REE supported VSH to win the battle

REE supported VSH to win the battle (Photo: vneconomy.vn)

The Hanoi People's Court has just decided to cancel the arbitration decision of April 10, 2019 of the Vietnam International Arbitration (VIAC) that ordered VSH to pay a compensation of more than VND2.163 trillion ($94 million) for contractors including Powerchina Huadong Engineering Corporation Limited and China Railway 18th Bureau Group Co., Ltd.

REE acquired its stake in VSH while it was stuck in the lawsuit with Chinese contractors related to the construction of Thuong Kon Tum hydropower plant.

Thuong Kon Tum (TKT) hydropower plant was kicked off in 2009 with the total investment of VND5.74 trillion ($249.74 million) at the time. However, as the project was behind schedule, the investment climbed up to VND7.4 trillion ($321.74 million) in 2015.

The Chinese contractors then stopped working on the project, thinking that the investor defaulted on payments. Meanwhile, VSH thought argued that the contractors were in serious breach of the contract by delaying construction.

The Chinese contractors brought the case to VIAC and won in this April as VIAC ordered VSH to pay a compensation of VND2.16 trillion ($94.04 million).

At this point, the State Capital Investment Corporation (SCIC) was the big shareholder of VSH. Because of the lawsuit, SCIC decided to fully divest the company. Seizing the opportunity, REE spent nearly VND700 billion ($30.43 million) to acquire 21.01 per cent in VSH, becoming the second-biggest stakeholder, only behind EVN Genco 3. REE also took over the TKT lawsuit.

Nguyen Thi Mai Thanh, REE chairwoman, said, "The Chinese contractors had a good chance to win the lawsuit, however, REE made up our mind to not back down and uncovered new evidence to support our argument that the contractors have violated the law while investing in Vietnam."

In fact, there are many projects performed by Chinese contractors in Vietnam that are increasing the initial investment cost or are running behind schedule, such as the Cat Linh-Ha Dong urban railway project.

According to Mai Thanh, VSH's power plants are quite efficient, with a total capacity of 136MW, and production will go from 700 million to 1 billion KWh per year. The objective behind buying shares in VSH was for REE to gain a stake in Thuong Kon Tum hydroelectric plant, a first-class hydroelectric project with a capacity of 220MW. When put into use, TKT will produce an average of 1,094 billion kWh per year.

Another special feature of TKT is its production efficiency. Other hydropower plants take up to 2-3 cubic metres of water or more to produce 1 kWh of electricity. However, TKT was built on a terrain with a big slope and only needs 1 cu.m of water.