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Thailand Puts Off Plans to Increase Generation Capacity
May 25, 2002

The Thai government has put off the construction of two large power plants contracted to foreign companies. The move raises questions about the true commitment of the government with the restructuring of power markets in Thailand.

The two projects, which were commissioned to Union Power Development and Gulf Power Generation in 1997, are considered key to Thailand's efforts to expand power supply through private investment. The projects have been put off after new forecasts indicate that energy demand is slowing down, the government has raised concerns about potential adverse environmental impact on nearby communities.

Plans for the controversial projects have run up against strong opposition from local pressure groups that contend, if built, the plants would harm the environment and the livelihoods of local communities. Different environmental impact assessments yielded mixed findings, resulting in a heated debate that has already delayed the projects for nearly four years.

The state-run Electricity Generating Authority of Thailand, or EGAT, is to seek a compromise with the foreign contractors. The Thai government has failed to indicate whether it will compensate the investors for past or additional costs of the delay in the two projects. Combined, the two consortia are estimated to have already invested $125 million in preliminary research and planning.

The whole energy-reform program, including the privatization of EGAT, is undergoing a rethink. Officials at the National Energy Policy Office, or NEPO, have long insisted the construction of the two coal-fired plants were necessary not only to meet steadily rising energy demand, but also to promote more private competition in the domestic electricity market. The present reform blueprint includes provisions for the breakup and privatization of EGAT in preparation for the market move to a fully competitive system by 2003. More competition, advocates argue, would reduce electricity tariffs and improve overall efficiency in the industry.

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