Billion-dollar Chinese hydropower projects get go-ahead in Cambodia

Wed, 03 Mar 2010
DPA

Phnom Penh - Construction of two Chinese-funded hydropower dams costing more than 1 billion dollars is to begin in south-western Cambodia in the coming weeks, local media reported Wednesday. A report from the Ministry of Industry, Mines and Energy said work would begin this month on a 246-megawatt dam costing 540 million dollars on the Tatai River.

And building would start in April on a 338-megawatt dam costing 496 million dollars on the Lower Russei Chrum River.

The Phnom Penh Post newspaper quoted Suy Sem, the minister for industry, mines and energy, as saying the dams would take up to four years to complete.

"We hope that the two hydroelectricity dams will help complement local demand for electricity in the future," Suy Sem said.

Cambodia suffers from high electricity prices, which have long been a hindrance to foreign investors and economic growth. A number of overseas companies are studying the feasibility of around 20 hydropower dams in the country.

But the opacity surrounding hydropower deals has long made opposition legislators uncomfortable, and they have unsuccessfully called for the contracts to be made public.

Environmentalists too are worried that projects could be pushed through with insufficient consideration given to their social and environmental impacts.

National media last year quoted a senior energy ministry official as saying the government had agreed to buy electricity at 7.45 cents per kilowatt-hour from the Tatai dam, and for 7.35 cents per kilowatt-hour from the Lower Russei Chrum dam.

That commitment has at least one multilateral institution worried.

The International Monetary Fund (IMF) recently warned Phnom Penh against taking on open-ended financial commitments - particularly in the power-generation sector - that could burden the impoverished nation with significant ongoing liabilities.

In its annual country report released in December, the IMF noted it had been given assurances by the authorities that "no explicit government guarantees have been provided" for such projects.

But it said greater transparency was required to monitor the potential risk of contingent liabilities.

"The staff urged the authorities to thoroughly review existing contracts for potential liabilities, and exercise caution when evaluating new investment projects that carry an explicit or implicit government guarantee," the IMF stated.

Cambodia currently operates two hydropower dams which have a combined capacity of 13 megawatts. A third dam - which is being constructed by Chinese firm Sinohydro Corp - is partially operational with a projected final capacity of 193 megawatts.

The Tatai River dam is reportedly to be built by China National Heavy Machinery Corporation, while the Lower Russei Chrum dam is due to be built by China Huadian Hong Kong Limited.