Electricity venture to power up northern investment

The joint venture, in which local Power Company No1 has 51 per cent of the shares and China’s Yunan Power Company the remainder, will build the Seo Chong Ho 22MW hydroelectric plant in Lao Cai province. The total investment capital for the plant is estimated close to $30 million.
Le Tien Dung, head of the external relations division of the Lao Cai Planning and Investment Department, took pride in the first electricity joint venture in the north and also in the fact that the province, where foreign projects are a few, granted its own investment certificate in line with the Investment Law.
Dung told Vietnam Investment Review that the venture company lodged an application with the Ministry of Planning and Investment (MPI) in July this year. MPI, after consulting several government agencies on the project, then returned the application to Lao Cai People’s Committee to issue an investment certificate.
“The central government has allowed us to call for foreign investors’ involvement, including in the form of joint ventures in construction of planned hydro-electric projects so as to tap on local power potential and remove energy shortages,” Dung said.
The Lao Cai government has recently planned for 38 hydroelectric projects of small and medium size, ranging from 5 to 90MW in annual generation capacity. But just even of those projects are under construction with domestic funds while 31 have stalled as a result of funding problems. Officials estimate that the required investment ratio in each megawatt of hydroelectricity is about VND18 billion ($1.12 million).
Dung hoped that with the Vietnam-China power investment venture and the government’s greater transparency and favourable policies for foreign investors in the power sector, Lao Cai would be likely to receive more such projects.
“Many Chinese and Japanese firms have come and sought for investment opportunity in small and medium hydroelectric projects here in Lao Cai. In the current circumstances, we are hopeful they will stay for the local power sector development strategy,” he said.
At present, most power projects in Vietnam are operating on domestic funds and the government has been criticised by the international community for not making the investment environment attractive enough to bring foreign investors to the sector.
The greatest hindrances are low power prices and a monopoly on distribution by state-run Electricity of Vietnam in the domestic power market. Until now, only two joint ventures in the energy sector, Phu My 2.2 and Phu My 3 in Ba Ria-Vung Tau province, are operating in Vietnam. EVN’s estimates show that there will be shortages of around 1.1 billion kWh in 2006, 6.6 billion kWh in 2007, 8.6 billion kWh in 2008, 10.3 billion kWh in 2009 and 7.2 billion kWh in 2010 and additional funding sources must be mobilised for construction of new power plants across the nation.
Among proposed projects, the 1,200MW coal-fuelled Mong Duong, jointly developed by Vietnam National Coal and Mineral Industries Group (Vinacomin) and the US’ AES, will be the largest of its kind in Vietnam. At a cost of $1.4 billion, the plant will be a build-operate-transfer project in the country’s richest coal region, Quang Ninh province. Mong Duong is expected to start operating in 2011.



No. 788/November 20-26, 2006