Laos power plant misses jumbo payout
By Beaumont Smith



SAYABOURY, Laos - The wildly successful Sayaboury Elephant Festival, held this year in the village of Hongsa, attracted more than 80,000 visitors, some elegantly attired, some dreadlocked ganja-inspired, despite the event's remote location in northwestern Laos. The 70 or so jumbos were by turns applauded, photographed and simply adored as they dipped like divas.

Behind the scenes, women in traditional skirts took money from thirsty visitors, sticking wads of kip, the local currency, into capacious pockets. It was the sort of tourism that gains international plaudits, with money going directly into the hands of

the villagers. The event, this year's was the third, is now one of Laos' biggest tourism-related money spinners.

So why then did authorities recently give the final go-ahead to a Thailand-invested lignite mine and power station to be built only five-to-seven kilometers from the festival village of Hongsa? Sayaboury province, which cuddles like a spoon into Thailand, is Laos' center for domesticated elephants. It thus maintains the major gene pool needed for the survival of the species, which is fast dwindling.

On the event's final day, saffron-clad Buddhist monks prayed and chanted, and senior Lao government officials watched, clapped and gave speeches in praise of their national symbol, readopted as a tourism signature and in particular the symbol of the forthcoming Southeast Asian Games to be hosted in the Laotian capital of Vientiane. But the happy dancing cartoon jumbos belie the decimation of their real cousins in "the land of a million elephants", which increasingly are at risk from Laos' electricity generation designs.

"We are being told that the mine will bring jobs, and that may be true, but we want to know if we can live our lives in the village as our ancestors have done," said Mongkeo, a mahout at the festival. "We earned good money from the elephant festival and we are pleased that people want to come to see us. Now we don't know about the future. I know I have no skills in mining. I would probably just have to dig holes."

The lignite mine plans, known as the Hongsa Thermal Power Plant Project, took on a surreal quality at last year's elephant festival, when a float in the grand parade was decked in acid orange and green bunting. On top and surrounded by nylon rosettes was an artist's impression of the power plant and mine, a science fiction monstrosity set in the plains of the picturesque Hongsa Valley.

Sebastien Duffillot, program manager of ElefantAsia, a non-governmental organization (NGO) that provides technical assistance to Laos' Ministry of Agriculture and Livestock and currently assisting in planning next year's festival, is puzzled by the government decision.

"There has been a lot invested in ecotourism, and Laos has a very good chance of being one of the global success stories," he said. "I think some people think that they can have electricity generation and elephants. There seems to be little comprehension of the consequences ... from building this power plant."

Duffillot notes that money has been distributed to help Vieng Khao village (host of the planned 2010 festival) develop community-based ecotourism, including funds to decorate guest houses, provide English classes, find new trekking routes and design more tourist-friendly mounting stations. He notes that the mine site would be 12 square kilometers and that Vieng Khao is only five to seven kilometers from the site's epicenter.

To mine lignite these days is as unhealthy as admitting to smoking five packs of cigarettes per day. Lignite is a dirty fossil fuel, so heavy in sulfur, carbon and water that often the only effective way of getting energy from its source is to process the lignite at the mine's mouth. Otherwise, the cost of transporting the coal often makes it uneconomic compared with other energy sources.

A 2007 New Zealand report called lignite the "wettest, most inefficient and polluting coal there is" and noted in its assessment of a plan there to convert lignite to liquid fuels that one lignite facility would produce twice as much carbon dioxide per year as the total amount generated by coal-fired electricity in all of New Zealand.

Environmentalists are now calling on governments to consider bringing international sanctions against countries that knowingly initiate high-carbon projects, such as the plans Laos has for Hongsa. Tellingly, the original project was rejected as uneconomic because it would have generated a mere 684 megawatts of power. The Thais and Laos have since been dickering over the price of the electricity and the plant's generating capacity.

Questionable economics
Banpu PCL, the Thai energy company leading the venture, promised 1,878 megawatts if they found an investment partner. Thai and Chinese businessmen, along with loans from the Chinese Import-Export and Development Bank, later enabled the Lao government to enter into an agreement, which includes the granting of a 25-year lease on the mine site.

TMC news reported that in 2007, Banpu was sued for tort and other civil claims from the owner of the Hongsa Lignite project, Thai Lao Lignite (TLL) and businessman Siva Nganthavee, for billions of baht in damages (US$1 = 34 baht). Banpu entered into a joint venture with TLL as the concession owner, pushed the joint venture partner out of the deal, according to the complaint. TLL and Hongsa Lignite Co are claiming against the Lao government for US$3 billion.

The government, through its Lao Holding State Enterprise, stands to make a mere US$2.5 million per year from taxes and shares in the deal. It was able to participate after agreeing to a loan of $100 million from China's EXIM Bank. It is not clear if Laos' estimated annual profit from the venture includes the cost of debt servicing.

The Thai investors, including the Ratchaburi Electricity Generating Holding Company and the Electricity Generating Authority of Thailand (EGAT), will be the main beneficiaries of the power generated. Yet they have admitted in their technical reports and to the Thai English-language newspaper The Nation that the quality of the lignite is low, producing only 2,400 to 2,500 kilocalories, which will be converted to 10 megajoules. According to international lignite industry codes, an economic energy ratio for such projects is 10-20 megajoules, so the Hongsa mine just barely scrapes past the benchmark measure.

Geologist Surasit Areesiri of World Drilling Services, who did the geophysical analysis for the mine, did not respond to questions about energy outputs and economics. Steve Raines, a coal mining engineer in Woollongong, New South Wales, who attended the first elephant festival in Sayaboury, agreed that the mine will create huge problems unless it is carefully built and monitored.

"I don't see much reason to build lignite mines of that energy output unless there is nothing else. Hasn't Laos thought of renewables?" he said. "To run a safe and environmentally clean lignite mine these days costs a fortune. Lignite is one of those old-fashioned fuels that we choose to avoid now unless it's pulling 20-plus megajoules. It's a big price to pay so your neighbors can run air conditioners. The modern approach would be to leave it in the ground and go with renewables."

The operation of "brown coal" plants, particularly in combination with strip mining, is often politically contentious due to environmental and safety concerns. Its something that Laos' National Assembly is said to be concerned about in areas where eco-tourism is taking off.

Using an average of 13 million tonnes of lignite per year, the 12 square kilometer site will necessitate the relocation of 15 villages, the Vientiane Times quoted government sources as saying. Given the mine's location, it is likely that some of those villages are home to the mahouts who put on the increasingly popular with tourists elephant festival.

Residents of the mahout villages around Hongsa are still uncertain which of them will be required to move. Relocation due to construction is one thing, as it usually comes with some form of economic package and assistance. But involuntary relocation due to possible fallout of fly ash, acid rain and at times heavy aerial contamination by carbon disulphide, which will likely result in chemically induced devastation of plants used for elephant fodder, is quite another.

Sayaboury province has already been unsustainably logged, and both work and food sources for elephants are dwindling. Acid rain and sulfur dioxide emissions from the mine and plant will provide additional burdens to the people and elephant herds of the area, environmentalists say.

"The difficulty is that there is no information. We don't know which villages will be moved," said Madame Keo, a mahout's wife in the area. "Lao people don't usually criticize government projects, but we are angry in private."

According to an Australian volunteer biologist with the Wildlife Conservation Service (WCS) who curated an exhibition of Laos' disappearing species, "The government seems to be conflicted between industrial development and the donors wanting to develop an eco-development model. From my conversations with other biologists here, it appears that the Lao government thinks that modernization and development is all about covering the place with concrete, getting rid of the trees and the wildlife.

"They praise the wildlife at ecotourism conferences and other international meetings, and then give the go-ahead to destroy the very thing that makes Laos special: its fantastic environment. The ones who make decisions don't realize being modern is to care about the natural environment and to be eco-conscious."

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