International Rivers

Nam Ou River Cascade Hydropower Project

Nam Ou 3’s construction site with safety warning in Chinese at the top of the dam, 12 August 2018. Source: International Rivers
Asia

By International Rivers originally published in The People’s Map of Global China

Nam Ou River, Lao People’s Democratic Republic

The Nam Ou River Cascade Hydropower Project comprises seven dams, with a combined generating capacity of 1.27 GW. The cascade includes two phases. Phase One has been fully operational since October 2016 and Phase Two since September 2021. The project is owned and operated by PowerChina Resources under a build–operate–transfer (BOT) contract. Although the development pre-dates the Belt and Road Initiative (BRI), it is now presented by PowerChina as a key BRI project. The dams have impacted the sensitive ecology and biodiversity of the Nam Ou River Basin, on which thousands of people depend for their livelihoods. Thousands of people were displaced—mostly ethnic-minority and Indigenous peoples.

Basic Information

Chinese Name: 老挝南欧江流域梯级水电站项目
Location: Nam Ou River, Lao People’s Democratic Republic.
Type of Project: Energy.
Project Developers: The Nam Ou River Cascade Hydropower Project was initiated by Sinohydro but completed by PowerChina Resources Limited (PCR) after the companies merged. PCR, a subsidiary of Power Construction Corporation of China (PowerChina), developed the project through two subsidiaries: 1) Nam Ou River Basin Hydropower Company Limited (85% owned by PCR and 15% by Électricité du Laos), which is responsible for the development, construction, operation of and power sales from the Nam Ou River Cascade Hydropower Stations (Phase One); and 2) Nam Ou Power Company Limited, a wholly owned subsidiary of PCR, which is responsible for the construction and operation of and power sales from Nam Ou River Cascade Hydropower Stations (Phase Two).
Main Contractors: Engineering by Kunming Engineering Corporation Limited; construction by Sinohydro Bureau 10 Company Limited, Sinohydro Bureau 15 Company Limited, Sinohydro Bureau 8 Company Limited, and Sinohydro Foundation Engineering Company Limited (all subsidiaries of PowerChina).
Known Financiers: China Development Bank (Phase One); Export–Import Bank of China; and China Construction Bank (Phase Two).
Cost: 2.73 billion USD.
Project Status: Operational.

Project Outline

The Nam Ou River Cascade Hydropower Project features seven dams constructed along 350 kilometres of the Nam Ou River in the Lao People’s Democratic Republic (Lao PDR). A transboundary river shared by Laos and Vietnam approximately 480 kilometres long, the Nam Ou is the seventh-largest Mekong River tributary in terms of water flow and contributes 4.8% of the Mekong’s sediment load. The river basin is a recognised biodiversity hotspot with a variety of endemic and threatened fish species; it serves as an important migration corridor providing key fish spawning, nursery, and feeding grounds. In Laos, the Nam Ou River Basin is home to more than 400,000 people, including Khmu, Akha, Songsiri, Hmong, Lue, and Lao ethnic and Indigenous groups. Before the development of the hydropower cascade, the river was in the top eightieth percentile in terms of overall river health—the second-highest in the Lao PDR.

The Nam Ou River Cascade Hydropower Project is part of Laos’s bid to become the ‘battery of Southeast Asia’—a bet on rapid hydropower development as a way to generate much-needed income while also increasing electrification within the country. Exploration of the hydropower potential of the Nam Ou River began in 1995, with the Lao Government seeking higher domestic electrification rates and energy exports to Thailand. Despite a slow beginning, the project development agreement was signed in 2007, and was followed by a feasibility study. Based on this study, in 2009, Hydrochina (a consultancy firm specialising in hydropower that, after 2011, would become a subsidiary of PowerChina) recommended the development of two storage reservoirs with a total of seven hydropower dams.

In April 2011, the project’s original developer, Sinohydro, and the Government of the Lao PDR signed a masterplan for the development of all seven dams. In November 2012, the China Development Bank agreed to provide a loan worth 660 million USD to the Nam Ou River Basin Hydropower Company Limited as a joint venture between Sinohydro and local state utility Électricité du Laos(EDL), with a 85–15 ownership split, under a 25-year BOT agreement. After Sinohydro merged into PowerChina in 2011, the project was folded under the portfolio of PowerChina Resources, PowerChina’s overseas investment arm.

The cascade includes two phases. Phase One consists of Nam Ou 2, 5, and 6 hydropower plants. Construction for Phase One formally began in December 2012 and it was fully operational by October 2016. Phase Two consists of Nam Ou 1, 3, 4, and 7 hydropower plants and became fully operational in September 2021.

Phase One was developed by Nam Ou River Basin Hydropower. Phase Two was developed by Nam Ou Power Company Limited, a wholly owned subsidiary of PowerChina Resources, which is responsible for construction, operation, and power sales. The China Development Bank, the Export–Import Bank of China, and China Construction Bank financed Phase Two. The combined cost of both phases was 2.73 billion USD.

PowerChina subsidiaries were contracted for the project, including Kunming Engineering Corporation Limited for the engineering, Sinohydro bureaus 10, 15, and 8, and Sinohydro Foundations Engineering Company Limited for the construction. Other non-PowerChina companies have been involved in the development of the different dams, including:

The Nam Ou River Cascade project is the first time a Chinese company has obtained the rights to develop a cascade system along an entire river basin outside China, and was the first overseas project to be developed by a Chinese company under a BOT model. The Nam Ou River Cascade complex is also the largest hydropower cascade in the Lao PDR, spanning more than 350 kilometres.

Under the BOT model, the company is responsible for every aspect of the project, including financing, compliance with local laws, completing proper environmental and social assessments, undertaking impact monitoring and mitigation, and ensuring timely delivery of the project. The project has a 29-year concession period once each dam is operational, during which time the company will earn profits from the operation of the dams by selling power to state utility EDL. Following the concession period, the project’s operation will be transferred to the Government of the Lao PDR.

Nam Ou 3, with river blocked in background, 12 August 2018. Source: International Rivers.

Project Impacts

  • Livelihoods: The dams will have significant impacts on the food sources, livelihoods, and cultures of local populations, including ethnic-minority and Indigenous peoples. Aquatic plant and animal species—such as freshwater prawns, riverweed, amphibians, and reptiles—feature prominently in local economies, livelihoods, and diets within the basin, but have not been documented through systematic studies.
  • Environment and Biodiversity: A Cumulative Impact Assessment commissioned by the World Bank’s International Finance Corporation (IFC) predicts the projects will have a severe impact on biodiversity in the Nam Ou River Basin—in particular, for fish species, due to loss of connectivity, and conversion of the river ecosystem from free-flowing to a series of reservoirs. The Nam Ou River Cascade is also contributing to the wider impacts of hydropower development within the Lower Mekong River Basin, including alteration of water flows and blocking of sediment flows downstream, with serious impacts on ‘overall river morphology, aquatic habitats and productivity right through the whole river system’.
  • Land: The Nam Ou River Cascade project has displaced thousands of villagers to resettlement sites and reduced their access to fisheries and the natural resources important for their livelihoods. In interviews conducted at the cascade by International Rivers with PowerChina Resources, the company said the project had caused the relocation of approximately 9,748 people from 127 villages. This has also undermined the existing livelihoods of tens of thousands more villagers within the basin according to cumulative impact assessment reports.
  • Ethnic-Minority and Indigenous Peoples: Most of those affected within the Nam Ou River Basin are ethnic-minority and Indigenous peoples. The Nam Ou River and its tributaries have historically sustained local cultures and ways of life, including traditional practices, belief systems, and identities. Indigenous and other local communities were not afforded their right to free, prior, and informed consent to the project. The project’s environmental impact assessment and other information were not made publicly available.
  • Socioeconomic: According to the Cumulative Impact Assessment, impacts on the river’s ecosystem are expected to have corresponding social and economic effects due to the loss of agricultural and forest land, reduction in fish catches, increases in demand for and prices of fish and non-timber forest products (NTFPs), and pressure on wildlife. Livelihood sources have been destroyed or significantly reduced due to dam construction, without adequate compensation or acknowledgement of their loss. The river also supplies the water essential for the daily and agricultural needs of local populations.

The Nam Ou River is recognised as one of the most important tributaries of the Mekong River in terms of biodiversity, with many native and endemic fish species. An estimated 139 species of fish are found in its basin, at least 35 of them endemic, and at least 86 native to the Mekong River Basin. Five species are known in no other drainage area and may be endemic to the Nam Ou River Basin. Fish migration is an important part of the river system’s seasonal cycle, with fish moving upstream from the Mekong into the Nam Ou and from the Nam Ou mainstream into tributaries to breed. Studies of the Nam Ou River Basin and Nam Ou River Cascade sponsored by the IFC predict the dams will have a severe impact on biodiversity in the Nam Ou River Basin, in particular for fish species, due to loss of connectivity and conversion of the river ecosystem from free-flowing to a series of reservoirs. One study estimated a loss of 66% of fish biodiversity in the Nam Ou, with a cumulative impact on the wider Mekong River Basin. The IFC’s Basin Profile predicts the disappearance of critically endangered and endangered species due to construction of the dams.

A section of the catchment falls within the Phou Den Din and Phou Hiphi National Protected Area (NPA), a recognised biodiversity hotspot that is home to endemic and threatened species, including Asian elephants, Indochinese tigers, white-cheeked gibbons, and large-antlered muntjac. The basin also sustains populations of otters, reptiles, and birds, including species recorded as endangered on the International Union for Conservation of Nature Red List. At least 20 species impacted along the Nam Ou River Cascade are on the Red List, including:

  • Siamese giant barb: Critically endangered
  • Mekong freshwater stingray: Endangered
  • Asian box turtle: Critically endangered
  • Yunnan spiny frog: Endangered
  • White-cheeked gibbon: Critically endangered
  • François’ langur: Endangered
  • Sunda pangolin: Endangered
  • Chinese pangolin: Endangered
  • Large-antlered muntjac: Endangered
  • Indochinese tiger: Endangered
  • Fishing cat: Endangered
  • Green peafowl: Endangered
  • Big-headed turtle: Endangered

The Nam Ou River Cascade is contributing to the wider impacts of hydropower development on the Mekong mainstream and within the Lower Mekong River Basin, including destruction of migratory fish species, alterations of water flows, and blocking of sediment flows downstream. The Cumulative Impact Assessment commissioned by the IFC in 2016 estimated that 70% of the sediment transported from the Nam Ou to the Mekong River will be trapped by the cascade—amounting to approximately 4.2 million tonnes per year. The Cumulative Impact Assessment asserts: ‘[T]hese changes will alter the overall river morphology, aquatic habitats and productivity right through the whole river system.’

Other research has examined the cumulative impacts of hydropower development and other activities on the Mekong and its major tributaries. For example, the Stockholm Environment Institute released a study in November 2017 that noted that dam construction, together with riverbed mining and climate change, had caused a drastic reduction in sediment and nutrient transport in the Mekong River Basin, with severe implications for ecosystems, agriculture, fisheries, and local livelihoods. The study found that if all the dams proposed for the Mekong River Basin were constructed, including the Nam Ou River Cascade, the sediment load reaching the Mekong River Delta would be reduced by 97%, with dire consequences for the future sustainability of the delta and its populations. The Mekong River Commission’s ‘Council Study’, released in December 2017 and examining the cumulative impacts of existing and proposed hydropower developments within the Lower Mekong River Basin, produced similar conclusions.

After the project began, International Rivers conducted a field survey in March 2012 in many of the communities that would be impacted by the seven dams. We found that during the preparatory stage for Nam Ou 2, most villagers interviewed said they did not believe Sinohydro would serve their best interests, given the company’s poor track record in stakeholder engagement, participatory decision-making, and provision of compensation for impacted farmers. Among the primary concerns were the lack of prompt compensation for lost or impacted assets, failure to guarantee assistance with physical relocation, and a lack of assurances that the infrastructure in the new consolidated resettlement sites (including schools, roads, medical clinics, and water pumping stations) would be built in a timely manner to adequately serve their families.

Farmers affected by the cascade development have lost their lands. Over the years, International Rivers has received testimonials from families who did not receive compensation for the farmland lost when they were forced to relocate. This means livelihoods and food security for families have been compromised as they can no longer grow rice and other crops. Even though it is not a safe or permanent solution, some villagers have opted to return to their old village sites to farm, in an attempt to sustain their families.

Fishing is a key source of food security and livelihoods; one study led by the IFC found that 70% of sampled households rely on fishing in the Nam Ou. Other important river-related livelihoods include a prawn fishery on the Nam Ou in the mountains near the small northern Lao town of Muang Ngoy, and the collection and sale of riverweed (kai), which is a significant source of income, particularly for women and elders. Villagers throughout the Nam Ou River Basin also rely on the collection of NTFPs for livelihoods and household use.

During fieldwork in the project area in September 2016, International Rivers spoke to shop-owners in villages downstream from the dams who complained that their shops had experienced flash-flooding on several occasions, sweeping away their goods. Villagers informed International Rivers that they do not receive official announcements or warnings about water releases. In August 2018, PowerChina told International Rivers it did not accept responsibility for any damage to homes or local businesses because of unexpected flooding as it occurred outside the vicinity of the dam site.

Tourism—another important source of income for people within the basin—has been significantly affected due to the construction of the dam cascade. Cruise trips on the Mekong and Nam Ou rivers are some of the most popular sightseeing options in Laos. Communities in Muang Khau, Muang Ngoi, Nong Khiaw, and Pak Ou have already experienced reduced incomes because of reduced tourist traffic due to dam construction. Although the Lao Government has acknowledged impacts on the tourism industry, PowerChina has not recognised or compensated small boat-drivers and related tourism business owners such as family-run guesthouses and shops.

The Nam Ou dams will alter seasonal flow regimes in the Nam Ou River Basin, with major impacts on aquatic species and downstream ecosystems. Six of the projects are run-of-river systems with limited or no storage capacity, though their operations are designed to meet daily power generation schedules and may produce significant changes in water levels on a daily or even hourly basis, with potentially destructive impacts on downstream ecosystems and habitats.

Except for Nam Ou 2, environmental impact assessments of the other six dams and resettlement action plans for affected communities have not been released publicly, as required by Lao law. PowerChina has undertaken environmental impact assessments for each of the individual projects in the cascade, but despite requests from civil society organisations, these have not been made publicly available. The full Cumulative Impact Assessment has also not been made publicly available.

Despite available research that points to extensive and cumulative impacts of the Nam Ou project on the ecosystems and biodiversity of the Nam Ou and the wider Mekong River Basin, based on company statements and interviews with International Rivers, the Nam Ou Power Company appears to take a relatively narrow view of its environmental responsibility, largely focusing on the issue of waste management at the dam sites. The overall health of the river and maintenance of flow regimes that support critical ecosystems have not been acknowledged or considered by the project developers to date. No measures have been taken to develop a regime for environmental flows in the cascade management to ensure the optimisation of outcomes for biodiversity and ecosystem health, despite the recommendations in the IFC’s Basin Profile.

Based on fieldwork and other studies of the project, in November 2018, International Rivers submitted a report to PowerChina with detailed recommendations on how it could meet its own commitments and obligations under Lao law. While the company responded positively in a workshop presenting the findings, there have been limited opportunities for follow-up on the issues highlighted.

In-Depth Sources

International Finance Corporation (IFC). n.d. ‘Nam Ou River Basin Profile Resource Page.’ Washington, DC: International Financial Corporation website. Link.

International Financial Corporation (IFC). 2017. Nam Ou River Basin Profile Summary Document. Washington, DC: International Financial Corporation website. Link.

International Rivers. n.d. ‘Nam Ou River.’ Oakland, CA: International Rivers website. Link.

International Rivers. 2012. An Eyewitness Report on Involuntary Resettlement Associated with Nam Ou 2 (Hat Kip) Hydroelectric Project, Lao PDR (April 2012). Oakland, CA: International Rivers website. Link.

International Rivers. 2015. Benchmarking the Policies and Practices of International Hydropower Companies. Oakland, CA: International Rivers website. Part A; Part B.

International Rivers. 2019. Watered Down: How Do Big Hydropower Companies Adhere to Social and Environmental Policies and Best Practices? Oakland, CA: International Rivers website. Link.

Jensen-Cormier, Stephanie. 2019. ‘Lessons from My Three Years Engaging with China’s Hydropower Giants.’ Panda Paw Dragon Claw, 5 April. Link.

Ka, Ton. 2020. ‘Loss of Faith along the Ou River.’ China Dialogue, 27 March. Link.

Featured Photo: Nam Ou 3’s construction site with safety warning in Chinese at the top of the dam, 12 August 2018. Source: International Rivers