"We're expecting to conclude a study of the possibility of investing in both a lignite mine and a power plant in either the third or last quarter of this year," said managing director Charnchai Chiwaket. "Then we'll submit the loan proposal to financial institutions. We're looking for partners, and both Thai and foreign companies have expressed an interest. The Lao government will also be one of the shareholders."

He explained that the project study would consider the amount of lignite in the concession area, the production technology and the investment risk. The firm will also have to project the electricity price to be negotiated with the Electricity Generating Authority of Thailand as buyer.

"The difficulty of this project is that the investment in the mine and power plant will be conducted simultaneously. Hong Sa Lignite power plant is Laos' first project. At the same time the company has to be aware of environmental standards," Charnchai said.

"The location of this project is quite remote. The Lao government is also requiring very clear details of project development. The project has been talked about for a long time, but practical development was not started until the company received authority recently."

The lignite reserve in the area is expected to be 500-600 million tons. The quality is low with a thermal at 2,400-2,500 kilocalories per kilometre, compared with 6,500 kilocalories per kilometre for coal found in Australia by BLPC Power.

"Beyond the quality of the lignite, a power plant needs to be located in the same area in order to lower transportation costs," Charnchai said.

There will be three Hong Sa Lignite power plants, producing 1,800 megawatts. The firm expects construction to take place over four years. The electricity produced from this plant will be sent to the distribution system at Mae Mo, in Lampang province.

Charnchai said that the Hong Sa lignite power plant would help stabilise the electricity system in Laos, which has one hydropower plant and whose production capacity depends on the periodic flow of water.

"Hong Sa Lignite power plants can be operated consistently," Charnchai said. "The price of lignite won't fluctuate with global prices as there's no need to buy the lignite from elsewhere."

Banpu Power signed its agreement with the Lao government last December 18. It has been granted the authority to study and develop the mine and power-plant project in Tambon Hong Sa of Chai Buri district in Laos.

This is part of a project by which the Thai and Lao governments signed an agreement to trade electricity from 3,000 megawatts to 5,000MW by 2015, in order to support electricity consumption in both Thailand and Laos.