Thailand's Government Axes Power Plants, Shelves Electricity Development by Phairath Khampha 13 May 2002 Thailand's government decided to scrap the controversial Bo Nok and Ban Krut power plants, but it was reluctant to say so in public for fear of hurting the investment atmosphere. Citing adequate energy reserves which could last until 2007, the government said the Electricity Generating Authority of Thailand would be allowed to negotiate with contractors to solve any problems arising from its decision to shelve the projects, according to the source. It was even considering renegotiating with the Lao government to see if might be necessary to shelve the controverisal Nam Theun 2 Hydropower Project. An announcement by Prime Minister's secretary-general Prommin Lertsuriyadech gave few details regarding this development. The source said the government kept details vague to avoid hurting the investment atmosphere related to the project, and head off accusations that it interfered in construction contracts. "The government has a clear answer for this," said the source. EGAT would be asked to exploit a gap left by the contractors to restart negotiations so as to avoid penalties. The contractors had failed to produce financial sources by April 30 and were unable to promote understanding with local residents and environmentalists with respect to these projects. According to the source, the prime minister's advisory team urged power plants be scrapped for now, arguing they were not cost-effective particularly as there was a large glut of electricity in Thailand. Furthermore, the projects appeared to be heading towards being considerably above budget. For instance, he said, unless the design consultants were going to come up with an original and different solution for the project the costs for the Nam Theun 2 project could reach as much as 20 percent above budget. The final decision for this project would be based on the outcome new engineering estimates based on the design-build bids prepared in May and June and subsequent discussions held with the Lao government.. "It's cheaper to scrap the projects--the state will pay only nine billion baht. If they proceed the government has to pay 17 billion baht," said the source. Construction of the Ban Krut power plant, scheduled for completion in January 2006, was postponed for 51 months while Bo Nok, scheduled for completion in April 2005, was delayed for 36 months. The source also said if EGAT improved the efficiency of existing plants, electricity from existing plants would end up being cheaper than power from the three proposed plants. Prime Minister Thaksin Shinawatra said the government's decisions were in the best interest of the country. "If we have power plants when they are not needed, people will have to absorb the burden. I hope everybody understands and allows the concerned parties to proceed in line with the contracts," he said. Mr Thaksin said new technologies were needed to save energy and save on power plant construction costs. "We haven't looked hard enough into this aspect. If we can cut down consumption by 1,000 megawatts, we can save 100 billion baht of construction costs," he said. The government, however, approved construction of the Thai-Malaysian gas pipeline, a joint venture between Thailand's PTT Plc and Malaysia's Petronas, with some changes. The pipeline would be rerouted within five kilometres of the original path, where environmental impact assessment studies have been conducted. The government also promised to look into transparency of all the power plant schemes, amid reports that some contracts were altered seven times. The Senate committee on the environment criticised the contracts, saying they put the state at a disadvantage and were 100% "risk-proof" for contractors. Chairman Panas Thassaneeyanont said EGAT could not scrap the contracts even though the firms failed to present their financial sources or had problematic financial solvency. Moreover, EGAT was bound to pay penalties in the event of delays while the contracts said nothing about what penalties would be imposed on the firms if they caused delays. Sen Kaewsan Atipo, the panel's secretary, said another problem for the government was that contractors were allowed to choose where the plants would go. The contracts, he said, were signed at a time when EGAT and the National Energy Policy Office were already aware that power needs were in decline because of the 1997 economic crisis, which was precipitated in Thailand. "That's why the schemes have been put off. EGAT wants to delay these projects because it knows there are more than enough power supplies," he said. He suggested opponents take a case to the Administrative Court, saying flawed EIA studies would make good evidence. Sen Kraisak Choonhavan said the government should cite flawed EIA studies and false information supplied by the contractors to scrap the schemes. It was obvious some of the EIA reports for the Hin Krut project, including those produced by a Vancouver, Canada-based engineering firm, were written in a manner aiming at pleasing the customer in order to invite new consulting contracts rather than discussing the environmental and social issues in a transparent and objective manner, he said.