Wednesday, December 14, 2011

Xayaburi in hot water

Concerns are mounting that the US$3.7-billion Xayaburi Dam cannot proceed after the four-member Mekong River Commission delayed the project pending further environmental study.
Analysts said the decision at last week's MRC meeting disappointed the Thai market and raised concerns about the outlook of Ch. Karnchang (CK), Thailand's No. 3 construction company by value and the project's developer.
In a joint statement released after the meeting, the commission said Laos, Cambodia, Vietnam and Thailand would ask the Japanese government and other international partners to help assess the impact of planned hydropower dams on the Mekong.
Chaiyatorn Sricharoen, an analyst at Bualuang Securities, sees the possibility of cancellation.
"Although the management of CK has remained confident that the project can go ahead," he said, "we have started to see that the ecosystem and sustainability of the lower Mekong have more weight than the benefits of selling the electricity from the dam."
According to Bualuang, the US Congress, which has influence on the MRC, seems to be opposed to Xayaburi for its possible impact on the environment.
More than 90% of the electricity from Xayaburi, with its capacity of 1,285 megawatts, would supply Thailand. The project is scheduled for commercial operation in early 2019.
CK owns a 57.5% stake in Xayaburi, with PTT Plc and Electricity Generating Plc holding 25% and 12.5%.
Nat Panassutrakorn, an analyst at KGI Securities, said the MRC resolution surprised the market and raised uncertainty about the viability of the project.
"Although the Laotian government has the final say," he said, "there is a political effort behind the scenes and development of Xayaburi is critical to the rest of the planned dams along the Mekong River."
The Xayaburi Dam, in northern Laos, is the first of 11 dams planned for the lower Mekong. Some 60 million people depend on the river and its tributaries for food, water and transportation.
"Currently, it depends on how much the information to be found by the Japanese side can back up the project," Mr Nat said.
CK executives could not be reached for comment. But SouthEast Asia Energy, the company overseeing the engineering works, reaffirmed that the possible impact to the environment was taken into account in CK's study presented to the Laotian government.
"It seems to me that the MRC decision does not directly mention further study of Xayaburi, but the general Mekong River," said Somkuan Watakeekul, SEAN's managing director. "The study we did covers all the concerning aspects, and we invest a lot to minimise environmental impact."
CK shares closed Tuesday at 7.70 baht, up 5 satang, in trade worth 41 million baht.


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