Some Cross-Cutting Lessons
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critics that could have delayed the project, and mitigating risks for financing institutions and private sector partners involved in Nam Theun 2’s development.1 Seeking private capital was new and in many ways politically contentious for the government, and the political risk guarantee was a relatively novel instrument. In 1994 NT2 represented the first major cross-border hydropower sales project in Asia. Mitigating political risk and raising financing required the participation of many bilateral and multilateral agencies. Coordination among the multiple agencies depended on harmonizing policies and procedures. Significantly leveraging official financing to attract private sources of financing was another challenge. The controversial nature of the project and the intense international scrutiny meant that external risks, including reputation risks for the World Bank and other partners, had to be carefully managed. The challenges for the World Bank have been not only to reduce risk for the organizations financing the project but also to ensure sound project preparation and design with regard to five factors: • governance (that is, the management of revenues generated from the project) • project economics, including Thailand’s demand for power • environmental and social impacts and the need for reliable upfront assessment, management, and monitoring throughout project implementation • transparency and the strong interest in disclosure of the information contained in the concession agreement and the power purchase agreement • timely and clear dialogue with the client on these issues. The World Bank’s role as the lead partner among a diverse group of private and public financial/development partners required it to ensure that project appraisal was based on strong technical work that other partners could rely on for financial due diligence, assessment of social and environmental safeguards, and designing revenue management. The viability of the public-private financing arrangement required the World Bank to take the lead on due diligence assessments related to safeguards, economic and financial analysis, procurement, revenue and expenditure management, and monitoring and evaluation. The World Bank also assisted NTPC in developing its financing package and the government in coordinating its international financial institution and bilateral equity package. (NTPC and the Electricity Generating Authority of Thailand [EGAT] negotiated the power purchase agreement without the World Bank’s involvement; the financiers performed due diligence on the commercial aspects of the deal.) Although the government and NTPC negotiated the concession