However, in their latest annual update on the 1070MW project, the banks caution that better progress needs to be made on erosion and drainage of some roads, compensation payments, finalising resettlement consultations and entitlement packages, and strengthening the livelihood programmes.

Construction activities on the project were better matched with environmental and social mitigation measures, said the banks. They added that project construction performance did not indicate major programme slippages or excess costs.

The banks further noted that the coming 12 months will be a vital phase in the project ahead of the start of reservoir impoundment behind a 39m high dam on the Nam Theun river, a tributary of the Mekong, and which is scheduled for June 2008.

Financial contributions to social and environmental initiatives over the first decade of the project’s operations are expected to total US$30M annually. From 2020-34 the project is expected to give US$110M per year.

Recently, ADB agreed to a US$20M loan to Nam Theun 2. The project is being developed by Nam Theun 2 Power Co, which has a 31-year concession that includes an operating period of 25 years. The company will export much of its electricity to Thailand and the Lao PDR state will receive a mixture of income and taxes from the scheme.