Sunday, February 24, 2013

Chinese Dams in Cambodia - Lower Sesan 2 Dam (various reporting)

Lawmakers Approve Lower Sesan 2 Dam
By Kuch Naren, The Cambodian Daily (February 18, 2013)

The National Assembly approved the financing of a 400-megawatt dam in
Stung Treng province on Friday, giving the project the green light in
spite of objections from opposition lawmakers who argued that the
so�cial and environmental impacts outweigh the project's benefits.

After four hours of debate by opposition SRP lawmakers, 82 out of 90
lawmakers voted in favor of moving ahead with the Lower Sesan 2 dam�a
controversial hydropower plant that will be located at the confluence of
the Sesan and Srepok rivers.

It is set to displace more than 5,000 villagers, and studies have shown
that up to 100,000 residents upstream and downstream of the dam will be
severely affected by its impact on the rivers' fisheries.

"There is no transparency in almost all of the government's hy�dropower
dam projects and coal plant construction projects because public bidding
is never done," said SRP lawmaker Son Chhay, who voted against the law.

"[The National Assembly] should not approve the law and a new thorough
study and research for the impacts of the project should be conducted,"
he continued.

Documents presented on Fri�day supporting the law de�tailed the costs of
the dam's construction, the cost of electricity sold to state-owned
utility Elec�tri�cite du Cambodge, and the resettlement of almost 800
affected families in Sesan district.

The law also guarantees that in the event that the $781 million project
should fail, the government would grant a bailout to the company, owned
by local conglomerate Royal Group in collaboration with China's
Hydrolancang Inter�national Energy Co. Ltd.

Before the law passage, Mr. Chhay also pointed out the discrepancies
between the law and a 2009 environmental impact assessment commissioned
by then-majority shareholder EVNI. While it was originally estimated
that 1,052 families would be impacted, the new law only factors in
compensation for 797 families.

In addition, the project was originally slated to cost about $500
million under a 35-year Build-Operate-Transfer (BOT) model; the project
now costs $871 million and is under a 45-year BOT.

Mr. Chhay added that past experience showed that companies often cleared
forest areas outside the designated reservoir and in this case could
have bad consequences for the forests of Stung Treng and Ratanakkiri

The luxury wood from these forests will bring a great profit to the
company, SRP lawmaker Yim Sovann said after the passage of the law.

"When it comes to clearing trees for the dam reservoir, we have seen
that the forests outside of the dam reservoir in the Stung Tatai dam [in
Koh Kong province] were destroyed," Mr. Chhay said.

Energy Minister Suy Sem, who de�fended the law during the de�bate,
argued that thorough studies have found fewer villagers than previously
believed would be affected and that the project would generate cheaper
energy for the country.

"For planned construction of the Lower Sesan 2 dam, two impact
assessments have been conducted already and a number of thorough debates
have been made," Mr. Sem said. "We are not careless, and we are not
hurting people."

However, villagers living in Srekor commune, inside the designated
reservoir area, reiterated yesterday that they had not been con�sulted.
Puth Khoeun, 35, la�mented the law's passage and said the entire process
had lacked transparency.

"I want to say that the government does not own the river. The river is
for all," said Mr. Khoeun. "We are the villagers most affected by the
dam and this development comes without any of our direct involvement to
discuss the impacts."

"This project should have been suspended. This will stir a big an�ger
among the affected families," he added.

Royal Group chairman Kith Meng declined to comment. "Please talk to the
ministries," he said.

Mr. Sem gave no details on when the clearing of land or the dam
construction will begin, but said that the project should be completed
by 2017.

(Additional reporting by Dene-Hern Chen)


Regional Bank, IMF Note Risks to Government's Dam Guarantee
By Dene-Hern Chen and Kuch Naren, The Cambodian Daily (February 22, 2013)


The government's guaranteed bailout of major infrastructure projects,
such as the future 400-megawatt hydropower dam in Stung Treng province,
requires a thorough assessment of forecasted risks�a capability which
the government currently does not possess, an Asian Development Bank
(ADB) official said on Wednesday.

Speaking on the sidelines of the 2013 Cambodia Outlook conference in
Phnom Penh, Eric Sidg�wick, country director of ADB, de�clined to
comment directly on the $781 million Lower Sesan 2 dam, but said that in
regards to public-private partnership projects, he would advise for the
government to start small in terms of projects and risks.

"A risk management unit is a fairly advanced unit that is staffed with
people who know how to do that, and I don't think [Cam�bo�dia] has that
staff in the government yet," Mr. Sidgwick said.

As for guaranteed payments on multimillion-dollar projects undertaken
with private partners, the government must be able to forecast the
future risks of a project, or its contingent liabilities, he said.

"Over time, it must not end up being a constraint for the government,"
Mr. Sidgwick said.

"You need good information on what the contingent liabilities are and
what the terms are so that the government can factor in over a long
period of time what its financial position is in any point in time," he

"If all these guarantees were recalled at the same time, what would be
the implications? It's unlikely to happen, but the government should
know what would be the implication of that."

Under the contract between the government and the two companies
responsible for the Lower Sesan 2 dam, local businessman Kith Meng's
Royal Group and China's Hydrolancang Interna�tional Energy Co. Ltd.,
Cambodia promises to provide a financial bailout in the event that the
project should fail for "political" reasons, or if Electricite du
Cambodge is unable to pay for the electricity the dam generates during
the 45 years that the two companies will operate the facility. After 45
years, ownership of the dam reverts to state ownership.

CPP lawmaker Cheam Yeap vigorously defended the government's guarantee,
saying that it helps to build the confidence of investors and that it is
typical in such a project.

Explaining the guarantee's reference to "political force majeure," Mr.
Yeap said the term re�ferred to a future "political deadlock," war, or
"national chaos." He also said the guarantee stipulated that future
governments could not change the terms of the contract with Royal Group,
a company with no experience in hydropower and which did not have to
competitively bid for the contract, and China's Hydrolancang.

"The government bodies from the top to the lower level have worked with
all relevant ministries and the [Council for the Development of
Cambodia] to review all impacts before handing the biggest energy
project to Roy�al Group to do the construction," Mr. Yeap added.

Mr. Meng was in attendance at Wednesday's conference, which was
co-sponsored by another of his partnerships, ANZ Royal Bank, but he
declined to comment on the government's dam guarantee.

Asked about the IMF's position on the government's guarantee, IMF
Resident Representative Faisal Ahmed, a speaker at the conference,
declined to comment and referred instead to a 2012 IMF report on
Cambodia's debt sustainability and economic performance.

In that report, the IMF singled out the government's energy generation
expansion as an area where liabilities are not being fully considered in
light of the government's rapid push for power and their "conservative
forecasting scenarios" when providing "take-or-pay guarantees."

�However, the sheer size of these projects, and the fact that risks for
complex infrastructure projects are difficult to quantify [before the
event] call for continuous and careful monitoring, as they could
severely curtail the fiscal room for maneuver, in particular in the
event of adverse economic shocks,� the IMF said.

Transparency in terms of liabilities, as well as a competitive bidding
process for such projects, would help alleviate these risks to
government, the IMF said.

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