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Logo of Phnom Penh Post newspaper Phnom Penh Post - Gridlock over power plant plans

Gridlock over power plant plans

A PROPOSED power plant that critics charge could emit enough pollution to damage

the temples of Siem Reap is the focus of a rancorous dispute that will likely decide

the direction of Cambodia's energy policy.

Cam-Tai, a joint US-Taiwanese company, has proposed to build a 72-megawatt heavy-fuel-oil

(HFO) power plant about 15 km from Angkor Wat in Pouk district. The company has insisted

that the $95 million project is essential if Cambodia ever wants to wean itself off

international aid.

Development experts have often asserted that Cambodia needs affordable power to promote

viable economic growth. Cambodia now ranks among countries with the world's highest

electricity rates due to high taxes, power theft and poor infrastructure.

However critics of Cam-Tai's proposal claim that the plant would needlessly pollute

air and water, and that the resulting acid rain would speed the deterioration of

the country's most treasured temples

Calculations by researchers at the government's Climate Change Office at the Ministry

of Environment (MOE) show that a 72 megawatt (MW) plant similar to the one being

proposed could release more than 3,265 tons of sulfur dioxide per year, a primary

component of acid rain. Heavy fuel oil is a low-grade fuel high in sulfur and other

toxins commonly blamed for health and environmental problems.

The possible emissions pose a "major concern" that the acid rain could

accelerate damage to the temples, climate researchers said.

Although more comprehensive studies are needed, the office said the HFO plant was

a last resort from an environmental point of view. The scientists concluded that

energy alternatives such as imported power, natural gas and diesel fuel would be

less harmful. The calculations did not evaluate treatment of the exhaust air, but

Climate Change Office researchers noted that cleaning the exhaust would still leave

an enormous amount of liquid waste.

Officials at the World Bank (WB) and Asian Development Bank (ADB) also stated they

were opposed to the project. The institutions, which fund a plan to bring electricity

to Cambodia via transmission lines from neighboring countries, said the project's

power would prove "impossibly expensive" and that the approval process

lacked sufficient transparency.

The country head of the ADB, Urooj Malik, expressed his reservations about the project

at a meeting at the Inter-Continental Hotel on November 14.

"First and foremost, we like to promote transparency in the bidding process,"

he said. "The government dealt directly with the private sector without transparency.

You may not end up with a deal that is best for the country."

He also alleged that the company had designs on expanding its operations beyond the

scope of Cambodian law.

"Our impression was that the company did not just want to generate and transmit

electricity; it wanted to retail and distribute it as well," he said. "That

is against the electricity law. Our interest is that the government gets a good deal."

When asked about Cam-Tai's proposal, the World Bank's country manager Nisha Agrawal

replied by email that the institution was concerned about excessive power costs,

a lack of transparency and financial consequences for Electricité du Cambodge

(EdC), the technically bankrupt state power utility and a major partner in the Bank's

electrification plan. EdC now loses more than $2 million a year on its Phnom Penh

operations alone, mostly due to non-paying government customers.

Agrawal warned that approval of such a project, if done outside EdC's agreement with

the WB and ADB, could have serious consequences.

"Execution of new, non-competitive, directly negotiated power projects... may

well jeopardize our ability to proceed with [approving] future support for the sector,"

she wrote.

For its part, Cam-Tai has denied the accusations and promised to install the highest

level of environmental safeguards, including scrubbers, to reduce air emissions.

It also said that the approval process for the project worth about $95 million was

entirely above board.

Cam-Tai's President and CEO, David Meng, claimed the plan followed "World Bank

procedures" despite the fact that no environmental impact assessment-a measure

required by the bank-had been conducted. He said one was planned for the future.

He added the Siem Reap plant, with government tariff exemptions and power demand

projected to grow by 10 percent per year, could provide competitively priced power

and serve as a model for foreign investment in Cambodia.

But it was unclear how the plant's expected power costs, approximately 14 cents per

kilowatt hour (kWh), could ultimately compete with the six cents per kWh power expected

to arrive over transmission lines from Vietnam and Thailand. Those are scheduled

to be operational by 2007.

The US embassy, which gave what it said was "typical assistance" for companies

involving US stakeholders to Cam-Tai, has come out in favor of the company. The US

Embassy insists that Cam-Tai is the one getting the raw deal.

A US embassy official, speaking on condition of anonymity, said that no legitimate

objections to the project had been raised.

"There is a suspicion that [the project] has not been judged on its merits,"

said the official. "If it's not a reasonable deal, we'll be the first one to

help dig its grave. But its not being evaluated objectively."

He presented the deal as a choice between an already indebted nation incurring more

loans or allowing the private sector to risk its own money to develop Cambodia's

infrastructure.

"To date, we have yet to hear a truly believable reason for why the deal has

been opposed," he said. "We would hate to see a viable deal, especially

one involved with American investors, fall victim to politics."

So far, the government has only officially said it is considering the proposal. However

government officials have offered conflicting, though increasingly pessimistic, opinions

about how the decision might go.

A department head at MOE said preliminary approval had been granted for the project

months ago and it merely needed to work its way through the ministerial review process.

Several visits by the Post to the Ministry of Mines Industry and Energy (MIME) and

the Ministry of Environment (MOE) found project documents in the possession of senior

officials.

But during that same period the project became a political football. The US embassy

official said that two scheduled signing ceremonies in July and August, complete

with fully appointed ballrooms and invited guests, had been canceled at the last

minute for undisclosed reasons.

And there are other signs that the project may be on its way out. Hing Kunthap, an

energy advisor with MIME, said on December 2 that he was told Prime Minister Hun

Sen might reject the project.

"I heard from MIME officials that apparently the Prime Minister said 'No',"

Kunthap said. "But whether that means, 'No, period' or 'No, subject to'... I

don't know."

Kunthap said there has been "so much fighting at the ministerial level"

about the project, but would not go into details.

Several government officials said approval boiled down to a well-known rivalry between

Minister of Commerce Cham Prasidh and Minister of Economy and Finance Keat Chhon.

Some officials said a clause inserted in Cam-Tai's draft contract at the behest of

the MEF, made the company's business proposal, in the words of the US Embassy official,

"unbankable".

Additionally, US Ambassador Charles Ray sent a letter to Prime Minister Hun Sen that

advocated Cam-Tai's proposal, while a joint letter by MEF, the World Bank and the

ADB that condemned the project was delivered to the US Embassy.

Both the US Embassy and World Bank officials acknowledged that correspondence was

exchanged, but declined to provide specifics.

Recently, however, the bank reportedly issued an ultimatum designed to kill the project.

According to officials connected with the MOE, the World Bank representatives told

the government that proceeding with the project would lead to suspension of the $63

million Rural Electrification and Transmission Project with joint-ADB financing for

high-voltage transmission lines and infrastructure improvements.

Cam-Tai officials said a decision was due out by the end of the month, the outcome

of which could decide the future of electricity policy in Cambodia. The government

is on the brink of either pursuing a strategy embracing fossil fuels or, at least

initially, the transmission-based model advocated by the international development

agencies.

Cam-Tai, with plans for at least one major coal power plant in Sihanoukville, is

just one of several companies with such proposals, said Victor Jona with the Department

of Energy Development at MIME.

The choice is crucial, since Cambodia is struggling to reach its stated goal of electrifying

70 percent of the country by 2030. Today, less than a quarter of the population receives

a reliable supply of electricity, according to MIME estimates. Eighty percent of

the population still relies on wood for fuel.

Government delays continue to thwart the approval process and the ministries involved

said they had no idea when a decision could be made. Several officials, when asked,

immediately said they could not comment on the project. One energy expert, who works

for the Japan International Cooperation Agency, merely said it was a "very serious

problem".

But by late November, Cam-Tai officials were still optimistic that the project could

proceed.

"This is a good project for Cambodia," said Meng. "If the model is

established, then overseas companies can come to invest, and not only in the power

sector. I am here not for myself... It's for the people of Cambodia."

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