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Energy projects to spark FDI growth

The local energy sector is expected to be the next driver for foreign direct investment growth in Vietnam this year.

The local energy sector is expected to be the next driver for foreign direct investment growth in Vietnam this year.

Foreign direct investment inflows to the energy sector is expected to reach record highs in the year ahead   Photo: Le Toan

According to a Ministry of Planning and Investment report, the foreign direct investment (FDI) commitment in this sector is expected to reach a record high of about $4-$5 billion in 2016. Last year, the sector attracted investment capital worth $2.8 billion, surpassing the real estate sector and falling just short of the FDI inflows to the manufacturing sector.
According to the General Department of Energy (GDE), which manages 20 build-operate-transfer (BOT) thermal power plants with the total capacity of 24,000 megawatts nationwide, a series of BOT power projects are expected to finish construction this year, contributing to ensuring the stability of the country’s power supply in the years to come. The plants are among the major projects approved in the Vietnamese government’s master plan for developing the national grid through 2020.
The GDE also reported that all procedures for licensing the 1,200 MW BOT Nghi Son 2 thermal power plant in the central province of Thanh Hoa had been completed, and an investment agreement for a consortium consisting of Marubeni Corporation and Korea Electric Power Company was scheduled to be signed in the first quarter of 2016, with the total investment capital of $2.2 billion.
In addition, another 1,200MW thermal power plant is likely to be built in the northern province of Nam Dinh, as per a recent agreement between Arab Saudi’s ACWA Power and Korea’s Taekwang Power. The investment certificate for this project is anticipated to be granted this year.
A further 1,200MW BOT power project, Vinh Tan 1, which is being developed by two Chinese corporations (China Southern Power Grid Co., Ltd, and China Power International Holding Ltd) as well as Vietnam’s state-run mining giant Vinacomin, has achieved financial closure two months ahead of schedule, according to the GDE. This $2 billion project got off the ground in the central province of Binh Thuan last year, and would annually contribute nearly eight billion kilowatt hours to the national power grid after becoming operational in 2018.
Earlier this year, Janakuasa Sdn Bhd signed four documents with Vietnam’s Ministry of Industry and Trade for the development of the 1,200MW Duyen Hai 2 coal-fired power plant in the southern province of Tra Vinh, namely a land-lease deal, a power purchase agreement, a BOT contract, and a grant of government guarantee. The project is one of four power projects within the Duyen Hai Power Centre, which has a combined generation capacity of 4,348MW, and uses imported coal as the feedstock to generate electricity. It is one of the key energy projects in the national power development master plan, meant to address the dramatically rising power demand in Vietnam in this decade, and with a vision to 2030.
The list of foreign-backed BOT power projects is expected to increase, as several foreign companies are currently in negotiations or are conducting feasibility studies for developing power plants in Vietnam, including South Korea’s Samsung C&T Corporation, India’s Tata Power, Singapore’s Sembcorp Industries, and Thailand’s EGATI.
The power demand in Vietnam is expected to see a remarkable increase of more than 10 per cent per annum in the coming years due to rising population and economic growth. Vietnam will therefore need an annual investment of $8 billion in the energy sector by 2020.

By Phuong Thu

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