The Multilateral Investment Guarantee Agency (Miga), a member of the World Bank Group, has announced the issuance of US$91mn in political risk insurance for a hydropower project in Lao People’s Democratic Republic (PDR).

 

The bulk of the guarantee, US$86mn, is covering a non-shareholder loan by Fortis Banque SA/Fortis Bank NV (representing itself and acting as agent for a number of banks) against the risks of expropriation, breach of contract, war and civil disturbance, and transfer inconvertibility in both Laos and Thailand. The rest of the coverage is protecting EDF International against the risk of transfer restriction in Laos. The agreement complements a US$50mn partial risk guarantee issued by the World Bank, as well as a US$20mn grant from the International Development Association.

 

Total cost of the project, referred to as Nam Theun 2, is US$1.2bn, the largest investment ever in Laos. The project involves the development, construction, and operation of a trans-basin power plant that will use water from the Nam Theun River, a tributary of the Mekong River.

 

Laos has an average income level of less than a dollar a day, with levels considerably lower in rural areas and few options for generating income.

The project is expected to generate an estimated US$1.9bn in foreign exchange earnings over a 25-year period through the export of 995 MW of electricity to Thailand. The project will also produce 75MW of power for domestic consumption.