 1997 - As international debate intensifies
>>over the social, environmental and economic impact of large dams
in a
>>number of countries, a South African cabinet minister, Professor
Kader
>>Asmal, has been chosen to chair the new World Commission on Dams.
>>
>>The Commission, to be formally launched in November, will conduct
the
>>first-ever independent review of the costs and benefits of large
dam projects.
>>
>>The establishment of the Commission was the unanimous recommendation
of
>>governments, civil society organizations, international financial
>>institutions, and private business people who met in Gland, Switzerland,
in
>>April 1997, to discuss the future of large dams. The conference,
hosted by
>>the World Bank Group and The World Conservation Union (IUCN),
was the
>>result of more than 18 months collaboration to develop an open
and clear
>>dialogue on the role of large dams in sustainable development.
>>
>>Asmal, was invited to chair the Commission earlier this month by
James
>>Wolfensohn, president of the World Bank Group, and David McDowell,
director
>>general of IUCN, after extensive consultations with the stakeholder
>>representatives from the conference.
>>
>>The Commission will carry out a two-year review of the development
>>effectiveness of large dams. The Commission will develop standards
and
>>guidelines to advise countries on future dam-building decisions,
including
>>the assessment of alternatives. Its final report will be delivered
in early
>>2000.
>>
>>By working closely with both advocates and opponents of large
dams, Asmal
>>and eight fellow members of the Commission will try to address
the deadlock
>>which has polarized the international debate on large dams.
>>
>>"The use of water is of vital interest to all of humanity,"
says Asmal.
>>"This forum offers a unique opportunity to mediate among competing
>>interests and obtain consensus on the issues around large dams.
It will
>>actively seek to review the development effectiveness of dams and
to
>>establish a set of guidelines, standards, and criteria for future
>>generations. I hope that the Commission's report will provide real
content
>>to the concept of sustainable development."
>>
>>"Large dams constitute a major technical, social, environmental,
and
>>developmental challenge," says Wolfensohn. "For this
challenge to be met
>>successfully, the World Bank is prepared to join IUCN and other
>>stakeholders to create an appropriate framework focused on learning
from
>>experience and on the design of adequate standards."
>>
>>As one of the initiators of the new Commission, IUCN, the world's
largest
>>grouping of environmental organizations, said the Commission would
create
>>invaluable opportunities to address the fundamental concerns expressed
by
>>both supporters and opponents of large dams.
>>
>>"We look to the Commission to address the difficult trade-offs
that affect
>>the biodiversity value of ecosystems and the daily life of communities
when
>>decisions about water resources and energy development are made."
says
>>McDowell, IUCN director general.
>>
>>Professor Asmal, South Africa's Minister of Water Affairs and Forestry,
>>brings with him a distinguished track record in water resources
management,
>>as well as human rights. As a member of President Nelson Mandela's
cabinet,
>>Asmal has led the fundamental review and reform of South Africa's
water
>>management policy. Prior to his return from exile in 1990, he was
a law
>>professor at Trinity College Dublin for 27 years, specializing
in human
>>rights, labor, and international law. He was also founder of the
British
>>Anti-Apartheid Movement, as well as the Irish Anti-Apartheid Movement
in
>>1963 and chairperson until 1990. In 1983, Professor Asmal received
the Prix
>>UNESCO award for the advancement of human rights.
>>
>>In 1993, he served as a member of the negotiating team of the
African
>>National Congress at the Multi-Party Negotiating Forum, and in
May 1994,
>>was elected to the National Assembly. In 1996, he was awarded the
Gold
>>Medal Award for conservation from the World Wide Fund for Nature-South
>>Africa. He is also the patron of the Global Water Partnership.
During his
>>tenure as Minister of Water Affairs and Forestry, he has spearheaded
the
>>recognition of the concept of "the environment as a prime
water user."
>>
>>---
>>The EnviroNews Service
>The Guardian (UK) September 24 1997
>
>Damning Evidence
>
>
, reports John Vidal.
>
>Pressure to stop the massive $1.5 billion Nam Theun 2 dam in Laos
is
>mounting following the loss of financial confidence.
>
>The project, which would export electricity to Thailand, can only go
ahead
>with World Bank guarantees of finance. However, an independent review
of the
>bank's economic impact study has found that it had "systematically
>underestimated" risks and that there was "a very real possibility
of Laos
>ending up with no net economic benefit, losing its total investment
and
>incurring the environmental, social and opportunity costs." The
study found
>that the World Bank's worst-case scenario excluded any consideration
of
>sedmentation in the reservoir, limits its potential construction cost
>overrun to 20 per cent, and did not consider the possibility of construction
>delays.
>
>The recent economic crisis in Thailand is expected to cut drastically
>previous projections of Thai energy demand growth. As a result, Nam
Theun 2
>could be left without a buyer for its power.
>
>Aviva Imhof, spokeperson for leading non-governmental group, the
>International Rivers Network, says: "This project is too risky
for a poor
>indebted country like Laos. The recent collapse of the financing package
for
>the Bakun dam in Malaysia shows that even in a relatively powerful
economy,
>large hydropower projects are simply not attractive to investors."
>
>Professor Guy Lanza, of the University of Massachusetts, has also concluded
>that the dam would "produce major irreversible ecological, cultural
and
>economic damage."
>
>The World Bank is due to decide in the next few weeks whether to move
>forward with preparing loan, equity and risk guarantee backing for
the project.
4 October 1997
Mr. Somphone Phanousith
Director of Cabinet
Science Technology and Environment Organization
Fax. 0015 85621213472
Dear Mr. Somphone
Please find following the response from Dr. Guy Lanza to NTEC's comments
on his review of the Environmental Assessment and Management Plan (EAMP)
for the proposed Nam Theun 2 project. Dr. Lanza, you will note, has read
several of the documents that Mr. Iverach claims he has not read, and,
contrary to Mr. Iverach's assertions, has spent considerable time in Laos
doing field research in aquatic ecology.
Dr. Lanza is therefore well qualified to comment on SEATEC's EAMP. Dr.
Lanza responds specifically to a number of Mr. Iverach's comments, which
he describes as "overgeneralized and unclear", and a "gross
oversimplification" of the project's impacts.
Dr. Lanza notes that his concerns about the lack of consideration given
to the cumulative effects of the Nam Theun 2 project were not addressed
by Mr. Iverach. According to Dr. Lanza, this is a "major flaw in the
EAMP and the general approach outlined by NTEC." Accordingly, Dr.
Lanza remains "convinced that the current plans for the Nam Theun
2 project will produce large scale environmental damage to the region,
and lead to irreversible cultural and economic losses that cannot be mitigated."
I hope that you find this information useful. Please contact myself or
Patrick McCully if you have any queries on Dr. Lanza's or IRN's work. A
hard copy of this letter and Dr. Lanza's comments will follow by facsimile.
Yours sincerely
Aviva Imhof
Mekong Program Coordinator
cc James D. Wolfensohn, President, World Bank
Jannik Lindbaek, Executive Vice President, IFC
Jean-Michel Severino, Vice-President East Asia and Pacific, World Bank
Jayashankar Shivakumar, Lao PDR Country Director, World Bank
David McDowell, Director-General, IUCN World Bank Executive Directors
________________________________________________
Mr. Patrick McCully
Ms. Aviva Imhof
International Rivers Network
1847 Berkeley Way Berkeley, CA 94703
September 22, 1997
Dear Patrick and Aviva;
Thank you for sharing the NTEC response to my review of the Environmental
Assessment and Management Plan (EAMP) for the proposed Nam Theun 2 project
produced by SEATEC International.
Contrary to the NTEC commentary provided by Mr. Iverach, I have read several
of the documents that he claims "The IRN consultants do not appear
to have read." Perhaps it is my different interpretation of the content
of the reports that has confused Mr. Iverach. Mr. Iverach is also incorrect
in his assertion that "none of the reviewers has any direct experience
in Laos." I had the pleasure of spending considerable time in Laos
doing field research in aquatic ecology earlier in my career.
In any event, I offer the following brief comments with regard to Mr. Iverach's
statements:
Mr. Iverach's statements that "The reviewer's comments appear to be
general ones that could equally be made of any trans basin diversion scheme
." and "The final sentence of this section is unsubstantiated."
are quite puzzling. My comments clearly refer to the very specific and
unique characteristics of the proposed project that would, among other
things, destroy large tracts of natural habitat.
Nam Theun 2 will totally eliminate a striking 84% of the total natural
flow sustaining the regional ecosystem and create a very large reservoir
impounding 3180 million cubic meters of water and it's associated biota.
I do not know of any other project in SE Asia or elsewhere that is equal.
Mr. Iverach's claim that my concerns that the proposed elimination of natural
flood events will produce major negative effects on the ecological integrity
of the river ecosystem below the dam "is unsubstantiated" is
contrary to current knowledge about the structure and function of the river
continuum.
In fact, the negative environmental impacts of eliminating the natural
flow regime of lotic ecosystems are well documented and very substantial
(see for example references 1-3). Mr. Iverach's assertion that "Specifically
the EAMP indicates that the only species ; terrestrial or aquatic, floral,
or faunal, which is likely to be impacted by reduced flows in zone 4 is
one species of fish." is typical of his gross oversimplification of
the project's impacts. The rich array of biodiversity that is supported
by the existing habitat in the project region is not merely a series of
disconnected "Zones." "Zone 4" is not a discrete ecological
entity, but rather an essential part of the complex river continuum and
it's riparian areas that support many other species. Complex biological
communities are not subject to anthropocentric "Zones" and should
not be managed as unconnected components.
The comments about my concerns for the environmental impacts of disrupting
the natural flow and sedimentation patterns in the ecosystem are totally
inaccurate. My review did not"ignore clear evidence that the present
sediment and nutrient loads are both extremely low , almost entirely because
of the present excellent condition of the NBCA watershed." I make
the point that the current natural levels of sediment and nutrients are
essential to the "present excellent condition of the NBCA watershed"
in my statement "Sediment quality and quantity play a vital role in
establishing and maintaining the natural ( emphasis added) architecture
of the riverine and riparian habitats that are essential to the survival
of the region's rich and unique biodiversity," The natural architecture
of the river ecosystem is characterized by low levels of sediments and
nutrients and the need to protect the present sediment quality and quantity
is implicit in my review.
The NTEC review comments regarding my concerns about DDT indicate a lack
of understanding about the environmental mobility of the toxic chemical.
DDT (and some of it's intermediate forms; e.g.DDE) is extemely mobile and
is commonly transported via water and air routes to different areas within
a region and around the globe. It accumulates in human tissue and is considered
to be very hazardous to human health. Adding to the baseline DDT contamination
in the region to control increased Malaria, Dengue, and other disease vectors
produced by the proposed Nam Theun 2 project is an unnecessary risk that
poses a real ecotoxicological threat to the region.
The statement that "NTEC has committed to the expenditure of $ 1.9
million over the 5 years construction period on Public Health in the region
via RAP and EAMP recommendations." seems to acknowledge my expressed
concerns about increased disease transmission and adverse impacts on human
health that will result from the project. The NTEC commentary seems to
subscribe to the notion that increased Malaria, Dengue Fever, and the potential
for other incurable diseases(e.g. Schistosomiasis) is an acceptable trade-off
in the project plan. Since there is no cure for these diseases, the plan
appears to focus on attempts to alleviate the pain and misery after they
occur rather than preventing the diseases from occurring at increased levels.
I find this particularly troublesome in light of the recent evidence of
emerging new infections associated with ecological change( e.g. see references
4-7). The recent reports of the increased replication of the HIV virus
stimulated by Malaria infections is of particular concern given the relatively
high incidence of both pathogens in the region. The comments by Mr. Iverach
describing my concerns about the loss of species that will result from
the Nam Theun 2 project due to flow disruption/elimination and the loss
of unique wetland habitat are overgeneralized and unclear.
Although the NTEC response acknowledges that "There will be a reduction
in wetland areas ." the response fails to recognize the importance
of scale in ecosystem conservation and dismisses the loss of 50% of the
wetland habitat as a minor consideration. The statement that "Those
existing species which are suited to low velocity flows are expected (emphasis
added) to flourish in the reservoir and those requiring higher velocities
may (emphasis added) migrate to tributary headwaters." clearly indicates
a high level of uncertainty and is totally unsubstantiated.
Mr.Iverach's comments on the water quality aspects of my review of the
EAMP are also overgeneralized and difficult to evaluate. One good example
is provided by his comments on nutrients. He limits his concerns about
nutrients to "levels" and totally neglects the importance of
the relative abundance of nutrients (e,g nutrient ratios) in estimating
the long term impacts of converting the lotic ecosystem to a reservoir.
He also neglects to consider the nutrients that are part of the microscopic
biomass in the river ecosystem( partially indicated by the chlorophyll
values in the EAMP) and the fact that the biomass is currently adapted
to low nutrient levels in a flowing water system.
All of these factors will be dramatically altered by the project and could
produce water quality degradation as described in my review. Mr. Iverach
states that "The reviewer would have profited by reading the complete
report on this matter prepared by the internationally respected Centre
for Water Research and referenced in our cover letter ." He seems
to imply that external reviewers merely have to read his consultant's reports
and agree with their results in order to be well informed. I do not question
the integrity of the Center for Water Research in my review, but I do feel
that the data used in the DYRESM-WQ and ELMO-WQ models is inadequate to
accurately predict the water quality of the proposed reservoir.
For example, the DYRESM-WQ model is designed for small to medium size reservoirs
as opposed to very large reservoirs like that planned for Nam Theun 2.
Inadequate data used in a model designed for a much larger scale reservoir
may not produce accurate predictions of water quality. DYRESM has been
tested on a number of lakes in Australia, but it's major evaluation and
development used data from the Wellington Reservoir in Australia which
is a small reservoir with a storage capacity of 185 million cubic meters
of water.
The Nam Theun 2 reservoir will have a storage capacity of 3180 million
cubic meters of water, more than 17 times that in the reservoir used to
develop the DYRESM model cited in the EAMP and NTEC reports( see references
8-10). As I stated in my review, I feel that more data is required for
an accurate prediction of the water quality changes that will occur with
the planned project. Apparently I am not alone in that belief since the
NTEC Nam Theun 2 Reservoir Sedimentation Risk Analysis Draft (July 18)
states " Data for the Nam Theun itself is rather scarce ,but there
is data for the Nam Ngum and other rivers in Laos." Models have their
limitations and adequate quantities of good quality data are essential
to achieve useful prediction. This is especially true with regard to spatial
scale, verification, and the typologies available for environmental impact
assessment (see references 11-13).
I also have reservations about using model outputs based on limited data
as the major decision tool in water quality assessments. In my opinion,
the data available in the EAMP indicates that the project can produce water
quality problems typical of large tropical impoundments, including DO losses
and nuisance blooms of toxic cyanobacteria( see references 14-15).
Finally, my concerns about the lack of consideration given to the cumulative
effects of the Nam Theun 2 project were not addressed by Mr. Iverach. The
increasing appropriation of freshwater resources by large scale dam projects
clearly requires new and innovative approaches to environmental assessment
and management. In my opinion, this is a major flaw in the EAMP and the
general approach outlined by NTEC. I remained convinced that the current
plans for the Nam Theun 2 project will produce large scale environmental
damage to the region, and lead to irreversible cultural and economic losses
that cannot be mitigated.
I will be happy to provide additional information and answer any questions
you may have about my comments.
Sincerely,
Guy R. Lanza
Professor and Director Environmental Sciences Program