The government of Laos has given the green light for the construction of the joint venture US$4 billion Hongsa lignite fired power plant in Xayaboury province.

Deputy Minister of Planning and Investment Thongmy Phomvixay signed the project concession agreements with representatives of the Hongsa Power Company in Vientiane on Monday.

The move gives legal backing to project shareholders of the Ratchaburi Electricity Generating Holding Public Company (RATCH), Banpu Power Limited (BPP) and Lao Holding State Enterprise (LHSE) to construct lignite mining and electricity generation facilities on a 60 square km site in Hongsa district, more than 300 km from Vientiane.

The concession period begins on the execution date and ends 25 years after the commercial operation date of the project, according to the agreement.

Speaking at the signing ceremony, Hongsa Power Company representative Thawat Vimolsarawong said project developers expected that commercial operation of the plant would begin in 2015.

The plant will be designed with an installed electricity generation capacity of 1,878 MW. Most of the power generated will be sold to Thailand under a Lao-Thai Memorandum of Understanding for the purchase of 7,000 MW by 2015.

The Electricity Generating Authority of Thailand (EGAT) has agreed to purchase 1,473 MW from the plant in accordance with the Tariff Memorandum of Understanding signed in May this year.

About 100 MW of power will be sold to Electricite du Laos for domestic consumption, to give a boost to local socio-economic development. The remaining power will be used by the project for internal mining and power generating operations.

Thai companies BPP and RATCH each hold a 40 percent stake in the project while LHSE holds 20 percent.

According to a press release from LHSE, BPP will utilise extensive mining and power project development experiences to provide necessary support for the project while RATCH will provide its expertise in power project development to ensure the project uses the most up-to-date and efficient technologies.

LHSE has valuable power development experience in Laos and will ensure the necessary coordination with local authorities.

The three project shareholders have made a strong commitment to ensure the project's compliance with all stringent applicable environmental standards, the extensive international environmental control system and tools to be installed.

The power plan consists of three units of 626 MW each, which are scheduled for completion in March, August and December of 2015.

The development of the Hongsa lignite power plant has a long history.

The government allowed Banpu Power Limited to carry out studies for construction of the plant in 2006 after the former project developer abandoned the venture.

The government believes a project of this scale will yield a high revenue while providing Lao people with jobs and income, one of the main factors in helping them to shake off poverty.