EXCLUSIVE: Power purchase deals for controversial Luang Prabang and Pak Lay dams signed, paving way for large-scale construction on the Lower Mekong_ and impacts

Power purchase agreements for the Luang Prabang and Pak Lay dams have been officially signed and the work on the ground is rapidly advancing. Concerns over the dam impacts now are looming large over the lower Mekong region for fears that the mega-infrastructure would disrupt the Mekong’s ecosystems and people’s livelihoods

A high-ranking source close to power purchase agreement matters at the Electricity Generating Authority of Thailand (EGAT) has confirmed to Bangkok Tribune that the Power Purchase Agreement (PPA) for the Luang Prabang dam project, most feared of having impacts on the World Heritage Site of Luang Prabang in Lao PDR, was approved in early November last year whereas the latest data from the US-based Mekong Dam Monitor shows work on the ground has gone far beyond the preliminary work.

The source said the agreement was signed on November 7 last year and that means the dam developers can now go ahead with the next steps including loan-securing. They, however, have to follow the conditions set under the agreement, the source said but declined to elaborate further.

“The signing means the agreement is completed. They can now proceed with the dam construction plan but have to follow the conditions set under the agreement as well,” said the source.

This information has also been confirmed by a member of the parliamentary standing committee on economic development, who had examined the project and was told that the power purchase agreement of the dam was already approved on the same date. 

The MP source was further told by EGAT’s representatives in mid-last month that it had not yet signed the other two agreements for the Pak Beng and Pak Lay dam projects planned consecutively on the same lower section of the Mekong River in Lao PDR. Their PPA signing process was endorsed by the government in mid-last year. (Read: Mekong residents and local agencies left in the dark about Pak Beng dam on the Lower Mekong)

The MP was told that the agency had been waiting for other related contracts that accompany the main agreements as they were not quite ready. The draft agreements, however, have been examined by the Office of Attorney General already, the MP source was told.

It was not until March 20 that the MP source and the public learned about the latest progress of the Pak Lay dam. Its PPA too has been signed by EGAT and the dam developers (Read more below). The signing was dated as Mar 20, the same day that Prime Minister Prayut Chan-o-cha declared dissolving the House.

“Again, we were not informed about anything but then learned about this progress from our contacts. As the House has been dissolved, it would be hard for us to follow up on the issue in the meantime,” said the MP source.

The progress on the ground

The confirmation comes amid the swift progress on the ground as the construction work has gone far beyond what has been learned by the public.

The Radio Free Asia (RFA) reported just late December last year as informed by its source in Laos that preliminary work for construction of the Luang Prabang dam had begun, with the paving of access roads and clearing of a dam building site. However, the news agency was informed that the PPA for the dam had not been signed yet, and workers could only dig out the project area and pave an access road while waiting for the PPA.

In March 2021, Xinhua reported on the progress of the Luang Prabang project and that its preparatory work was already 80 per cent completed. Among the preparatory work was the construction of an 11-km access road, a 500-metre bridge over the Mekong River, three temporary ports, as well as some transmission lines and a small electricity station.

About 69 per cent of compensation payments to people who had to give up their land or other property to the project were also already made at that time, according to Xinhua.

Bangkok Tribune in mid-January had a chance to visit the dam construction site in Luang Prabang in Laos and captured on camera the large-scale preparation and construction work (See: Dying Mekong). It also discovered some groundwork being undertaken by the river, which has recently been confirmed by the US-based Mekong Dam Monitor (MDM) through its satellite data that it’s a coffer dam. 

The dam, which is for creating space to lay the foundations of the main dam, is now complete and there was no groundbreaking ceremony held for this dam project, the organisation noted, suggesting that the construction of the dam is now going forward in full swing.

Stimson Center Southeast Asia Program Director Brian Eyler explained to Bangkok Tribune via an email that typically when a major dam begins construction in Laos, the developers and government officials gather to celebrate the commencement of the project as a kind of milestone achievement that bolsters the reputation of individuals involved with the dam. 

The Luang Prabang dam, however, is shrouded in controversy given several active petitions against it and an ongoing investigation by UNESCO in regard to the dam’s impact to the Luang Prabang World Heritage site downstream from the dam. 

“The government of Laos and the developer CK Power likely wanted to avoid the negative attention that a groundbreaking ceremony could bring. This lack of transparency unfortunately is becoming more common around dams in Laos,” remarked Mr. Eyler. He gave an example of the Don Sahong Dam, which is apparently undergoing a major expansion and the Sekong A Dam in southern Laos which was discussed publicly for the first time just over a week ago by the MRC even though it’s been under construction since late 2020. 

“Given numerous active campaigns which oppose the Luang Prabang Dam, a groundbreaking ceremony would have signalled the status of the dam’s progress to those campaigners so they can recalibrate their efforts,” remarked Mr. Eyler.

Through the satellite imagery from Planet Labs, it shows that the coffer dam is complete and the foundations of the main dam are being excavated, Mr. Eyler confirmed. 

“You can see the coffer dam jutting out into the river with its hard angles, and the dark lines inside the coffer dam area are where trucks and diggers are digging down into the now dry riverbed,” said Mr. Eyler. 

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As explained by Mr. Eyler, a coffer dam is a temporary structure that blocks off a section of the river to create space for a dam to be built. The river is then diverted around the coffer dam and space inside the coffer dam dries out so the main dam structure can be built. When the main dam structure is finished, the coffer dam is demolished to allow water to be blocked by the main dam or pass through its spill gates and power generation apparatus. 

Mr. Eyler made a remark when asked about his organisation’s projection over the work progress of the LP dam, saying mainstream Mekong dams are the most studied in terms of their impacts to the downstream, and generally they are the most impactful to fisheries and agricultural production because they block the river’s core passageway for fish migration and sediment flow. 

The Luang Prabang dam, he said, has mitigation features like fish passages and sediment flushing gates to facilitate flow, but these features are unproven in major tropical rivers like the Mekong and simply do not work the way they are expected to work. 

The Luang Prabang dam and the Xayaburi dam, he added, will have little effect on river regulation because of the way they are built as the famous Mekong flood pulse is able to move through those dams. It’s the large dams in China and major tributary dams in Laos, Vietnam, Thailand, and Cambodia which reduce the flood pulse’s benefits during the dry season.

However, Luang Prabang and Xayaburi have compounding and cumulative effects on fisheries as the Mekong has a tremendous variety of migratory fish, which move through this part of the river system in huge masses, Mr. Eyler noted.

“Let’s imagine a scenario of 100 fish migrating upstream through the Xayaburi dam’s and Luang Prabang dam’s fish passage structures. If half of the fish make it through the structures, only 25 are left after they clear the Luang Prabang Dam. 50% success rate for a fish passage is extremely high. Success rates for Xayaburi’s fish passage are unknown and unpublished four years after the dam became operational likely because the results are not good.

“(I think) more transparency is needed from the Government of Laos to communicate the status of dam construction and progress. Of course, the science shows that mainstream Mekong dams are a really bad idea,” remarked Mr. Eyler.

The Heritage Impact Assessment

The Luang Prabang dam is among the 11 dam projects planned on the lower section of the Mekong River and the fifth project that was put forward to the Mekong River Commission’s prior consultation in October 2019. Under the MRC’s procedures, any infrastructural project “using the mainstream water during the dry season within the same basin”, as well as “during the wet season between two basins”, must undergo the prior consultation process. 

Applicable projects include large-scale irrigation and hydropower development which may cause significant impacts on the environment, water flow and quality of the Mekong mainstream. The first project undertaking this procedure was the Xayaburi dam, of which the preliminary work was found to have gone forward despite its ongoing prior consultation.

The procedure was later interpreted to the public by the MRC that it is aimed to allow concerned parties to agree on “how the consulted case should proceed”, and therefore is not meant to approve or disapprove the proposed project.

According to the MRC, the Luang Prabang dam was first developed by the Luang Prabang Power Company Limited, a company established by the Lao government and PetroVietnam Power Corporation under their 2007 MOU.

Located around 25 km north of Luang Prabang town, the project will have an installed capacity of 1,460 MW, generating power set to be sold to Thailand from 2027 onwards, the MRC cited information in the notification documents submitted to it.

During the wrap-up session of the prior consultation of the project, which ended in June 2020, it was reported that Thailand, Cambodia, and Viet Nam had requested Laos to conduct “rigorous” transboundary impact assessments and enhance proposed measures to mitigate potential adverse impacts from this proposed dam.

While appreciating the Lao government’s submission of the project for prior consultation and its cooperation, and recognising Lao’s sovereignty and rights in deciding the dam development, they had requested that Laos take “due account” of their recommendations outlined in their Official Reply Form, the MRC noted.

For instance, Cambodia called for further transboundary environmental impact assessments to be conducted, considering proper and effective mitigation plans and measures. And Vietnam said; “The cumulative impacts of the Luang Prabang Hydropower Project and all the Mekong mainstream hydropower projects should be comprehensively assessed.” Thailand, meanwhile, said; “There is a proposal to Lao PDR and project developer to establish an Endowment Fund and determine transboundary impact mitigation measures in terms of socio-economic, livelihood and environment.”

The stunning view of Luang Prabang Town’s sunset attracts tourists from afar.
Photos: S. Chuen

In early March 2021, RFA reported that UNESCO requested a more detailed social impact assessment for the project for fear that the potential impacts of the dam could put Laos’ World Heritage Site of Luang Prabang town at risk. It did not accept the first SIA submitted. 

The UN’s cultural promotion addressed the town as “an outstanding example of the fusion of traditional architecture and Lao urban structures with those built by the European colonial authorities in the 19th and 20th centuries.” It just celebrated its 25th anniversary as a World Heritage Site in 2020.

UNESCO World Heritage Center’s Director, Dr. Mechtild Rossler, told the news agency that the organisation was informed in March 2020 about the planned project.

Although it would be outside the World Heritage Site, Dr. Rossler said it was quite close to the site. And as the MRC expressed concerns about dam security and safety standards, the organization hence also looked into that question.

“For us, the question is if there is any impact on the outstanding universal value of the World Heritage Site,” Dr. Rossler was quoted by the news agency as saying while giving some examples including possible man-made disasters that could pose threats to the town and population there.

Dr. Rossler also told the news agency that the organisation had written to the Laos government, asking for an assessment of possible impacts on the heritage and risk analysis.

She also told Bangkok Tribune and its collaborative news agency, the Third Pole, ahead of the extended 44th session of the World Heritage Committee in mid-July 2021 that the property had been subject to a number of World Heritage Committee decisions on its state of conservation since 1996. And in 2020, the Secretariat of the World Heritage Convention (WHC) also requested Laos to submit a state of conservation report.

By signing the WHC, countries pledge “not to take any deliberate measures which might directly or indirectly damage the natural and cultural heritage” of a site and to “ensure the protection and conservation of their Outstanding Universal Value and other heritage values.”

Following UNESCO’s call, the Lao government agreed to conduct the Heritage Impact Assessment (HIA). But a UNESCO source at that time said; “The exact scope of impacts will not be known until the HIA is conducted, but various concerns have been raised by various experts so far. Potential risks on the World Heritage site need to be taken into account as any impacts on this site could be irreversible.” 

The source also added that the dam would likely have impacts on the town’s Outstanding Universal Value given the information provided by the technical review of the project prepared by the MRC.

Should a World Heritage property deteriorate to the extent that it has lost those characteristics which determined its inclusion on the World Heritage List, the WHC states, WHC can decide to delete the property from the list. At least two well-known sites have been completely struck from the listing; Oman’s Arabian Oryx Sanctuary and the Dresden Elbe Valley in Germany, according to the source.

UNESCO had ever told the Laos government’s natural resources and environmental management officials that the buffer zone or no-large development zone should be at least 20 kilometres away from the World Heritage Site. Any development should also not generate loud noises, smells, air pollution, or any other disturbances to the residents of Luang Prabang, RFA quoted one of the officials in the town as saying. The same official said that if those rules and regulations were not met, UNESCO could revoke the city’s status as a World Heritage Site.

Following the WHC’s extended 44th session, the WHC had issued a decision, recommending the Lao government halt construction activities until it has undertaken the HIA alongside other measures and emergency preparedness plan and submitted them to the World Heritage Centre for review. 

The HIA, in particular, should be carried out in conformity with the ICOMOS guidelines, including the potential impact of the dam on the heritage site and its OUV with a risk analysis of the potential impacts, including those of natural flooding of the Mekong river, taking into consideration the findings of the 2019 environmental and social Impact Assessment, as well as identifying whether and how mitigation measures are required and how they might be implemented.

In late December last year, RFA reported that officials from the Ministry of Natural Resources and the Environment were still collecting information for the HIA report and do not yet know when they will finish it.

The villagers’ plights

Kham Sorn (real name withheld) sits in front of his new house in the newly constructed village of Houygno in the middle of nowhere far away from the river that once was close to her old village, weaving a fishing net.

Like several villagers in the areas around the dam site, they are still pursuing their traditional livelihoods, not knowing what to do next with their living. For instance, they still keep weaving fishing nets, but have no idea how to go fishing as their new village now is located far from the river. The nets, they said, will be use for their new fences, instead.

Social impact assessments and mitigation are among the most challenging and inaccessible tasks for external monitoring as it’s much about the internal affairs of Laos. 

As lately reported by the RFA in late December last year, more than 2,130 families in 23 villages would be relocated from Luang Prabang and Xayabury provinces. The news agency reported that concerned officials in Laos at that time discussed the project’s impacts on the livelihoods of villagers, who have lost land and who will be resettled, including those living in Chomphet district in Luang Prabang province, Hongsa district in Xayabury province, and Nga district in Oudomxay province.

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Some concerned officials had told the news agency in mid-2020, shortly after the prior consultation of the project was passed, that the relocation plan was already being prepared, and as soon as the PPA was signed, the relocation would begin.

As interviewed by the same agency in early 2021, some residents voiced their concerns and opposition to the project. Cited by the RFA, one resident told it; “We’re concerned about our safety because the dam is too close to the city.” Another resident said; “Most of us don’t want the dams, but we dare not speak out against them because they are government projects.” The third resident told the RFA that there was substantial worry over the uncertainty over where those displaced by the project will settle.

“Most of us don’t want to move to another location because it would be more difficult for us to make a living. We might not be able to operate our boat taxis, and we don’t know anything about compensation yet,” the resident was quoted as saying.

In mid-February this year, the RFA reported about the latest progress over the issue, focusing on complaints about the location of new homes and resettlement villages by the villagers in Oudomxay Province’s Nga District. They demanded for more compensation, saying flooding from the dam will wipe out their farmland, according to the RFA.

As learned by the news agency, for instance, the offering compensation rate for a hectare of residential and farmland there is 30 million kips (US$1,780), but the villagers want about 150 million kips (US$8,900) per hectare. Concerned officials told the news agency that they were working out the issue for the villagers there. 

Laos News Agency reported at almost the same time that the Luang Prabang dam project is expected to be completed in 2030, the Ministry of Energy and Mines and Luang Prabang province told a recent conference on the speeding up of the project. As checked by Bangkok Tribune on EGAT’s schedules, the project’s Scheduled Commercial Operations Date (SCOD) is set for January 2030.

As noted in the National Energy Policy Committee’s resolution last June, the project is developed by the Luang Prabang Power Co., Ltd., a consortium of CK Power Public Co., Ltd. (42%), PT (Sole) Co., Ltd. (38%), Petro Vietnam Power Corporation (10%) and Ch. Karnchang Public Co., Ltd. (10%). And the LPP company is registered in Laos.

Pak Lay Dam

Almost five months after the Luang Prabang dam’s PPA was signed, the agreement of the 770-MW Pak Lay dam project then followed. According to the same source at EGAT, she has confirmed to Bangkok Tribune that the PPA for the Pak Lay dam project was signed on March 20 by EGAT and the dam developers. As such, they can now go ahead with the next steps including loan securing. 

The source further said that the draft PPA for the Pak Beng dam project is also ready for signing as it’s been through the OAG’s examination already, and the agency is now waiting for the developers’ readiness to enter the process.

As reported by Gulf Energy Development Public Company Limited to the Stock Exchange of Thailand through its official notification dated on March 20, Pak Lay Power Company Limited, cited as a joint venture company in which the company holds 40% equity stake and SHK holds 60% equity stake, has entered into a Power Purchase Agreement with EGAT for a period of 29 years from the commercial operation date, which is scheduled on January 1, 2032.

The investment in the project, the company noted, marks its first step in entering the hydroelectric power market in Lao PDR, and is aligned with the company’s strategy to increase its investments in the renewable energy business, to reduce greenhouse gas emissions and move towards Net Zero Emissions.

“The Project is a run-of-the-river hydroelectric power plant that uses the natural flow rate of water in the Mekong River to generate electricity, with no large reservoir and no water diverting from the Mekong River, resulting in the equal amount of water inflow and water outflow. Therefore, there will be no impact on the water volume in the Mekong River,” said Gulf in the notification.

Mr. Eyler, however, views the otherwise, citing possible impacts on the Mekong ecosystems, still.

Mr. Eyler said the Pak Lay dam will effectively negate any fish passage mitigation efforts at the Xayaburi and Luang Prabang dams. This is because this kind of mitigation infrastructure into a cascade of dams located relatively close to each other reduces the effectiveness of that mitigation. Pak Lay is located downstream of these two dams and Pak Lay’s fish passage is likely useless. 

This means the hundreds of millions of dollars invested in state-of-the-art fish passages at Xayaburi and Luang Prabang is a huge waste of money and of course most of the fish in this part of the river system will die out, he said.

“But importantly, the fish passage at Pak Lay as currently proposed is far below the standard of the Xayaburi and Luang Prabang fish passage design, so the success rate at Pak Lay will be much much lower than at Xayaburi and Luang Prabang,” said Mr. Eyler.

This special report is part of the Environmental Challenges in Recent Times series.