Greater Mekong Subregion - Nam Theun 2 Hydroelectric Project

Quality project sponsors are essential for success, but their limitations and country capacity constraints also need to be considered. The selection of a well-qualified developer as the primary equity holder in the NTPC consortium appears to have played a major role in the efficient construction and operation of the dam and power facilities with very modest cost and time overruns. Additionally, the government’s commitment as seen in its equity in NTPC (through Lao Holding State Enterprise) and the guarantees backstopped by the IFIs also provided an incentive for it to honor its obligations in such policy and regulatory aspects as permitting, clearances, and others. On the other hand, entrusting a power company with implementation of a complicated social and environmental development program may not have been the best option. Biodiversity conservation, as well as resettlement and livelihood restoration, are not engineering issues, and it is clear that NTPC was not a very appropriate institution to manage implementation of these programs by itself, especially given the country’s limited institutional capacity. This should have been more carefully considered during appraisal and in making institutional arrangements.