Nan Theun II hydropower project, Laos

The USD 1,3 billion Nam Theun 2 (NT2) hydropower project in central Laos displaced 6,200 indigenous peoples on the Nakai Plateau. More than 110,000 people downstream, who depend on the Xe Bang Fai and Nam Theun rivers for their livelihoods, have been directly affected by the project, due to destruction of fisheries, flooding of riverbank gardens and water quality problems

NT2 is being developed by the Nam Theun 2 Power Company Limited, which includes Electricité de France. In 2005, the World Bank and Asian Development Bank (ADB) approved loans and guarantees for NT2. With the World Bank and the ADB’s endorsement, other lenders – such as the EIB, the Nordic Investment Bank, various export credit agencies, Agence Française de Développement, and a number of private banks –financed NT2.

For its part, the EIB loaned the oppressive Lao government EUR 45 million for NT2 in 2005, relying largely on the World Bank’s social and environmental assessments of the project. And the EIB has justified its involvement on the basis of some highly ambitious claims, such as the project’s “high development impact”, its generation of “net environmental benefit for the region, improved living standards and economic development for the local population”, and that it will tackle “climate change and promote sustainable use of renewable natural resources.”

The dam was inaugurated in December 2010 while many issues remain unresolved. These include:

• Communities on the Nakai Plateau still have no means for a sustainable livelihood, threatening their long-term food security
• Tens of thousands of people living downstream along the Xe Bang Fai River have suffered poor water quality, diminished fisheries and flooding of their riverbank gardens, and the project’s funding is inadequate to restore their livelihoods
• The Nam Theun 2’s reservoir has opened up access to the Nakai-Nam Theun National Protected Area, exacerbating logging and poaching and threatening its ecological integrity
• Whilst the project was supposed to improve standards for hydropower development more generally in Laos, there is little evidence that this has happened.

The project has violated provisions of its Concession Agreement and the World Bank’s resettlement policies, and the sustainable livelihoods of people directly affected by the project are far from guaranteed. In March 2010, for example, full-scale power production commenced in violation of legal obligations, including providing downstream communities with adequate alternative water supplies and compensation for flooded gardens.

These, as well as ongoing uncertainties about how the project’s revenues can help the poor in a country where corruption, financial mismanagement and a lack of transparency are rife, point to the failure of the company, the Lao government, the EIB, and other project backers thus far. Major question remarks remain over the accountability of all parties.

Related links

• Facts Sheet Nam Theun 2 Hydropower Project: The Real Cost of a Controversial Dam by International Rivers
• On a wing and a prayer: A bird’s eye view on dams (cartoon)
• Raising the bar on big dams:
  making the case for dam policy reform at the European Investment Bank (report)