Sumitomo red tape tangle delays power plant project

A source at Japan’s Sumitomo Corporation in Vietnam told VIR that the investor had not yet started negotiations with the Ministry of Industry and Trade (MoIT) over a build-operate-transfer (BOT) contract.

Because Sumitomo Corporation registered to invest in the coal-fired power plant under the BOT investment model, it needs to sign a BOT contract with MoIT before being awarded an investment license for the project.

“We informed MoIT we are ready to negotiate, but they responded that they had not yet arranged time for the talks,” said the source. He added that all Sumitomo could do now was to wait.

In November 2009, Sumitomo officially announced it would embark on the Van Phong 1 Thermal Power Plant project in Khanh Hoa province’s Van Phong economic zone. At the same time, the corporation also signed an MoU with the ministry for developing the project. The investment was expected to cost $2.19 billion at the current exchange rate.

According to Sumitomo the power plant would include two 660-megawatt boiler turbine generator units, supplying Electricity of Vietnam (EVN) over a period of 25 years. The power plant was slated to primarily use coal imported from Australia.

Initially, Sumitomo aimed to complete plant construction and start commercial operations in 2015. But due to the slow pace of negotiations, the corporation will obviously miss this deadline.

In a meeting with Khanh Hoa People’s Committee two weeks ago, Sumitomo announced it expected to start the construction of the plant in April 2015, with commercial operations to start in 2019, four years later than initially planned.

Although the investment plan has been delayed, the source said Sumitomo was still very interested in the project because of the growing demand for power in the country. So far, Sumitomo has already prepared negotiations with coal suppliers and EVN for a power purchasing agreement.

Early this year, Khanh Hoa People’s Committee announced it had spent around VND150 billion ($7.2 million) on land compensation and site clearance for the project since 2010.

If this project is implemented, it will be the second power plant Sumitomo has been involved in Vietnam. The first was the Phu My 2.2 plant in Ba Ria-Vung Tau province, which was invested a decade ago by a joint venture between Sumitomo, Japan’s TEPCO Company and France’s EDF Energy.