Laos on Monday said it would start construction of a controversial multi-billion dollar dam this week, after adapting the design to calm environmental concerns from neighbouring nations.

"After two years of preparation the Laos government will have a ground breaking ceremony on November 7 and will then start working on the dam itself in the Mekong river this week," deputy energy minister Viraphonh Viravong told AFP.

The $3.8 billion hydroelectric project at Xayaburi, led by Thai group CH Karnchang, has sharply divided the four Mekong nations -- Laos, Vietnam, Cambodia and Thailand -- who rely on the river system for fish and irrigation.

Building work on the main project has been stalled for about 18 months over concerns relating to its environmental impact.

Viraphonh said some aspects of the dam's design had been changed to "reassure neighbouring countries", but he insisted that objections would not derail plans to finish the project by the end of 2019.

The mooted 1,260 megawatt dam, the first of 11 on the key waterway, has become a symbol of the potential risks of hydropower projects in the region.

Communist Laos, one of the world's most under-developed nations, believes the dam will help it become "the battery of Southeast Asia" by selling electricity to its richer neighbours.

Thailand has agreed to buy most of the electricity generated by the project, but Cambodia and Vietnam fear the dam could decimate their farming and fishing industries.

Environmentalists say the dam would be disastrous for the 60 million people who depend on the river for transportation, food and economy.

They fear Mekong fish species will become endangered as vital nutrients are trapped and dozens of species are prevented from swimming upstream to mating grounds.

In July, Viraphonh told the state-run Vientiane Times that it would be "one of the most transparent and modern dams in the world", but promised that construction would not go ahead until fears from neighbouring countries had been assuaged.

He said changes to the project would address the two major issues -- fish migration and sediment flow -- by including a passage to allow 85 percent of fish to travel along the river and a "flushing system" to prevent sediment build-up.

Campaign group International Rivers accused the Laos government of pressing ahead with the project without conducting sufficient environmental studies.

"This latest announcement shows that Laos never intended to genuinely cooperate with neighbouring countries," the group said on Monday. "The Xayaburi project was never really delayed and always continued on schedule."

Fifty Thai villagers representing communities along the Mekong river submitted a lawsuit to a court in Bangkok in August seeking to prevent their country buying power from the hydropower project.

Thailand's Administrative Court has yet rule on the suit, which is against the state-run Electricity Generating Authority of Thailand, the energy ministry and the Thai cabinet.