NAM THEUN 2 HYDROELECTRIC PROJECT

The project concerns the development, construction and operation of a hydroelectric plant on the Nam Theun River in Laos, mainly intended for the export of power to Thailand. It will be carried out on a Build-Own-Operate-Transfer basis, under a 25-year concession, by a consortium of experienced companies.

The project is a major undertaking for the Lao PDR and can improve considerably the economic outlook of the country.

Financing of the supply of technology and equipment.

As to its economic objectives, the project offers the opportunity to produce a significant amount of cost-efficient renewable energy in the region. Most of it would meet increasing electricity demand in Thailand, for which the project would also contribute to the stability of the electricity supply system.

For Laos, the project represents currently the best single-largest option to contribute to sustainable social and economic development, and the first real prospect to reduce the country's dependence on Official Development Assistance. (The other main option is export of tropical timber, but this option has been rejected as being unsustainable over the long run and severely environmentally degrading).

The project is expected to generate substantial revenues for Laos: it will be by far the largest single contributor to GDP and to the GoL's fiscal revenues, and the largest single source of foreign exchange. Appropriate mechanisms are being designed by the Government of Laos and the project financiers to ensure that the revenues of the project help to reduce poverty, sustain development, and improve the environment.

In the project area, the project is expected to allow a significant improvement of living standards for the impacted population.

The potential environmental, social and economic impacts of the project have been subject to a series of thorough assessments and evaluations, including public participation, in line with the requirements of the concession agreement and with World Bank policies. The project provides for important measures to mitigate or compensate its social and environmental impacts.

The Bank is conducting its due diligence to ensure that the final EIA and the proposed mitigating measures apply appropriate technologies and comply with EU environmental and social policies as well as national requirements.

Also, it will ensure that the project is in line with the Bank's policies on sustainable development and, in particular, climate change. In that regard, the project offers the opportunity to supply large amounts of renewable power on a continuous basis (not requiring subsidies) for export to the growing and energy-needing economy of Thailand. It would thereby avoid thermal generation and the associated emissions of greenhouse gasses and other air pollutants in Thailand.

In the project area, the project is expected to support the long-term protection of the watershed and its 4,000 km2 primary forest.

• Non Technical Summary (NTS) of the Environmental Impact Assessment (EIA)

Negociated procedure, with some sub-contracts internationally tendered.