5 years ago during the KASIKORNBANK Public Company Limited’s Annual General Meeting of Shareholders dated April 3, 2013, there was a shareholder questioning about the loan from KBank to Xaiyaburi Hydropower Project. Mr. Bantoon Lamsam, Chairman of the Board and Chief Executive Officer, explained that “the Xaiyaburi Hydropower Project hardly had any risk of getting paid and every Thai bank was so eager to support since it has gone through the decision-making process of international commission. Moreover, the Electricity Generating Authority of Thailand (EGAT) is the one who will purchase all the electricity from the project and Thailand needs this electricity, then no worry about the liquidation”.[1]

This explanation reflected 2 important bound issues: EGAT’s electricity purchase guarantee scheme in Xaiyaburi Hydropower Project and loan liquidation to the banks that jointly provided loan to this project. It is comparable to the tip of the iceberg that yet has gigantic backgrounds hidden under water and such backgrounds made Xaiyaburi Hydropower Project a risk-free investment.

October 29, 2019 will be marked as the 8th anniversary of Power Purchase Agreement (PPA) signing between EGAT and Xaiyaburi Power Company Limited. It will also be the day that Xaiyaburi Hydropower starts to commercially supply 1,220 MW of electricity to EGAT and the agreement will continue like this for 31 more years.[2] EGAT has guaranteed to buy totally 5,709 million units (kilowatt – hour) of electricity per year[3] which would cost 13,257 million baht annually. Throughout the agreement period, 31 years, the total amount would be 410,967 million baht and this number assures the creditors of Xaiyaburi Hydropower Project to not feel risky providing loans for this project.

At the same time, in 2019, there will also be 2 other hydropower projects in Lao PDR: Nam Ngiep and Xe Pian Xe-Namnoy Hydropower which will commercially generate electricity to EGAT under the same power purchase agreement as Xaiyaburi Dam. Both aforesaid projects will distribute 269 and 354 MW of electricity or 1,459 and 1,575 million units (kilowatt – hour) of energy charge per year respectively, these agreements will last 27 years.

From the year 2019 onwards, EGAT needs to purchase electricity under the ‘Take or Pay’ contract from those 3 hydropower projects; it is to say totally 8,743 million units (kilowatt – hour) per year or equal to 1,843 MW of generating capacity. Nonetheless, EGAT has invested in all 3 projects through their subsidiaries: in Xaiyaburi Project, Electricity Generating Public Company Limited (EGCO) holds 12.5 % of shares in Xaiyaburi Power Company Limited; in Nam Ngiep Project, EGAT International Company Limited (EAGTi) has 30% of shares in Nam Ngiep 1 Power Company Limited and in Xe Pian Xe-Namnoy Project, through Ratchaburi Electricity Generating Holding Public Company Limited (RATCH), it has 25% of shares in Xe Pian Xe-Namnoy Power Company Limited. Therefore, EGAT’s electricity purchase expenditure of approximately 13,257 million baht per year will be converted into EGAT’s income through their subsidiaries according to the proportion of its shares in each project. In form of “Borrow money, then give the lender a present” relationship, this became a part of projects’ security under the iceberg.

Looking back to the PPA approval process in 2010, the National Energy Policy Council (NEPC) had endorsed the draft tariff MoU of Xaiyaburi Hydropower Project between EGAT and CH. Karnchang PLC.[4] After that, the Cabinet had acknowledged such MoU on March 23, 2010 during the Power Development Plan (PDP) 2010 (2010-2030). The essence of the PPA as mentioned above stated that it will purchase electricity from overseas only 600 MW in 2019 and Xaiyaburi Dam was added in the 3rd version of the PDP 2010 in 2012. This addition happened after the PPA signing between EGAT and Xaiyaburi Power Company Limited on October 29, 2011 and the purchase of electricity from foreign countries was 2 times higher than the old PDP.

Although, the 3rd version of the PDP 2010 specified the abroad purchase 1,220 MW of electricity merely from Xaiyaburi Dam in 2019. But a year after, EGAT had signed other PPA of Xe Pian Xe-Namnoy and Na Ngiep Hydropower Projects respectively in February and August which will also commercially generate power in 2019. The 3 hydropower projects as mentioned had appeared in the PDP 2015 which was announced in June 2015. This PDP had designated the highest electricity demand of 2019 at 33,635 MW out of the total installed capacity at 54,921 MW with 36.6% as the minimum of backup power. However, when comparing the actual installed capacity of April this year (2018) which is 42,447.65 MW, the peak of electricity demand happened on April 24 at 28,338.10 MW[5], the minimum backup is still at 33% which is a very high level.

Consequently, the total generating capacity of these 3 dams in Lao PDR running into EGAT’s system in 2019 is 1,843 MW or about 12% of the backup power happened in March 2018.

The backup power remains in high level, even though the installed capacity is approximately 10,000 MW lower than planned because of several important mistakes. Firstly, the electricity demand forecast shown in the PDP is very misleading with regard to the reality and that causes a very high backup power which is a burden of the electric system.

Secondly, although the forecasting trend of the backup power is likely to increase as seen in the 3rd version of PDP 2010 (promulgated in June 2012), it anticipated that the backup power in 2019 will be 18.7% more than the old PDP 2010 which was only 15.1% and it mentioned merely Xaiyaburi Dam. But EGAT signed more PPA with Xe Pian Xe-Namnoy and Nam Ngiep Hydropower Projects in 2013, in spite of the fact that these projects are not in the 3rd version of the PDP 2010. As a result, it increased unnecessary backup power.

Thirdly, there has never been any public hearing or even public disclosure of the draft PPA between EGAT and any private companies (even if it was signed), people have no access to information and are unable to officially comment on any PPA.

Yet, with the structure of the PPA that EGAT tightly signed in the “Take or Pay” terms of contract, it helps concealing many mistakes beneath this iceberg. Only the above-water part showing as a guarantee that we together have to pay for the electricity approximately 13,257 million baht a year or about 410,967 million baht throughout the agreement period. In addition, some amounts of money will be converted to bank liquidation without any risks as the KBank’s CEO said earlier, other amounts of money also return to be EGAT’s revenues through the investment of its subsidiaries.

How long do we have to bear this whole iceberg burden?

Montree Chantawong

The Mekong Butterfly

June 13, 2018

[1] ‘KBank’ explained to shareholder, confident of ‘Xayaburi Dam’ without telling value of the loan, 2013-04-04  https://prachatai.com/journal/2013/04/46111

[2] CH. Karnchang PLC’s information regarding financial assistance to Xayaburi Power Company Limited dated May 16, 2016 http://ck.listedcompany.com/newsroom/160520162012220239T.pdf

[3] Divided into 4,299 million units (kilowatt – hour) of Primary Energy (PE) per year costing 2.542 baht and 1,410 million units (kilowatt – hour) of Secondary Energy (SE) per year costing 1.652 baht

[4] http://www.eppo.go.th/index.php/th/eppo-intranet/item/1282-nepc-abhisit130

[5] https://webcache.googleusercontent.com/search?q=cache:TKX8mvQnEd8J:https://www.egat.co.th/index.php%3Foption%3Dcom_content%26view%3Darticle%26id%3D348%26Itemid%3D116+&cd=1&hl=en&ct=clnk&gl=mm&client=firefox-b-ab

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