A new wave of foreign direct investment (FDI) is expected to flow into Vietnam’s power sector to meet the country’s high electricity demand which local power plants have been struggling to meet.
According to Tata Power, a subsidiary of the Indian Tata Group, the company has gained a Vietnamese Government approval to conduct a feasibility study for the Long Phu 2 thermoelectricity plant in southern Soc Trang Province with a capacity of 1,200MW.
Having received the green light, the company would now rush to carry out the next steps toward the project, the firm added.
The Khanh Hoa Provincial’s People’s Committee also said the 2,640MW Van Phong Thermal Power Plant 1 has been the subject of negotiations between Japanese Sumitomo Group and Hanoi Industrial Investment and Construction Corporation (Hanoico).
Sumitomo’s representative said they had been in talks with the Ministry of Industry and Trade to sign a build-operate-transfer (BOT) contract in the first quarter of next year, Thoi Bao Ngan Hang (Banking Times) reports.
Once the contract is signed, an investment license should be approved in the second quarter of 2014.
Construction work is scheduled to start in August 2015, with the plant’s opening set for October 2019.
Ken Robinson, director of the multinational Howden Group which has officially opened a representative office in HCM City, said the potential of the country’s power industry was huge. They had been active in investing in modern technologies and expanding investment in sector, he added.
The group has provided more than US$1.5 billion worth of facilities, including blowers and fans, to regulate temperature for power projects in Vietnam including Mong Duong 2, Vung Ang 1, Nghi Son1, Vinh Tan 1 and Thai Binh 2.
Experts said Vietnam’s power industry is in a favourable stage of development, now making an ideal time to boost the sector’s growth by mobilizing FDI.
However, many power sector FDI projects have faced implementation difficulties due to inappropriate policies. Van Phong Thermal Power Project 1, for example, had shortcomings in the land lease contract with Khanh Hoa Province as well as electricity purchase contracts with Electricity of Vietnam.
Nguyen Chien Thang, chairman of the provincial People’s Committee told Vietnam Investment Review the province is committed to ensuring a favourable land hire contract for the project’s investors. To support this, the Japanese group was asked to provide a specific project completion timetable to help avoid delays.
Another project, Hai Duong BOT Thermal Power project is behind schedule due to unresolved investment agreement issues.
Experts said the country should produce an effective legal framework to help investors resolve difficulties in exploring the sector.