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Title: Laos PDR Power Purchase Agreement (“PPA”) for the Xayaburi Dam Project

Language: English

Type: Document

Nature: Agreement

Published: August 17, 2021

Region: East Asia and Pacific (EAP)

Country: Lao PDR

Sector: Energy and Power

Keywords: PPPs by Sector *, Energy and Power PPPs **, Lao PDR, Hydropower

Document(s):

Document Summary:

This PPA provides a more recent example of offtake arrangements for hydropower projects in Laos (a number of which are dedicated to power export to neighboring countries). The project is sited approximately 350km upstream of Vientiane and is developed pursuant to a concession agreement with the government of Laos PDR. The power plant has a nameplate capacity of 1225 MW and the electricity produced is exclusively earmarked for export to Thailand. The PPA is signed between the project company, Xayaburi Power Company Limited (a Laos incorporated subsidiary of the Thai construction company CH. Karnchang Public Company Limited, the lead contractor for the project) and Electricity Generation Authority of Thailand (“EGAT”). It is structured on a BOO model, with long term offtake to commence upon achieving commercial operation. It provides a useful illustration of an energy project involving the international export of electricity and some of the additional complexities involved in such projects (including risk allocation between state utilities from two different countries operating in different roles).

Document Details:

Key features of the Power Purchase Agreement (“PPA”) for the Xayaburi Dam Project:

  • Regulatory risk – the project company assumes the responsibility for obtaining all the necessary approvals and consents required from Laotian authorities for the project. EGAT only assumes limited responsibility for obtaining required regulatory approvals and consents.

  • Exclusivity – the project company cannot sell electricity from the power plant to any third party without EGAT’s prior written approval (which can be withheld at its discretion).

  • Take or pay – under the PPA, EGAT is required to pay for both the actual energy taken from the power plant and energy that is made available to EGAT, subject to a right by EGAT to take additional make-up volumes (i.e. the volumes paid for but not taken).

  • Liquidated damages regime – the project company is liable to pay liquidated damages to EGAT for failing to meet a number of performance requirements under the PPA (including for delay to commencement of commercial operation and unavailability of the plant during the operational phase).

  • Force Majeure Offset Amounts – the project is, to an extent, de-risked from exposure to Thai regulatory and political changes as EGAT is required to pay an offset amount to the project company in respect of certain force majeure events related to regulatory and political changes in Thailand.

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