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Last Updated: Tuesday, 10 May, 2005, 08:52 GMT 09:52 UK
Banks put $1.6bn behind Laos dam
Two girls on a bike in southern Laos
Laos is a poor country of farmers, river fishermen and forest nomads
Global banks have backed a $1.6bn (842m) funding deal to build a controversial hydro-power dam in Laos, one of the world's poorest countries.

Disputes over whether the giant dam on the Nam Theun river should be built have been raging for 10 years.

Environmental groups object that the dam will destroy farm land, and disrupt fish stocks.

The banks' decision turns on the cash flow to build the power project, which is backed by the World Bank.

It agreed to $1bn-worth of loan guarantees last month, thereby throwing the switch for commercial funding to flow into the project, which is 35% owned by Electricite de France.

Development plan

The dam is the biggest foreign investment in Laos yet, a desperately poor country in the Mekong River valley whose people rely heavily on the river system for food and transport.

Pilot resettlement for the Nam Theun 2 dam project (photo: Nam Theun 2 hydroelectric project)
Life expectancy 59 years old
$320 per capita income
70% illiteracy
70% have less than $2 a day
40% of villages use slash and burn farming
40% of children malnourished
Source: World Bank

Electricity from the dam will be sold to neighbouring Thailand and produce revenues for Laos of nearly $2bn a year for 25 years, said the Nam Theun 2 Power Company (NTPC).

It said it had received loans from nine international banks and seven Thai banks.

The international lenders include two French banks - BNP Paribas, Societe General - and Standard Chartered, ANZ of Australia, and ING, Fortis, BOTM, Calyon and KBC.

The package consists of an initial $1.2bn to cover the costs of building the dam, as well as social and environmental work.

Part of the money will be used to resettle the 6,200 people whose homes are due to disappear under the 450 kilometre square reservoir created by the dam, and for environmental monitoring to protect the area's endangered elephants.

International agencies like the World Bank and Asian Development Bank view the dam as an integral part of Laos' strategy for economic growth.

The dam is expected to begin supplying electricity in 2009, said NTPC.

In addition to Electricite de France, the investors in the NTPC consortium include the Lao government and Thai firms.

Altogether, the deal raises $1bn in loan funding and a further $580m in a mix of bonds and equity, to create a contingency fund.

World Bank backs Laos dam project
01 Apr 05 |  Asia-Pacific
Southern Laos braces for change
16 Jun 04 |  Asia-Pacific

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