PPIAF LAOS Nam Theun II Power Project The proposed activity will support the Government of Laos' preparation in the final stages of development of the Nam Theun II (NT2) power project in Laos.  The proposed private sector investment project, NT2, includes the development, construction, and operation of a 1070 Megawatt trans-basin diversion power plant on the Nam Theun river, a tributary of the Mekong, in the central region of the country, about 250 kilometers east of Vientiane (capital of Lao PDR).  The project is structured as a BOOT (Build-Own-Operate-Transfer) arrangement.  The Government asked a foreign consortium, Nam Theun 2 Electricity Consortium (NTEC), comprised of EdF (France) as head contractor  (35 percent), EGCO of Thailand (25 percent) and Ital-Thai Development also of Thailand (15 percent), to assist in constructing and operating the project.  NTEC, representing the private sector interests, has incorporated with EdL (representing the Lao Government's investment entity with 25 percent of equity) to form the operating company, Nam Theun 2 Power Company Ltd. (NTPC), for a concession period of 25 years from the start of commercial operations.  A Power Purchase Agreement (PPA) with EGAT (the Thai public-sector power entity) for export of about 95 percent of the energy generated by the project is the basis for commercial financing.  The base project cost is currently estimated to be about US$1.1 billion ($1.3 billion with contingencies) -- which is expected to be funded using loan facilities of $750 million and shareholders. equity of $320 million. The financing parties (in alphabetical order) include: AFD, ANZ Investment Bank, Asian Development Bank, Bangkok Bank, Bank of Ayudhya, Bank of Tokyo-Mitsubishi, BNP Paribas, COFACE, EIB, EDC, EKN, FMO, Fortis Bank, GIEK, ING Bank N.V., Kasikornbank, KBC Bank N.V., Krung Thai Bank, MIGA, NIB, PROPARCO, Siam City Bank, Siam Commercial Bank, SociÃ©tÃ© GÃ©nÃ©rale, Standard Chartered Bank, Thai Military Bank, Thai-EXIM, and the World Bank (in). The Concession Agreement (CA) between the Government of Laos and the Nam Theun 2 Power Company was executed in October 2002; The Power Purchase Agreement (EGAT PPA) between Nam Theun 2 Power Company (NTPC) and the Electricity Generating Authority of Thailand was executed on November 8, 2003; and the Shareholders Agreement (SHA) amongst the four shareholders of the Nam Theun 2 Power Company: Electricite du Laos, EDF International, Electricity Generating Public Company Limited and Italian-Thai Development Public Company Limited was executed in September 2001. Over the last year or so, NTPC has begun the financing process for the project.  Nine (9) international banks and Seven (7) Thai banks have begun due diligence of the project along with multilateral and bi-lateral guarantee and lending support from World Bank, MIGA, ADB, AFD, EIB, and Poparco. The World Bank and ADB are finalizing their review of the Safeguard documents and the project lenders are in the process of completing its due diligence of the project documentation.  The Safeguard documents have been released in the Bank's Infoshop. The financing parties, including the multilaterals have indicated to the GOL and NTPC that a number of amendments in the project documents (CA, PPA, GOL undertaking, direct agreements etc.) will need to be agreed upon as a pre-condition for financing.  The current project development timetable is provided below: - Completion of Safeguard related Documentation:  January 2004 - Completion of Lender Due Diligence:  February 2004 - Lenders and Multilateral Board Approvals:  March/April 2005 - Financial Close:  May/June 2005 In this context, GOL has sought further services of its Financial and Legal Advisors to complete the negotiations of the project agreements so that the financing process can be completed by NTPC for the project. The Government of Laos has requested PPIAF to provide grant financing that would be used to finance Legal Advisors to the GOL with the objective of completing negotiations and drafting of amendments to project documents for the NT2 project.  A detailed Terms of Reference for the work that needs to be completed before Financial Close of the project (expected May 2004) is available in Files.  Streategic Objectives of the activity are noted below.