Independent Power Producer (IPP) project development in Lao PDR involves many ministries and agencies of Government of Lao PDR (GOL) such as Ministry of Planning and Investment (MoPI), Ministry of Energy and Mines (MEM), Ministry of Finance (MOF), Water Resources and Environment Agency (WREA), Ministry of Agriculture and Forestry (MAF), Ministry of Public Word and Transportation (MPWT), Ministry of Justice (MoJ) and Central Bank of Lao PDR, etc.


GOL committees, departments and agencies shares responsibilities in IPP promotion, development, construction, operation, agreements and contracts administration, supervision of implementation of social and environmental plans, etc. Institutional arrangements are varied from time to time as GOL develops and refines its policies for private sector participation in electric power projects.


The functions of key agencies and their role in IPP procurement are outlined below.


Ministry of Planning and Investment (MoPI)


The MoPI is a high level committee established within the Prime Minister’s Office. MoPI is the agency charged with the responsibility for entering into commitments with IPP developers and it therefore signs Memorandum of Understanding (MOU), Project Development Agreement (PDA) and Concession Agreement (CA) on behalf of GOL.


Ministry of Energy and Mines (MEM)


Overall responsibility for power sector development is vested with Department of Electricity (DOE) within the MEM.


MEM has primary responsibility for policy formulation and strategic planning which are taken jointly with the WREA, MoPI and other agencies as relevant to the situation. It also has responsibility for preparing and implementing legislation and regulations, collecting and processing data on electricity generating potential, administration and inspection of electricity enterprises.


MEM has a number of planning and regulatory functions in the development of IPP which include:


·        Promotion of pipeline of projects (database);

·        Formulation of power sector policy and procedures;

·        Reviewing IPP studies and agreements;

·        Participation in tariff negotiations with foreign investors;

·        Monitoring environmental impacts and environmental Management Plans in cooperation with WREA and other relevant ministries, agencies and local authorities;

·        Establishment and monitoring of technical standards.


After reviewing technical studies prepared by developers promoting IPP projects, DOE formally issues a certificate of no objection.


Ministry of Finance (MOF)


The MOF is responsible for putting GOL’s fiscal and monetary policies into effect, either by direct control or through the Central Bank of Lao PDR. In this capacity, MOF approves loans and issues sovereign guarantee on behalf of GOL and in compliance with GOL’s international covenants. MOF holds accounts at Central Bank that receive soft loans that are on-lent to power sector projects.


Where GOL equity in IPP projects is financed by International Financial Institution (IFI) loans the loans are channeled through the MOF before being on-lent to the agency designated as the GOL shareholder.


Water Resources and Environment Agency (WREA)


WREA was established on 10 May 2007, by Prime Minister Decree No. 149/PM; as the main coordinating agency for environmental planning and management across all sectors. Its responsibilities are set out in Article 36 of the Environmental Protection Law and include implementing the National Social & Environmental Action Plan, forming environmental policy, issuing and revoking of licenses to organizations involved in providing environmental services, receiving and evaluating Social-Environmental Impact Assessment (SEIA) and other environmental reports, and regulating agencies to curtail or modify activities that are having an adverse effect on the environment.


WREA has a significant role in IPP project development. It evaluates IPP feasibility studies and EIAs and, if approved, it issues environmental certificates. It performs these responsibilities in cooperation with DOE. WREA then monitors environmental management plans of IPP projects and issues and revokes environmental licenses of IPP sponsors.

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Central Bank of Lao PDR (BOL)


The BOL was established in June 1990 through the Central Banking Law. The Central Banking Law provides for:


·        Regulation and supervision of commercial banks, regional banks and other providers of financial services;

·        Managing foreign exchange reserve; and

·        Issuing money and managing the money supply;


The BOL has sole responsibility for setting and managing the exchange rate. Banque pour le Commerce Extérieur Lao is a subsidiary of the BOL and acts in this capacity.


Currently the BOL role in IPP is limited. The BOL approves the establishment of foreign exchange accounts of the project companies in line with provisions of the various project agreements. The BOL also holds accounts on behalf of the MOF to receive soft loans from IFIs.


As it is required by Electricity Law (Article 12), the GOL shall” participate in the shareholding when there is a concession for an electricity enterprise”. The GOL designate Electricité du Laos (EdL) and Lao Holding State Enterprise (LHSE) to be a shareholder in different IPP project companies.


Electricité du Laos (EdL)


EdL is a state-owned corporation under MEM that owns and operates the mains generation, transmission and distribution assets in Lao PDR, and manages electricity imports to its grids and electricity exports from its generating stations. EdL answer to its board which includes GOL appointees.


EdL has a project development role as the implementing agency for GOL’s main generation, transmission and distribution projects. EdL’s system planning office performs system expansion planning and analyses potential generation and transmission projects.


EdL is involved in the Lao IPP program in several capacities:


·        EdL is an off-taker from IPP projects. Through EdL off-take from IPP projects has been small to date, it will become an increasingly important source of generation for EdL in future and larger commitments from new projects are planned.

·        Historically, EdL has been designated by GOL to hold its shares in IPP investments. It is the current holder of shares in the Theun-Hinboun Power Company and Houay Ho Power Company, which have been in operation since 1998 and 1999 respectively.


Lao Holding State Enterprise (LHSE)


The LHSE was established under the Business Law as a State Enterprise. Prime Ministerial decision of 27 January 2005 empowered MOF to establish the LHSE.


LHSE is governed by a Board of Directors.


LHSE’s role is initially to represent the GOL’s shareholder interests and to establish the revenue management framework for Nam Theun 2. As a holding company it could own shares in other projects and could establish them in a separate legal entity.