The government has decided to mothball the controversial Bo Nok and Ban Krut power plants, for at least three years, but, according to a highly placed source is reluctant to say so publicly for fear of harming prospects for inward investment. Citing as its reason energy reserves considered adequate until 2007, the government plans to leave to electricity generating utility Egat the responsibility of negotiating compensation with contractors. Egat would be asked to avoid penalties by exploiting a loophole left by the contractors - that they had failed to finalise financing by the deadline of April 30 and were unable to come to an accommodation with local residents and environmentalists. But behind the scenes the prime minister's advisory team had urged that the power plants be shelved, arguing that they were not cost-effective compared to increasing the efficiency of existing plant or cutting consumption, and that it was cheaper to scrap the projects at a cost of nine billion baht than to bear the 17 billion baht cost of proceeding.
The two projects have been abandoned in an atmosphere charged with accusation and counter-accusation about the necessity of the scheme and the least damaging way to abandon it. The government has come under fire for seeking a way out through financial loopholes after signing contracts at a time when it already knew that power demand would decline.
Advocates of scrapping the scheme, including prime minister Thaksin Sinawatra, say that technical aspects have not been examined thoroughly enough, that the transparency of the power plant contracts, some of which had apparently been altered seven times, needed looking into, and that the contracts disadvantaged the state by being risk-proof for contractors.
But the chairman of Thailand's environmental authority, Panas Thassaneeyanont, said that Egat could not scrap the contracts even though the firms failed to present their financial sources. Moreover, Egat was bound to pay penalties in the event of delays even though the contracts said nothing about penalties for firms causing delays.Another problem was that contractors could choose plant sites.
The decision to delay came after warnings from Tokyo that the outcome would have 'an adverse effect on the country's investment climate'. The Japan Bank of International Co-operation is the major creditor for the scheme. Gulf Electric planned to borrow $240 million from the bank as part of its $800-million investment in the Bo Nok plant, while Union Power Development Co planned to borrow $350 million towards its $1.3 billion investment in the Ban Krut plant.
In the event construction of the Ban Krut power plant, scheduled for completion in January 2006, has been postponed for 51 months while Bo Nok, scheduled for completion in April 2005, has been delayed for 36 months.
Linkedin
