Mr. Xiaoming Ou General Manager CETIC International Hydropower Development Co., Ltd.
CETIC ranks very high in the list of top Chinese Import and Export companies as well as in the listing of top contractors in the world. Can you introduce us your company in Cambodia and how it has developed since it was established here?

CETIC is a state-owned company, which belongs to the State Grid Corporation of China. Our company was registered around 20 years ago and as time goes by our company has changed at the same pace as the reforms and opening of China. CETIC is one of the first major companies in the construction business in China. We ranked the 147th position of Engineering New-Record (ENR).

We started to study the situation in Cambodia since 1998. At that time, we found out that the Cambodian government wanted to build a project, basically in the form of a BOT (Build-Operate-Transfer) contract. The project is called the Kirirom I Hydropower Station. This project was actually completed in 1968 by the Yugoslavian government, but due to the civil war, this project was destroyed. When Samdech Hun Sen became Prime Minister of the country, Cambodia started to open to the world and started to get investment from other countries. China has historically good relations with Cambodia, so when we heard about this rehabilitation project, we sent CETIC staff to Cambodia to gather more information.

At that time there were 17 companies from China and other countries willing to bid for this project. We also considered it a really attractive investment. First, because we have experience in the construction of power stations and secondly because, as a rehabilitation project, everything is done, so the investment can be easily controlled. The only problem was that after a civil war and thirty years without maintenance, almost everything was destroyed. Indeed our company has never invested in BOT basis before. The investment management is more competitive compared to ordinary contracting project. It is not only the building but the financing process as well. BOT, BOO and BOOT projects are ways of doing business in nowadays market. Our company got to understand that the best way to get in the market and to get more profit is to be the investor as well as the builder.

Can you give us some facts & figures about the Kirirom I project?

On July 8th, 2000, CETIC signed the IA (Implementation Agreement) and the PPA (Power Purchase Agreement) with the MIME (Minister of Industry, Mines and Energy) and EDC (Electricité du Cambodge). According to the contract we were supposed to invest 24 million USD for the project. Being a rehabilitation project, it was easier for us to build it. The main concern for us is the commercial management as this is the first BOT project for us. Nevertheless we are strongly supported by the Cambodian government and also got a loan from Chinese Banks. After one year we finished the project's construction phase. The second phase is to operate it.

The project at Kirirom I comprises one power plant with 2×6 MW capacity turbine units, and the dam which has been rebuilt. The dam and the power plant are connected by a six kilometers long penstock and we have also built a transmission line of 115 Kv. with a length of 120 Km to connect Kirirom with Phnom Penh. In the middle of the line, there is a substation built in Kompong Speu.

This project has been accomplished in one year, 14 months before the end of the contract. Last year we started to operate it though the PPA contract starts in July 28, 2003. During the first year we have produced something like 30 GWH, which upon sale to the EDC (Electricité du Cambodge) meant a total of 2 million USD for last year. This project will be operated by CETIC for 30 years still. So far we consider the conditions quite fine. We have an agreement with the EDC, the payment is being conducted properly and according to our experience in terms of risk (management, finance, construction, insurance, etc…) this operation is considered very stable and risks can be controlled. Until now, there has been no problem with payment, and as you will understand, for an investor, the payment is quite important.

We have a good and smooth relationship with the MIME (Ministry of Industry, Mines & Energy) and EDC. We hope that this will last a long time. According to our calculations, within 10 or 12 years we can refundour investment back. We just hope the political situation will keep being stable, then everything will be just fine.

You mentioned several kinds of potential risks, do you have any kind of partnership policy to reduce those risks?

We are a construction company, if we had to bring in all the people you need to operate this plant it could become an expensive operation for us. So we found a Chinese hydropower station company to come here to operate this power plant. It can be seen as a sub-contractor or sub-operator. By doing so, we can concentrate in the development of the business instead of the operational side, and it is good for us to avoid operation risks, as well.


What about the future of CETIC in Cambodia. We heard you might be interested into bidding for the Kirirom III project?

From the experiences of the first BOT project, we have learned the risky points and solutions these kinds of undertakings bring along. We are very happy to get support from the Cambodian government who has offered us the sole bid opportunity to develop Kirirom III. The site is around 30 Km. from Kirirom I; near Road No. 4, which implies good conditions for construction. The main difference from Kirirom I is that in this project we will have to start from zero. We have already started studies and drawn maps of the area. We have formally expressed our desire to the MIME to build Kirirom III on a BOT basis. We are scheduled to start in July or August this year. First we will have to get the feasibility studies from the design institute. Once all the studies are made, we will have to submit the report to our parent company in China. The next step will be to negotiate with MIME and the EDC for the IA and the PPA.

Can you give us an idea of the magnitude of this future project of Kirirom III?

We have not received the feasibility report yet, but according to our experience, this project will be slightly bigger than Kirirom I, we believe it will be an 18 MW capacity power plant. We estimate the investment around the 36 million USD. We also consider that just one transmission line to Phnom Penh it will not be enough, so we are studying the possibilities to construct a second transmission line towards Sihanoukville.

Those are our plans, but it is not decided yet. We have already reported to our parent company and we have support from them. 70% of the investment will come from Chinese banks because the Chinese government supports companies who want to develop themselves oversea to aid developing country. Kirirom I is the first successful BOT project in power systems of China. It's small but a very typical project. Our Prime Minister Mr. Wen Jiabao has even met with the Cambodian Prime Minister, Mr. Hun Sen. The later has expressed his strong willingness to develop Kirirom III by CETIC and he wishes the Chinese Government to support CETIC in its endeavors to achieve the completion of this second project. With those two projects a total of 56 million USD will be invested by our company in Cambodia, it is not so easy for a company like ours to achieve that, so support from the governments is very important to us.