DR. CARL MIDDLETON (International River) MR.SAM CHANTHY (NGO Forum) Chinese Involvement in Cambodia’s Hydropower Sector 18 January 2008 Royal University of Phnom Penh

Research Aims/Background Deepen understanding of key government agencies, decision makers, Chinese actors and decision- making process. Identify key laws and policies related to hydropower development in Cambodia Prepare general overview of Cambodia’s power sector development, determine the current status of projects under development, and possible environmental and social issues A case study on Kamchay Dam in Kampot Province Small grant provided by Oxfam GB, with possible support for a popular publication from Oxfam America. Prepared together with the NGO Forum on Cambodia

Current Situation in Cambodia Cambodia’s electricity is amongst the most expensive in the world, and is seen as a barrier to economic growth Present electricity infrastructure is rudimentary. Electrification rate stands (at most) at 20% The Cambodian Government has proposed an extensive hydropower development program, although until recently has struggled to attract investment Chinese companies backed by Chinese finance have recently demonstrated interest – reflecting strengthening political ties

Policy: Energy in the Rectangular Strategy Energy sector and electricity network constitutes one side of the second “Growth Rectangle” of the strategy. –Government will promote private sector participation in electricity production and distribution, and support power transmission grids that facilitate electricity imports from Cambodia’s neighboring countries. Support for constructing Kamchay, Stung Battambang, Stung Atay and Stung Russey Chrum. –The strategy states writes “In developing hydro power resources, the Royal Government will carefully analyze all aspects involved, especially its economic benefits and environmental and social impacts.”

Key Actors and Laws Ministry of Industry, Mines and Energy (MIME) –The Electricity Law (2001) states that “The Ministry of Industry, Mines and Energy shall be responsible for setting and administrating the government policies, strategies and planning in the power sector” (Article 3). –Department of Hydropower is key department –Signs MoUs with hydropower companies Ministry of Water Resources and Meteorology (MOWRAM) –MOWRAM is responsible for the overall management of Cambodia’s surface and groundwater water resources (Water Resources Law, May 2007) –Department of Water Resources Management and Conservation –Issues and monitors compliance of licenses for water use MoE

Key Actors and Laws Ministry of Environment –Law on Environmental Protection and Natural Resources Management (1996) and associated sub-decrees –Department of EIA review (implementing Sub- decree on EIA process) –There are well-recognized constraints to the preparation of EIAs in Cambodia Electricity du Cambodge –Wholly state-owned limited liability company since March 1996 Electricity Authority of Cambodia –Independent regulator established under 2001 Electricity law Council for the Development of Cambodia –Cambodian Investment Board for private sector investment

Some Other Actors Involved To Date Politicians (Hun Sen, Sok An, and Chinese counterparts) Provincial government and local authorities Chinese Chamber of Commerce Chinese Embassy Cambodian civil society Absent –MRC, ADB, World Bank

Overview of Cambodia PDP Most recently approved Power Development Plan (PDP) dates Power imports from Thailand, Vietnam, Laos Build domestic grid (Thai TA) Development of Cambodia’s domestic hydropower generation capacity (JICA TA), thermal generation plant in Sihanouk Ville, some new diesel Rural electrification - REAP

Kirirom I (12 MW) China Electric Power Technology Import & Export Corporation Built with US$15.5 million loan from China Exim in year BOT contract

Reservoir of Kirrirom I

Kamchay Dam (193 MW) Sinohydro Corporation Approved for construction April 2005 with strong political support Located in Bokor National Park Funded by US$600 million aid package from China in April year BOT

Stung Atay (120 MW) China Yunnan Corporation for International Techno- Economic Cooperation Approved for construction Feb Cost $255 million No public consultation held According to company no environ/ social damage Other maps indicate flooding of protected area Construct for 230 kV transmission line from the dam to Phnom Penh, Kompong Chhnang, Pursat, and Battambang provinces awarded to Yunnan Southeast-Asia Economy and Technology Investment Industrial Co Ltd (YSE). The transmission line will cost US$113 million under 25 year BOT agreement.

Stung Cheay Areng (260 MW) China Southern Power Grid company MoU for feasibility study signed October 2006 Likely to have unspecified environmental impacts

Stung Tatay (80 MW) China National Heavy Machinery Corporation MoU for feasibility study signed January 2007 Estimated cost US$ 215 million Will flood hundreds of Ha of three communes, including durian orchards Villagers hope the dam will develop local roads

Lower Stung Russey Chrum (235 MW) Yunnan Corporation for International Techno-Economic Cooperation MoU to develop project April Cost $290 million No public consultation held According to previous study, no resettlement but some downstream impacts on water quality, fish and water levels

Sambor Dam (465/ 3300 MW) China Southern Power Grid company MoU for feasibility study signed October 2006 Mekong mainstream dam Massive impact on deep pools, fish migration, Irrawaddy dolphins Will flood villages, villagers worried

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Other mainstream dams threaten Cambodia Don Sahong dam, Champasak province, Lao PDR: MoU signed between Mega First Corporation Bhd and the GoL for feasibility study in March  Sambor dam, Kratie province, Cambodia: MoU signed between China Southern Power Grid Company and the Government of Cambodia for feasibility study in October Xayabouri dam, Xayabouri province, Lao PDR: MoU signed between Ch. Karnchang Public Company Ltd and the GoL for feasibility study in May Pak Lay dam, Xayabouri province, Lao PDR: MoU signed between Sinohydro Corporation, China National Electronics Import, and GoL for feasibility study in June 2007 Pak Beng: Expression of interest from General Director of Datang International Power Generation Company to Prime Minister Bouasone Bouphavanh in August (Possibly MoU signed) Ban Koum: Plans of Thailand’s Ministry of Energy announced in Nation newspaper on 4 th November, 2007

Lower Sesan 1 (90MW)/Lower Sesan 2 (420MW) August 2006, Cambodian Government requests Vietnam Government to conduct a hydropower feasibility study for the Sesan River June 2007 Electricity of Vietnam, agrees to feasibility study Downstream impacts on Sesan not yet resolved

Development of the Kamchay Dam Project first conceived in the 1950s CIDA considered the project in the 1990s, but withdrew support following environmental concerns Closed door negotiations between high-level government officials revived the project in 2005 The 110-meter-high dam’s reservoir will flood 2,000 hectares of forest in Bokor National Park –habitat of 31 mammals including 10 endangered species, (Asian elephants, leopard cats, and tigers) Initial EIA prepared, but with poor consultation and has still not been publicly released Government has decided to prioritize power production over national park conservation, although there has been no serious public consultation surrounding this decision

Tour of the Project 2000 Ha of protected forest flooded upstream in Bokor National Park

Tour of the Project NTFP collection is important for 30% of downstream population in Mak Prang commune

Tour of the Project Rattan and bamboo products

Samrong (Mulva nuts) Tour of the Project

Preparations at the main dam site

Tour of the Project Road along side Kamchay River, and preparations for the regulating dam

Tour of the Project Irrigated durian plantations close to the location of the regulating dam

Tour of the Project Children playing in the rapids at Touk Chhu resort

Tour of the Project Sellers at Touk Chhu resort

Tour of the Project Kampot water supply extraction point

Tour of the Project Kamchay River in Kampot town

Political Backing For The Kamchay Dam On 4th July 2005, at the second Greater Mekong Subregion (GMS) summit in Kunming, Sinohydro and Cambodia’s MIME signed an agreement witnessed by Chinese Premier Wen Jiabao and Cambodia’s Prime Minister Hun Sen In July 2006, Cambodia’s National Assembly voted to give Sinohydro a guarantee whereby financial compensation would be provided if the project faced difficulties –Contract not disclosed to lawmakers 44 year BOT contract granted (typically length is years) Energy Sovereignty: The price of electricity will be marginally higher than imports from Vietnam; (700 riel/ kwHr versus riel/ kwHr).

The 2006 Aid Package The Kamchay Dam is financed as part of a Chinese US$600 million aid package to Cambodia announced in April –In 2005, Cambodian Govt officials had engaged China Exim to receive a low interest loan Wen Jiabao pronounced that bilateral relations had entered a new development stage and both sides should seize the opportunities. Hun Sen thanked Wen Jiabao for the “no strings attached” loan, commending China for not interfering in the internal affairs of Cambodia The Chinese aid will be disbursed over a three to four year period and is marginally less than pledged to Cambodia by all Western donors for Is from China Exim.

Kamchay Dam could be considered a test case for the quality of hydropower development in Cambodia –Public participation needs to strengthen in planning and monitoring (e.g. Provincial committees) –Plans to address social and environmental impacts need to be developed and meaningfully implemented –Benefit sharing (Dam operation for environmental flows/ irrigation, PES) –NGO Forum is closely monitoring the project to make sure promises are kept (environ and social imapcts, Khmer workforce, US$400,000 per year for watershed management…).

Key Issues/Recommendations There is a strong link between people and rivers in Cambodia. Power generation without undermining the natural resources on which people depend Multi-stakeholder process to examine the recommendations of WCD and how they could be adopted to Cambodian law Cambodia implement a transparent and participatory power planning process (IRP or WCD) to evaluate different options for meeting power needs with participation of public Public pressure on need for transparency in project bidding and approval, minimizing potential for corruption “International role brings with it international responsibility” –Chinese Dam Builders, Commercial Financiers and China Exim to raise standards to an international level (WCD/ IHA, Common Approaches, Equator Principles)

Thank You For Your Attention Rena Sugita

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Company selects potential sites, signs MOU for further study PROCESS Feasibility study, EIA Public announcement

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique OPTIONS  Independent review of energy planning  Comprehensive energy options assessment  Reform of EIA/SIA, resettlement policies and standards

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique Influence national hydropower planning OPTIONS  What are criteria for dam site selection?  What are priorities – large size? Cost/benefit ratio?  How are environmental and social impacts assessed?  Current JICA Master Hydropower Plan

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique Influence national hydropower planning Integrated basin management, ECHD OPTIONS  Mekong River Commission initiatives  Transboundary analysis  Comprehensive impact assessments  River basin organizations

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique Influence national hydropower planning Technical review of FS, EIA Integrated basin management, ECHD OPTIONS  Independent expert analysis  Critique of assumptions on economics, impacts  Contribute comments to relevant agencies  Training for consultants on social issues

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique Influence national hydropower planning Strengthen conditions in concession agreement Environmental flows included in PPA Technical review of FS, EIA Transparency and public consultation for all stages of selection and planning process Improve compensation and mitigation programs Integrated basin management, ECHD OPTIONS

National energy strategy and policies established Pre-feasibility studies, dam sites evaluated and ranked by gov’t or donor Company selects potential sites, signs MOU for further study If results satisfactory, company negotiates CA and PPA, loans Agreements signed, construction begins Dam sealed, revenue flows begin Continued monitoring of social and environmental impacts by gov’t Transfer to government power utility after yrs Operation according to PPA Resettlement and compensation Public announcement PROCESS Feasibility study, EIA Policy analysis and critique Influence national hydropower planning Strengthen conditions in concession agreement Environmental flows included in PPA Technical review of FS, EIA Transparency and public consultation for all stages of selection and planning process Improve compensation and mitigation programs Improve monitoring of environmental and social impacts Ensure that programs meet guidelines and agreements Additional env’l/social programs through CSR, gov’t support Integrated basin management, ECHD OPTIONS