IFC, a member of the World Bank Group, and Lao PDR’s Ministry of Energy and Mines (MEM) have signed a Memorandum of Understanding (MoU) to strengthen and extend the country’s energy sector by mobilizing private investment in the transmission infrastructure. 

The MoU is expected to help improve the domestic grid to enhance electricity service provision as well as promote power exports, contributing to the country’s economic growth and shared prosperity.

Thanks to the nation’s geographical location and hydropower resources, Lao PDR’s primary energy supply grew at 7.5% annually and electricity exports increased almost fourfold over the 15-year period 2000-2015. However, the development of transmission infrastructure has been slow, hampering the country’s ability to utilize this generation capacity for domestic consumption and further export.

To reduce the burden on limited public finances, which could be deployed into other critical sectors of Lao PDR’s economy, IFC will support the MEM to assess a range of transmission projects, identify a suitable pilot project and help structure and attract private sector investments into the project. If successful, this model could then be replicated for other essential transmission projects needed to upgrade and extend the country’s power system.

“To harness our country’s abundant energy supply, we need to develop quality transmission infrastructure – and we are keen to partner with the private sector to deliver this, especially when the government is focusing on exporting electricity to boost Lao PDR’s economic growth,” said H.E. Mr. Thongphat Inthavong, Vice Minister of Energy and Mines. “By working with IFC, we can leverage their global expertise as we explore different initiatives, such as development of transmission assets through various forms of private sector engagement.”

As part of the MoU, IFC, in partnership with the Electricité du Laos (EDL) will also conduct a pre-feasibility study on a 500kV transmission line to export power from Lao PDR to Vietnam. IFC will also help the ministry identify and assess other suitable lines for private investment.

“Globally, we see a growing trend of private sector participation in critical infrastructure in developing countries. Drawing more private capital into the country’s power infrastructure will help Lao PDR expand electrification, generate higher export revenues, and support increased efficiency and improved service quality,” said Lubomir Varbanov, IFC Manager for Infrastructure and Natural Resources, Asia and the Pacific. “It will also help reduce the burden of capital investment on the government, freeing public resources for other critical sectors and thus contributing to the country’s socio-economic development.”