Laos hikes price amid rising costs

Saiprasert Pimsupa, chief of the energy development department of the Laos Ministry of Energy and Mines, said the new price was proposed to Thailand on the sidelines of the Asean Energy Ministers Meeting. This is the price for power from four hydropower plants in Laos - Nam Ngieb, Nam Thuen 1, Nam Ngum 3 and Nam U.

He cited higher oil prices, which pushed up the construction and financial costs by 25-30 per cent, for the revision. Without an increase in the purchase price, the concessionaires could not complete the projects, which are of importance to both countries. The rising cost will delay the power delivery by one year from the original schedule.

"Laos has set the power rate at no less than $0.07 per unit to maintain the internal rate of return at 10-12 per cent. Without our participation, the rate could be over $0.08 per unit," he said.

The Laos government has commissioned British adviser PB Power to set the new price, taking into account the construction costs. It was concluded that at the original price, concessionaires would suffer losses.

Under the memoranda of understanding, Laos agreed to sell power from Nam Ngum 3 and Nam Thuen 1 at 5.34 cent per unit, Nam Ngieb 1 at 5.57 cent, and Nam U at 6.1415 cent. Then, it was agreed that the first two projects would start supplying power in 2014 while power supply from Nam Ngieb 1 and Nam U would start in 2015 and 2016, respectively.

Sino Hidro, the major partner of the consortium to develop Nam U, is now under negotiation with the Electricity Generating Authority of Thailand and Ratchaburi Electricity Generating Holding for equity participation.

Meanwhile, the price for power from Hongsa Lignite project remains unchanged at 6.0289 cents per unit. The power would be delivered from 2013.

Thailand has struck a deal with Laos for the purchase of 7,000 megawatts, and so far negotiations have involved the supply of 5,000MW. Recently, Laos offered to supply 250MW from the Don Sahong project, whose concession has been given to a Malaysian contractor. It is expected that Laos would offer to sell 300MW from the Sepian project of Korea-based SK Engineering and Construction.