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BRI-Backed Power Plant Set to Reduce Cambodia's Energy Shortfall

US$781 million Sesan II hydroelectric facility tipped to cut country's reliance on imported energy as demand soars.

Photo: Lower Sesan II: The BRI-backed hydropower facility that now produces 20% of Cambodia’s electricity.
Lower Sesan II: The BRI-backed hydropower facility that now produces 20% of Cambodia's electricity.
Photo: Lower Sesan II: The BRI-backed hydropower facility that now produces 20% of Cambodia’s electricity.
Lower Sesan II: The BRI-backed hydropower facility that now produces 20% of Cambodia's electricity.

After a lengthy five-year construction programme, the Lower Sesan II hydroelectric power facility – one of the biggest Belt and Road Initiative (BRI) backed projects in Cambodia – officially came online in the closing weeks of 2018. With a 400MW generating capacity, it is the seventh mainland China-built hydropower dam in the country and will keep the lights on in Phnom Penh, the national capital, and throughout the northeastern Stung Treng province.

In total, the seven now-completed China-backed dams have a generating capacity of 1,328MWs. This represents half the country's overall electricity production level, with Lower Sesan II alone accounting for about 20% of Cambodia's total installed capacity.

Built along one of the principal tributaries of the Mekong River and standing 56.5 metres high, the project covers an area in excess of 36,000 hectares. A truly massive feat of civil engineering, the completed dam is 6.5 kilometres long, the longest in Asia. Its eight bulb tubular units, each with a 50MW generational capacity and all of which were manufactured in China, are now said to be fully operational.

The facility has been built under the build-operate-transfer (BOT) structure that has come to characterise BRI initiatives throughout the Asia-Pacific region and beyond. In line with the initial agreement, the developers – led by Huaneng Hydrolancang International Energy – have a 45-year operating concession, although five years of that elapsed during the construction period.

As well as Beijing-headquartered Huaneng, which has a 51% stake in the consortium, Cambodia's Royal Group holds 39%, with Vietnam's EVN International Joint Stock Company controlling the remaining 10%. The total project cost has been estimated at US$781 million, with the dam expected to bring in almost $30 million a year in revenue.

The completion of the dam is somewhat timely, with Cambodia currently wrestling with a severe power shortage, a problem exacerbated by the fact that it is in the midst of a power-hungry, FDI-fuelled manufacturing boom. To make matters more complex still, despite the surge in industrial development, the country still has a number of significantly populated regions that have no access to the national grid. Tellingly, although over the past 15 years the country's level of electricity production has increased by 1,250% (from 208MW in 2004 to 2,650MW last year), it has barely kept pace with the growth in consumption, which rose by about 1,140% over the same period.

According to the 2018 annual report of the Electricity Authority of Cambodia (EAC), despite the increased power supply delivered by the Lower Sesan II project, the Kingdom will still need to import the same volume of energy from neighbouring countries in 2019 as it did the preceding year. The total shortfall is estimated to be about 442.50MW, of which 277MW will be sourced from Vietnam, 135.50MW from Thailand and 30MW from Laos.

On a more upbeat note, however, Ty Thany, the EAC Vice-chairman, has gone on record as saying that not only will the power grid extend to every village in Cambodia by the end of this year, but also that the overall percentage of the nation's homes connected to the grid will rise to 80% from the current 70%. Significantly, he also made assurances that the cost of electricity will drop considerably. This is in line with a number of previous reductions that resulted from the completion of earlier China-backed power projects.

For this year, the projected new tariffs range from 4-20% less than the current charges, depending on the monthly consumption brackets of individual / corporate users. Further reductions are expected to follow in 2020.

Welcoming the planned reductions, while still sounding a cautionary note, Ly Visal, the Operations Manager of The Federation of Associations for Small and Medium Enterprises of Cambodia, said: "While any reduction in electricity prices is going to be good for local business, the price does still remain comparatively high. Even after these promised cuts, the per-unit tariff will still be 30-40% higher than that in our neighbouring countries, which makes it tough for domestic businesses to be truly regionally and globally competitive."

Geoff de Freitas, Special Correspondent, Phnom Penh

Content provided by Picture: HKTDC Research
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