huge windfall expected from hydro project

Ch Karnchang expects to reap windfalls from the Xayaburi hydropower plant in Laos for years, as the Bt90-billion project will entail construction work worth more than Bt80 billion.

"As the construction will span through a period of six or seven years, this will guarantee revenue of more than Bt10 billion a year to the company," said Plew Trivisvavet, president and chief executive officer.

Ch Karnchang on Tuesday signed a development contract with the Lao government to develop the 1,260MW plant. The project, which is three times bigger than the Nam Ngum Dam, is a "run-of-river" dam development scheme in Xayaburi province.

In May 2007, the Thai company signed a memorandum of understanding with the government to conduct a survey and feasibility study of the project.

The feasibility study proved that the project was financially feasible.

Under the new contract, the company will conduct further studies and prepare project details for up to two years.

Then the concession and construction contracts, and related contracts, will be executed.

In this regard, the company will be granted the right to operate the project for 27 years, with the additional right to extend such a period twice for five years each.

Aside from the revenue from construction, Ch Karnchang also looks to increase dividend income from the new project.

The power plant will be another investment project for the firm in Laos, after the 615MW, Bt31.6-billion Nam Ngum 2 project, which is invested through a 38 per cent-owned subsidiary, SouthEast Asia Energy.

Now 70 per cent completed, the plant is expected to generate power and income starting in late 2010.

Plew said a new company would also be set up for the Xayaburi project. Ch Karnchang will hold 25 to 30 per cent in the venture while the rest will be shared with partners.

The project will supply 90 per cent of its output to the Electricity Generating Authority of Thailand and reserve 10 per cent of output for local consumption.

Though the Energy Ministry may revise the national Power Development Plan to be more in line with lower economic growth and lower power demand, Plew said it would not affect the company's investment in hydropower projects.

He added that Thailand was in dire need of new power supply, particularly from projects that rely on clean and stable sources - like hydropower.

"Now that the generating cost is cheaper than that of gas-fired plants with stable generating capacity, Thailand is ready to buy up all output from hydropower plants.