International law firms Mallesons Stephen Jaques, Clifford Chance and Allen & Overy have combined to advise on the largest Lao PDR hydro project ever financed - the landmark US$1.25 billion financing of the Nam Theun 2 Hydropower Project.
The project is a major boost to the Lao economy and is supported by the World Bank, Asian Development Bank, major project banks and other leading international financial institutions.
Over the past decade Mallesons has acted as the primary adviser to the Government of the Lao People’s Democratic Republic. Partner Paul Cargill and his team, including senior associate Jane Furniss, combined with the Government to negotiate and draft the terms of the Project’s Concession Agreement, which establishes the framework by which that project will be financed, developed and operated, including the legal protections ensuring compliance with the most stringent of environmental and social obligations.
The extent to which the concession agreement articulates and addresses the obligations of the Project consortium and the Government, and particularly their respective environmental and social obligations, is thought to be a first for a country such as Laos. It is expected to show other developing countries with similarly complex projects what they can achieve for themselves if they are given access to the same levels of international legal, as well as financial and engineering, expertise as that relied on by the developers they are dealing with.
“We helped redress the balance that naturally leans against the small, under resourced state,” said Paul Cargill. “It has been extremely satisfying to be involved in a project having such profound economic and social consequences, especially when one considers that all revenues raised by the Government will go towards alleviating poverty and improving the standard of living for the people of Laos.
“The overriding focus of our role was to ensure that the interests and welfare of the affected families and the surrounding environment were protected in a way which would be effective in both the short and the long term, while at the same time recognising that the overwhelming aspiration of the Lao people was to actually enjoy the economic fruits from this Project.
“They, after all, have waited so stoically for so long while the stakeholders strived to achieve the correct balance between economic benefit and social and environmental protections. That it took 10 years to achieve this demonstrates that all involved, the Government, the Project consortium and the World and Asian Development Banks realised that they were, perhaps, involved in a first and that the world was watching to see if striking of that balance was actually achievable. We at Mallesons are pleased that we were part of finding that balance, and we will remain forever appreciative to the Government of the Lao PDR for giving us this opportunity to do so.”
With financing agreements just signed on Nam Theun 2, commercial operations are now scheduled for 2009. The project entails the development of a 1,070MW hydroelectric power plant and its related infrastructure under a 25-year build, operate, own and transfer (BOOT) concession with the Government of the Lao PDR for the export sale of a major portion of the electricity produced by the project to the Electricity Generating Authority of Thailand (EGAT) with the balance being sold locally to Electricité du Laos (EDL).
Mallesons’ involvement in the project was also significant for a number of other reasons, including meeting the World Bank’s requirements and gaining its support, while at the same time, balancing the competing needs of multiple stakeholders.
The firm also reviewed and advised on the power purchase agreements, the construction contracts and provided advice in relation to the particularly stringent environmental requirements.
Mallesons’ Hong Kong-based Banking and Finance partner Steven Christopher, represented the Government of Lao PDR in respect of raising more than US$100 million financing for equity capital and participating (as a shareholder) in Nam Theun 2 Power Company's raising of the commercial debt and support from multilateral agencies for the project.
The Mallesons Stephen Jaques’ team was led by Paul Cargill, who was assisted by senior associate Jane Furniss and partners Steven Christopher (Finance), Andrew Beatty (Environment) and Damien McNair (Construction).
Clifford Chance acted as international counsel for the foreign sponsor consortium and the project company. Allen & Overy acted as international counsel to the project lenders and, additionally, to the Asian Development Bank.