Private equity, public affair: Hydropower financing in the Mekong Basin Vincent Merme a,e, *, Rhodante Ahlers b , Joyeeta Gupta c,d,e a Independent Researcher, France b Independent Researcher, The Netherlands c University of Amsterdam, The Netherlands d Amsterdam Institute for Social Science Research, University of Amsterdam, Delft, The Netherlands e UNESCO-IHE, Institute for Water Education, Delft, The Netherlands 1. Introduction Increasing global energy demand and the need to shift away from fossil fuels contribute to the current renaissance of hydropower development. Proponents commonly present hydro- power as a straightforward way to exploit the power potential trapped in uncontrolled rivers, thereby supplying electricity, reducing greenhouse gases and attracting foreign currency, for sustainable regional development. Both the International Energy Agency and the World Bank (WB) argue that seventy percent of economically feasible hydropower potential (1330 GW) is still unexploited, of which most lies in Africa, followed closely by the Asia-Pacific region (IEA, 2010; WB, 2009). This potential far exceeds existing production capacity. A study commissioned by the WB (corroborated by our own research) reveals that large-scale hydropower investment costs between US$ 1000 and 4000 per kW capacity, depending on the unique nature of each project (IEA, 2010; MRC Database, 2009; WB, 2000). Consequently, exploiting the energy confined in those undammed rivers appropriate for hydropower development would require roughly between US$ 1.33 and 5.32 trillion. The average returns on investment for equity investors depend on several factors but sits between seven and twenty percent (and around two to three percent over the cost of capital for debt lenders) (Ljung, 2001). Such a prospective market makes investment in hydropower financially quite attractive in general and in particular in the Mekong River Basin – the case study in this paper. The current increased interest in large dam development and its financial opportunities is not accompanied by increasing literature on hydropower financing dynamics and the mechanisms that bring (private) financial actors together to finance a single dam project. Much literature is available on the social and environmental impacts of large dams (in general, see Gupta, 2002; Khagram, 2003; Klingensmith, 2007; Scudder, 2005; WCD, 2000 and for the Mekong, see Fergusson et al., 2010; Grumbine and Xu, 2011; Hoa et al., 2007; Kummu and Varis, 2007; Stone, 2011; Vaidyanathan, 2011; Virtanen, 2006); challenges facing dam hydropower development since the World Commission on Dams came out with its influential report on sustainable dam building (in general, see Baghel and Nu ¨ sser, 2010; Bosshard, 2010; Kaika, 2006; Karki et al., 2005; Nu ¨ sser, 2003; Shah and Kumar, 2008; and for the Mekong, see Grumbine et al., 2012; Smits and Bush, 2010); and the Global Environmental Change 24 (2014) 20–29 A R T I C L E I N F O Article history: Received 30 May 2013 Received in revised form 13 September 2013 Accepted 3 November 2013 Keywords: Hydropower Finance Mekong Water Accountability E&S impacts A B S T R A C T Large-scale hydropower development is increasingly popular. Although international finance is a significant driver of hydropower market expansion, financial data is relatively obscure and literature remains scarce. This article tracks the financial process in hydropower development in the Mekong River Basin. It shows a shift in influence from traditional public international financial institutions to a diverse mix of private actors, who are enticed with attractive terms of trade and complete decision making power over water resource management. Traditional players have now taken on a more facilitating and regulatory role by providing guarantees and mitigating social and environmental impacts partly releasing the new global and regional private actors from these responsibilities. Because hydropower financing involves opaque processes and confidential documents public accountability is severely limited. While the private sector benefits from relatively short term returns, the public sector is left responsible for long term impacts. ß 2013 Elsevier Ltd. All rights reserved. * Corresponding author at: Archimedesstraat, 37 III, 2517 RR The Hague, The Netherlands. Tel.: +31 645 511 954. E-mail addresses: vincent.merme@gmail.com (V. Merme), rhodanteahlers@gmail.com (R. Ahlers), j.gupta@uva.nl (J. Gupta). Contents lists available at ScienceDirect Global Environmental Change jo ur n al h o mep ag e: www .elsevier .co m /loc ate/g lo envc h a 0959-3780/$ – see front matter ß 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.gloenvcha.2013.11.007