Power firm is ready to pounce

Many investors are waiting for electricity prices to float before addressing Vietnam’s chronic power shortages

The Norwegian firm plans to become an industrial investor in Vietnam within the next 12-18 months.

SN Power’s executive vice president in South East Asia Erik Knive said the company’s initial target was to buy hydropower assets in Vietnam, while greenfield investment would be looked into when a local foothold was secured.

The absence of a competitive power market in Vietnam also made the Norwegian firm adopt a safe first approach.

“Once Vietnam has a credible power market, which sets power prices at the true value of power, then we will be able to invest,” Knive told VIR.

“We think there are a lot of interested companies and we are now looking at several where we think we can add some value,” he said.

Hydropower plants are generating about 35 per cent of power in Vietnam. The remainder comes from coal-fired and gas-fired power plants, combined cycle thermal power and wind power plants.

Long-lasting dry weather, a result of climate change over the past year, has dried up hydropower plants in Vietnam.

“SN Power has followed the Vietnamese power market for several years. We believe we can strengthen Vietnam’s long-term renewable energy generating capacity through our power market experience and technology transfer,” Knive said.

In July 2010, SN Power signed a joint development agreement (JDA) with International Finance Corporation (IFC) to provide partners more opportunities to invest in renewable power projects in Vietnam.

The JDA deal enables the two parties to develop an investment strategy, policy and guidelines to address Vietnam’s growing demand for power. The partners will acquire operating assets and invest in greenfield projects to build up a portfolio of renewable energy investments in the country.

“Nobody has been able to secure a long-term debt without government guarantees. We hope together with IFC, we will be able to do acquisition without any guarantees behind,” Knive said.

“Part of the reasons that we established our representative office here in Vietnam is that we think the Vietnamese government is making necessary steps to have a commercial market. As long as the market becomes realistic, then we do not see any need for the government’s guarantee,” he said.

SN Power and IFC collaborated previously on several of SN Power’s global investments in wind and hydropower plants in Chile, India and the Philippines.

SN Power is operating wind and hydropower plants in the Philippines, India, Nepal, Sri Lanka, Chile and Peru.