Nam Theun 2 Project in Lao PDR; Project Financing Completed With Signing of IDA Guarantee, Other Agreements

May 3, 2005

Hong Kong, May 3, 2005—The World Bank’s International Development Association (IDA), together with other public and private lenders and guarantors, today signed the remaining financing agreements for the Nam Theun 2 (NT2) Hydroelectric Project in Lao PDR. In addition, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, has agreed to provide up to US$200 million in guarantee coverage, protecting the project sponsor and private commercial lenders against potential political risks associated with the project. The project, for which the base cost is US$1.25 billion, will allow Lao PDR, one of Asia’s poorest countries, to earn revenues for poverty reduction and environmental conservation programs.

The World Bank’s IDA is supporting NT2 with a US$20 million grant to finance the Government of Lao PDR’s equity in the Nam Theun 2 Power Company (NTPC), which will build and operate the hydroelectric facility and undertake social and environmental safeguard measures, as well as a US$50 million guarantee to lower the project’s risk profile for commercial lenders.

Representing the Government at the signing of the IDA Guarantee Agreement and the NT2 Project Agreement, Dr. Somboune Manolom, Permanent Secretary of the Lao Ministry of Industry and Handicrafts, said the Government of Lao PDR was "pleased to formalize our ongoing commitment to ensuring that implementation of the NT2 project adheres to the criteria laid out in the World Bank's Decision Framework, particularly in respect of the continued involvement of local communities, mitigation of social and environmental risks, regular communication with international stakeholders, and the need to ensure that revenues from the project are transparently managed and directed towards priority poverty-reduction and environmental programs."

World Bank Country Director Ian C. Porter noted that "we are bringing our support for the financing of NT2 after years of careful study, preparation, and discussion. These have resulted in robust arrangements being put in place for managing the project revenues so that these are used for the benefit of the poor and the environment, for ensuring that its social and environmental impacts are fully addressed, and for engaging local communities and other stakeholders in the process." He added, "The World Bank is committed to the sound implementation of these agreements, and will remain engaged to this end."

The IDA Guarantee Agreement signed today backstops limited Government of Lao PDR obligations under the Concession Agreement with NTPC. The NT2 Project Agreement, also signed today, confirms the obligations of NTPC and its partners with respect to the technical, social, and environmental aspects of the project. The financing agreements will allow NTPC to borrow up to US$1 billion in debt financing to undertake the project, including environmental and social mitigation measures, costs associated with unanticipated impacts, as well as external monitoring and evaluation arrangements. NTPC has also committed an additional US$200 million in contingency financing.

NTPC Chief Executive Officer Bernard Tribollet reiterated that the signing of the agreements signalled NTPC's "commitment to full compliance with the NT2 social and environmental risk-mitigation plans, studied and prepared over 10 years, in accordance with the discipline required by our shareholders and financing partners, including the multilateral development banks."


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