Hydroelectric Dam Laos The Intercultural Stakeholder Engagement Simulation This document is an entirely fictional work, intended solely for use in an educational context. While some places and situations described may exist in reality, the authors do not guarantee the accuracy of any of this content and do not intend to convey any opinion whatsoever about the information that may or may not appear to be based on fact. Any similarity between the names of individuals and organisations featuring in the work and those of real-life individuals and organisations is entirely coincidental. This simulation has been developed by Ososim Ltd. in association with Maarten Asser, an expert on intercultural competence. © Ososim Limited 2016. All Rights Reserved. Proprietary and Confidential. www.ososim.comHydro Laos © Ososim Limited 2 Internal Memo From: Sharon Brown Executive Director Asia Pacific, Hydro Con To: Sam Grey Head of Nam Kading Hydro Power Project Date: 30 March Dear Sam, Please accept my congratulations on your appointment as the head of one of our most important hydroelectric power plants in the coming years. As you are aware, planning is well advanced and we are eager to get the actual construction phase of this project underway as soon as possible. However, this is also one of the most complex and ambitious hydroelectric schemes we have undertaken on an international scale and before we can get going properly, we need to be sure that all of the parties who will have an impact on the success of this venture are behind the plan or at least have been fully consulted. You are familiar with our company’s commitment to consultative engagement with our stakeholders in the best long-term interests of our business. I expect you to carry out this process with the list of stakeholders I have compiled for you in preparation for a final sign-off on the major decisions of the project plan. You will find in the attached documents information about the current draft site development plan, the decisions to be finalised and the stakeholders to be included in your discussions. Although the draft plan has already been reviewed by myself and several of the other important parties, do not assume that it is set in stone. I give you full authority and responsibility for changing any of the decisions set out here, as you see fit, always keeping our business objectives in mind, of course. I expect to have the finalised plan on my desk at the end of June, in 12 weeks time, along with a report on the views of the stakeholders at that time. I am confident that you will deliver the results we need to make this project a great success. Best regards, SharonHydro Laos © Ososim Limited 3 Context The hydroelectric power business is an old, yet still dynamic industry, with the first hydroelectric power plants having been constructed in the late 19th century. Currently hydro power constitutes approximately 20% of the world’s electricity generating capacity, with several major countries including Norway, Brazil and Canada, generating the majority of their electricity through hydro power. Hydroelectric power projects are under construction in 80 countries, with the primary growth regions being China and South-east Asia and South and Central America. Hydro power is by far the largest source of renewable energy. Your company, Hydro Con, is a large, international business specialised in the construction of hydroelectric power plants. It is the hydro power construction subsidiary of a major energy conglomerate. Initially established in North America, the company has completed projects in many countries around the world, including South America, Africa and Asia. The development of a hydroelectric power facility on the Nam Kading river on the Nakai Plateau of central Laos was initiated 5 years ago with talks between the Lao PDR government, a Thai energy consortium and several potential financial investors. Due to its ties within the region and reliable track record, Hydro Con was brought in quickly as the construction partner in the deal. After a series of initial studies on the social and environmental situation in the area, site location alternatives and financial projections, the project partners signed the launch agreements stipulating structure, shareholdings, license, power purchasing and financing last year. With a target of financial closure and start of full construction activities scheduled for next spring, there remain some open questions on major decisions within the draft project plan. Goal and Final Outcome Your goal is to achieve maximum buy-in from the stakeholders for the project’s site development plan while achieving the best expected outcomes for your business from the project. Your company’s main success criteria is Profitability (see below for how this is measured), but it has also relatively recently introduced a measure of ‘Sustainable Business Practices’ which is a synthesis of the views of relevant stakeholders for each aspect of the business, expressed as the ‘stakeholders’ weighted opinion score’. The stakeholders’ views to be included in this measure for this project are the ones who have been identified by your boss and whose descriptions are included in this document. Your success will be judged on the basis of both of these criteria. Hydroelectric Site Development Plan Project Background The current draft site development plan for the construction of the Nam Kading Hydroelectric power plant has been based on the studies that have taken place over the previous years in the region, the experience of the project partners involved, and extensive consultation with various other parties. However, the complexities of the issues, along with the lengthy establishment process mean that there are still major decisions to be finalised with regard to the construction of the project. The sections below summarise the decisions you will be expected to finalise, as well as their impact on various outcomes of the hydro power project.Hydro Laos © Ososim Limited 4 Site location map The site area chosen for the power plant is at the confluence of the Nam Kading and Nam Mouan rivers. There are two potential dam sites: one on the Nam Kading river just above the confluence with the Nam Mouan (site A), and the second on the Nam Mouan just before it flows into the Nam Kading (site B). The area is heavily forested with sparse settlement, but there are several villages located nearby which would be flooded by situating a dam at site A. Of interest is also an ancient burial ground currently under some archaeological investigation, which would be flooded if a dam was situated at site B. Decision Elements and their Impacts Dam site location The draft plan currently calls for one dam to be built at site A, but this is still up for discussion. Those who want to maximize power production and utilize the site most efficiently argue for building dams at both sites A and B. However, the construction of both dams would flood a larger area, covering both the local villages and the burial ground, and causing more disruption to the local environment. Another alternative would be to construct only the dam at site B instead. The Nam Kading river has a larger volume of water and would produce more power, with site B predicted to produce approximately 30% less than site A. Construction at dam site A would require the resettlement of approximately 4,300 villagers. Construction at dam site B would require either the costly relocation of the burial site or result in its complete destruction. Whether one or both of the dams are constructed, the location of the proposed power plant and transmission lines would remain unchanged. Nam Mouan River Nam Kading River Principal village sites Ancient burial ground Proposed dam site A B Power plant O Proposed dam site Transmission lines Transmission linesHydro Laos © Ososim Limited 5 Fish ladders The rivers are home to numerous species of fresh water fish, some of which are already endangered by the impacts of fishing and human populations on their aquatic habitat. Their lifecycles cause them to move up and down the rivers during spawning and after hatching. The fish are a staple food item for the local population and provide a large portion of their livelihood. Dams built at the proposed sites are expected to have a significant impact on the fish populations in the rivers, reducing their population to only 30% of pre-dam levels if nothing is undertaken. The most effective means of improving the survival rate would be to construct fish ladders alongside the dams, allowing the fish to migrate up and down stream without entering the dam intakes and getting caught in the turbines. Fish ladders can mitigate the population losses by up to 50%. The current draft plan does not foresee fish ladders, as their cost was judged to be too high. Community development investment Investment for community development goes towards improving local infrastructure for the populations impacted by the project. These investments may include covering the cost of providing local electricity from the power plant to surrounding communities, improving the road and transportation network in the region, building educational and medical facilities to serve the local population. This is a poor region with a standard of living below average even for Laos, already a poorly developed country compared to most of the rest of the world. Certain studies predict a significant impact on the lives of the local population just from the additional income and work that this project will bring to the region, regardless of whether any money is invested specifically in community development. There are mixed views as to the need for or desirability of making additional targeted investments in the community. The current draft plan provides for a low level of supplementary community development investment. You can choose to invest at any level from none to high: Low – provides basic infrastructure connection from power plant to local electricity grid and upgrades existing road network. Medium – provides for local electricity to the community, expands upon the existing transportation infrastructure and establishes a fund for expanding educational opportunities in the region. High – guarantees local electricity to the community from the plant, substantially expands the transportation infrastructure and establishes on-going funding for both educational and medical facilities in the region. The community development level is a measure on a scale of 0 to 5 with 5 being the highest level of development. This level is affected by the dam project and the level of community development investment chosen.Hydro Laos © Ososim Limited 6 Transmission lines The transmission lines will connect the power plant to the grid, transporting the electricity generated to its customers both in Laos and Thailand. Over 165 km of transmission lines will be built, much of this through largely undeveloped landscape and part of it through a national conservation area. The most direct, safe and efficient method of installing these lines is using a straight-cut method which takes the path of least resistance and clears the terrain to accommodate overhead high-tension lines on pylons. The low-profile method provides an alternative which is more costly and involves a higher risk, both during the construction phase and in on-going operation. This method accommodates itself as far as possible to the existing terrain, following natural contours and even possibly laying some cable underground where the sensitivity of the environment dictates. Construction process investment Construction process investment covers the costs of complying with national and international standards and regulations, applying best-practice methodologies for power efficiency and safety, and implementing innovative technologies and solutions throughout the construction of the dams, the power plant itself, the transmission lines and all other parts of the project. There are three levels of construction process investment which the project can commit to maintaining: Minimum – the minimum standards are adhered to, with just enough investment to comply with required regulations and ensure completion and on-going operation of the facilities. Average – construction process conforms to industry standards and accepted best-practice, balancing costs with expected benefits; some newer technologies and solutions are chosen which promise long-term efficiencies at the expense of higher short-term costs. Maximum – every attempt is made to surpass even the most rigorous international standards and best-in-class solutions are chosen whenever possible to make this project one of the most modern and advanced showcases in the hydroelectric power industry to date. The current draft plan provides for an average level of construction process investment. Landscape impact The Landscape impact rating is an outcome measured on a scale of 0 to 5, with 5 representing a high impact on the landscape and 0 representing no impact. Of course, simply the building of the dam or dams on this site will inevitably impact the local landscape. Furthermore, other choices made in the site development plan will affect the impact on the landscape to a greater or lesser degree. The choice of the type of transmission lines is one of these elements, with the straight-cut method disrupting the existing environment to a greater extent than low-profile lines. The amount invested in the construction process also affects to what degree the surrounding landscape is likely to be changed by the project, with a higher investment causing less impact, as better standards are followed and the latest technologies used to minimise negative side effects of the construction.Hydro Laos © Ososim Limited 7 Accident risk The accident risk is an indication of the probability of a major accident potentially involving human injury or death occurring during the duration of the construction project and the first ten years of the power plant’s operation. As for any complex construction, the risk of accidents can never be completely eliminated, but the choices made will impact the probability of a major accident happening. The resulting probability is drawn from your company’s extensive experience with such projects, as well as industry-wide standards and statistics. In general, the larger and more complex the project, the higher the accident risk. Furthermore, of the decisions in the site development plan that need to be finalised, in particular the type of transmission lines chosen and the amount of construction process investment undertaken will impact the probability of accidents. Employment The construction project will create job opportunities for local employment throughout its duration. Although many of the jobs created will be for relatively low-skilled construction site workers, there will also be job opportunities for more highly skilled engineers, technicians and crew managers. If these cannot be recruited from local and regional populations, they will be brought in by Hydro Con and the subcontractors from other locations, either from other parts of Laos or potentially from Thailand. The number of jobs created is related to the size and extent of the final project. The amount of community development and construction process investment undertaken also both affect the number of workers needed to complete the construction. Energy output This project outcome expresses the expected annual energy output once the plant is fully operational. The energy that the power plant will be able to supply is primarily a function of the dam(s) constructed and the flow of the water in the rivers concerned. Because of the greater water flow on the Nam Kading river, the dam at site A will provide more power than the one at site B. The construction process investment also affects the potential energy output somewhat, due to differences in the engineering technology. More process investment will result in more efficient power conversion and a higher output. Profitability Profitability is the most important business measure for Hydro Con in judging the relative success of its various projects. The Profitability measure is calculated using the projected future cash flows of the business from the construction period and throughout the expected operational lifetime of the power plant. Hydro Con’s experienced corporate financial team carries out scenario planning and forecasting to most accurately project these expected values, from construction and operational costs, through revenue streams and potential market changes. The net present value of these future cash flows is calculated to arrive at as good a measure as possible of the actual value to be created by the project. Every decision taken will affect the profitability of the project in some way, through changes in costs, revenues, the capital investment needed, or the risks involved. It is this measure which will be one of the primary criteria for judging your success in managing this task.Hydro Laos © Ososim Limited 8 Corporate taxes Corporate taxes generated from the project are an important measure particularly for the Lao government, in addition to their interest and shareholding in the venture. Although there have been various tax concessions agreed in the project licensing, once revenues start to flow from the sale of electricity, and certain construction costs have been recuperated, the government fully expects to collect corporate taxes on any profits made by the business. Similar to the Profitability measure, the expected corporate taxes are calculated as a net present value of the future projected cash flows based on mutually agreed forecasting scenarios. Summary – Current draft plan decisions and outcomes Decisions Outcomes Dam site A Yes Village site Flooded Dam site B No Burial site Unaffected Fish ladders No Fish population 60% Community development investment Low Community development level 3 Transmission lines Straight cut Construction process investment Average Landscape impact rating 3 Accident risk 5% Annual energy output 175 GWh Employment created 3,080 jobs Profitability $ 110 000 Corporate taxes $ 24 200 You will be provided with a computer model that calculates the various outcomes based on any changes you make to the decision elements.Hydro Laos © Ososim Limited 9 Project StructureHydro Laos © Ososim Limited 10 Project Stakeholders The principal stakeholders of the project have been identified. You will find brief descriptions of each of the stakeholders and their organisations below and in the software. You will be able to collect more information about these people throughout your task and get to know them better by communicating with them. In the simulation the coloured circle around the head of each stakeholder gives a quick indication of that person’s current opinion towards the hydroelectric plant’s site development plan. The circle colour shows red (very negative), orange (negative), yellow (positive) or green (very positive). Sharon Brown – Executive Director Asia Pacific, Hydro Con Sharon Brown has created a reputation for herself as a hard driving corporate leader in the construction business. Born and raised in the mid-west of the United States of America, she studied engineering and then joined Hydro Con at an entry level position. She climbed the corporate ladder steadily, succeeding in a domain largely dominated by men. Hydro Con is the largest shareholder and the lead contractor in the Nam Kading Hydro Power Project. You report directly to Sharon who holds final Profit & Loss responsibility for the project. She has been leading the Asia Pacific region for the past 4 years. The region makes solid contributions to shareholder value under her leadership and she has been behind the success of a few big projects in the region before this one. She is optimistic by nature and confronts issues head-on. Thongsavath Boupha – Energy Minister, Laotian Government The Laotian government holds a 35% stake in the Nam Kading Hydro Power Project through its state-owned holding company, Lao PDR Holdings. This holding company falls directly under the authority of the Ministry of Energy of Laos. The economic development of the country hinges on affordable energy sources and distribution, as well as the taxes gained from this type of business investment. Thongsavath Boupha is a smart and goal-orientated professional bureaucrat in the Laotian government. He became the Energy Minister during the last elections and his re-election could depend largely on the success of this project. He is ambitious and progress orientated, but knows the risks involved for his political career should this project not succeed.Hydro Laos © Ososim Limited 11 Tanipat Thinnakorn – Project head, PTE - Thai Energy Corporation PTE is the Thai energy corporation which controls and manages all of the infrastructure and energy supply within Thailand. It has more recently also been making selected foreign investments to secure additional energy supplies for Thailand. For the Nam Kading Hydro Power Project, PTE is not only a minority shareholder; it also will supply some of the distribution infrastructure and has been guaranteed the majority of the power output of the facility. A successful Thai businessman, Tanipat Thinnakorn, has already had a distinguished career at PTE. Leading this project successfully will almost certainly put him in line for a top position within the organisation. He knows he needs to please both the Laotian government and his Thai customers. His project team members speak very highly of him, but this is the first time that he is working with the French subcontractor, Devela SA. Birgitt Hanssen – Fund manager, Investment Fund of Norway The Investment Fund of Norway has taken the lead of a consortium of lenders to secure debt financing for the Nam Kading Hydro Power Project. The fund manager put in charge of this investment is Birgitt Hanssen, a Norwegian who has been with the Fund for 10 years. An exceptionally sharp and decisive professional, Birgitt got to the top of her career track early. Her superior analytical assessments and deft long-term planning skills have made her very successful in the complex projects with public and private shareholders that the Investment Fund of Norway tends to support. Deeming herself to be extremely efficient, she does not spend a lot of time explaining her choices. Michele Chow – Project Director, World Bank The Nam Kading Project is a typical investment for the World Bank which is interested particularly in the impact of the project on economic development in Laos. The lead for this project at the World Bank is Michele Chow, a Singaporean of Chinese descent who has made it to Project Director based on a solid track record within the organisation. Non-confrontational in her attitude, she invests in projects with a longterm point of view. Her diplomatic skill is well suited to this project, and her financial acumen leaves little to be desired. She is a strong supporter of clean energy investments in the region. Mr. Soulivong – Director, Provincial Agriculture and Forestry Office The Provincial Agriculture and Forestry Office in the Kading region is responsible for implementing and enforcing the Lao government’s policies and regulations regarding both cultivated and natural environments in the region. Mr. Soulivong is a quiet local Laotian official who takes pride in his job. He has held this position for 12 years and has built strong connections to other local officials in the field. His friendship and sympathy for the village leaders in his region is well known, as are his political links with the national government. Mr. Soulivong truly believes that all stakeholders of this project can be satisfied.Hydro Laos © Ososim Limited 12 Keo Xayavong – Village leader The villages which will be affected by the proposed dam construction are scattered mainly up one side of the Kading river. Mr. Xayavong has been the leader of the largest village in the affected area for 20 years, a position which he took over from his father. He is a wise elderly man who is proud of his heritage. His collaborative, yet decisive manner of governance have made him popular in his village and the surrounding area, but the ‘newcomers’ from the project have concerned him. He is determined to do whatever is best for the population of the village and the whole area. François Delors – Construction subcontractor, DEVELA SA Devela SA is a well-established French construction company which has an extensive presence in Southeast Asia and many local connections. It has been awarded the primary construction contract and is responsible for the full dam and power plant construction. François Delors is heading this project for Devela; he is French and a hard-working, former foreman in the construction business. He made his career on solving difficult issues at problem projects to get the job done. Monsieur Delors understands that he needs the locals to be successful in this project. He has travelled and worked all over the world and generally gets along with everybody. He does not mince words and offers his opinion freely. Buk Phongvonsa – Union Leader, Local construction workers union Trade unions in Laos are subject to strict regulation and are linked directly to the political organisation. There have been some recent reforms of the Labour Law to improve workers’ rights, but unions remain relatively restricted in their powers. Buk Phongvonsa is Laotian and has been a union leader for 5 years. Most local construction workers are not yet unionized in this region; hence Buk is plotting carefully to increase membership. Safeguarding and protecting employment is first and foremost on his agenda. He is ambitious and understands the conflicts and potentially adversarial relationships within the project. Josephine Candor – Professor of Archaeology The burial site situated along the Nam Mouan river has been used by local populations for many centuries, but was recently added to the list of sites being investigated by the Mekong Tributaries Archaeological Project when evidence of Iron Age jar burials was unearthed here 5 years ago. The archaeological project is being sponsored jointly by the University of Toronto and the Lao Department of Heritage. The head researcher, Josephine Candor, is Canadian and a specialist in the field of jar burials. She spends about half her time in field research and the other half teaching in North America. There is no question in her mind of the value of her findings in Laos, but she is continually frustrated by the lack of site protection and the relatively low priority placed on such work by the government.Hydro Laos © Ososim Limited 13 Kai Chareonkul – Environmental Impact Expert Various impact studies have been conducted during the preceding project phases. One of the initial environmental studies, contracted by the Lao government to comply with pressure from the World Bank and other standards, was conducted by Kai Chareonkul, an expert in the field. Kai is of Thai heritage and was educated overseas at Rice University graduating with a Professional Masters Degree in Environmental Analysis and Decision Making. Back in Thailand and thanks to his father’s connections, Kai set up a small consultancy in the field, specializing in this region of the world. A forward-looking and systems-orientated specialist, he reports to the government which has asked him to continue to assess the dam development plan and its environmental impact. Gert Offerbach – Activist, EcoAction EcoAction is a widely recognised and respected Non-governmental organisation (NGO) devoted to raising awareness of environmental issues and ecological problem spots around the globe. Gert Offerbach has been the leader of the organisation’s Southeast Asia chapter for the last three years. He has been an activist all his life. Born and raised in Germany in the ‘green movement’, he became politically involved and organised demonstrations during his student days. Although he first worked on the German government’s Council on Sustainable Development, he became disillusioned after just a couple of years and left to travel the world. He eventually joined the Southeast Asia chapter of EcoAction after becoming friends with some of the founding members. Daniel Fairbanks – Bureau chief, International News Agency The International News Agency is a global independent news organisation which delivers news and commentary worldwide. Daniel Fairbanks has been the Bureau Chief at the Agency in the region for two years and he is personally covering the Hydro Development Plan in Laos. Daniel is British, a savvy reporter with a nose for the human interest story and a patience for his stories to develop that is usually associated with much older journalists. He is keen on getting the full story over time, but wouldn’t hesitate to create a bit of controversy with occasional editorials.Hydro Laos © Ososim Limited 14 Actions you can take There are fundamentally two types of activities in which you can engage: (1) adjusting the hydroelectric site development plan elements and (2) communicating with stakeholders to engage them and ensure support for the plan. Hydroelectric site development plan elements You can change any of the decision elements shown in the draft plan above at any time during your assignment. Your current set of decisions is entered into the project proposal and the projected project outcomes are recalculated based on the new data. The resulting outcomes can be discussed with and communicated to stakeholders (see below for communication options). In order to discuss a specific set of outcomes with someone, you must first enter the corresponding decisions in your proposal. The site development plan decisions are only finalised at the end of your 12 week deadline. Be sure to enter your desired final decision options in the plan before this time. Communication activities with stakeholders You will be able to choose from the following list of communication activities to schedule during your working hours. You work from Monday to Friday and have 8 hours available each day. Each type of activity chosen takes a set amount of time and is scheduled for the next available slot during which all of the stakeholders involved are free. For the following three types of activities, you will simulate the actual exchange of messages, choosing questions or statements from a list of possibilities and receiving responses from the individuals. You can choose to hold these activities with one or more individuals. Be aware that the statements and questions available for you to choose from will vary depending on the form of communication chosen, which stakeholders are being communicated with, and how many stakeholders are included. There are also restrictions on which stakeholders are available to meet or speak with each other (eg. you will not be able to arrange a meeting which includes a very senior stakeholder together with a very junior one). • meeting (takes two hours, maximum 10 messages) • phone call (takes one hour, maximum 5 messages) • emails (takes half an hour, maximum 3 messages) The following types of communication activities involve selection of the attendees, but you do not see the events simulated directly on screen. They will occur at the scheduled time and have an effect on those involved. There are also restrictions which apply to the choice of stakeholders which you can request to meet with or speak to each other. • get others to meet with each other: allows you to ask two stakeholders to meet with each other (takes an hour to arrange, but none of your time when it occurs) • get others to phone each other: allows you to ask two stakeholders to call each other (takes half an hour to arrange, but none of your time when it occurs) • send the current site development plan: allows you to send the current contents of the plan proposal to the stakeholders of your choice (takes half an hour) For the following communication activity you do not select any attendees, as the press release is simply issued to the general public and you do not have control over who reads the information. • issue a press release (takes two hours): you may choose to issue each press release on one subject only. The available subjects are either one of the proposed site development plan elements as per your current plan or the current opinion of one of the stakeholders.Stakeholder panels Hydro Laos Simulation Quick Reference Chart Access to information viewing panels Current time period Schedule various forms of communication Email Telephone Meetings Other (non-simulated) Document file with additional Manual time advance buttons Calendar showing past and future scheduled actions Click here to view and make changes to the dam site development plan Access to chat functions Status indicator giving a quick view of the current stakeholder weighted opinion score used to determine the 'Sustainable i buttons access information on people Access to dam site development plan quick change options Coloured circles indicate current opinions of stakeholders © Ososim 2016. All Rights Reserved. Proprietary and Confidential.