Geleximco unswayed by investors' refusal to hand over thermal power plants

Vinacomin has yet to complete the site clearance of Quynh Lap 1 thermal power

Geleximco determines to develop Quang Trach II and Quynh Lap I thermal power projects

Earlier in July 2017, Hanoi General Export Import JSC (Geleximco) expressed interested in co-operating with Sunshine Kaidi New Energy Group Co., Ltd. to invest in five thermal power projects, including Quynh Lap I, II, Quang Trach I, II, III, and Haiphong III under the public-private partnership (PPP) model.

Three months later, in October 2017, Geleximco sent documents to the government and authorities to propose establishing Geleximco-HUI, a joint venture between Geleximco and Hong Kong United Co., Ltd. (HUI, a subsidiary of Kaidi), to implement the $2-billion thermal power plants Quynh Lap 1 and Quang Trach 2 from Vinacomin and EVN, respectively.

Notably, Geleximco proposed permitting the joint venture to hold a 75 per cent stake in Quynh Lap 1, leaving the remaining 25 per cent with Vietnam's mining group Vinacomin. Meanwhile, the joint venture is looking to acquire the entire 100 per cent stake of Quang Trach 2 from state run Electricity of Vietnam (EVN). Geleximco stated that 80 per cent of the investment capital comes from loans from Chinese banks, while equity is only 20 per cent.

However, Geleximco’s proposal has yet to be approved due to concerns of the existing investors of Quang Trach II and Quynh Lap I about potential delays in construction and rising capital demand in case Geleximco partners up with Chinese contractors.

A representative of Geleximco stated almost all long-delayed projects are invested by either state capital or loans with government guarantee. Besides, numerous investors from Europe and the US had their investment certificates revoked due to the long delays in construction.

“Thus, selecting partners that have enough financial potential and experience is more important than the origins of the investors. Furthermore, we affirmed that the joint venture can arrange capital without guarantee from the Vietnamese government, thus in case the projects fails to meet the schedule, we will have to bear the most responsibility,” the representative said.

Talking about Kaidi, the representative of Geleximco said that the corporation was selected as the contractor of Mao Khe-Quang Ninh thermal power plant invested by Vinacomin. The project is considered the largest thermal power project so far and the only thermal power project in Vietnam that has been constructed before schedule. Staring operations in April 2013, the plant is still operating smoothly.

SOE still wants hold majority stake in large-scale projects

In April 2009, the government assigned Vinacomin to develop Quynh Lap I thermal power plant. According to the plan, the project will come into operation in 2022-2023. However, it was not until seven years later in September 2016 that Vinacomin submitted the pre-feasibility and the environmental impact assessment report to the Ministry of Natural Resources and Environment for evaluation.

During these seven years, Vinacomin failed to find co-investors due to legal and financial problems.

Notably, Vinacomin invited Kospo Group from South Korea and Geleximco to join the project. However, Kospo asked the Vietnamese government to guarantee the loans as well as the electricity purchase contracts. As a result, the two parties failed to reach a compromise.

Geleximco affirmed that it can arrange capital without guarantee from the Vietnamese government, however, it asked to hold 75 per cent of the project. Vinacomin disagreed with Geleximco's proposal.

Failing to find partners, Vinacomin has yet to complete the site clearance, despite the ground-breaking ceremony organised in October 2015.

As the manufacturing sector has been driving electricity demand, the Ministry of Industry and Trade (MoIT) has issued a document to collect opinions from relevant authorities about Geleximco’s proposal to establish Geleximco-HUI and implement the Quynh Lap 1 and Quang Trach 2 thermal power plants.