The site for Mong Duong power plant

VietNamNet Bridge – The US-based AES Group surprised the public when they announced the sale of 49 percent of stakes of the Mong Duong 2 thermopower project to two foreign partners.

The sale is surprising to many people because it is unimaginable that the group would sell stakes after four years of hard negotiations to obtain the investment license.

The two foreign partners are South Korean Posco Power and Chinese CIC Group who purchased 30 percent and 19 percent of stakes, respectively. With the restructuring of the project, the Vietnam Coal and Mining Industries Group (Vinacomin) will withdraw its 10 percent capital contribution. As such, AES will hold 51 percent of stakes, Posco Power 30 percent and CIC 19 percent.

Ian Fox, General Director of AES-TKV Joint Venture which is developing Mong Duong power plant project, estimated to be capitalized at $1.9 billion has declined to give details about the share prices.

However, he said that once Posco and CIC join the project, it will receive the financing guarantees from the Governments of Republic of Korea and China which will help the investors easily seek capital from banks in the respective countries. CIC is now holding stakes of 10 banks in China.

In fact, the project’s investors will rely much on the capital mobilization from South Korean banks instead of Chinese banks, which explain why Posco holds a bigger volume of stakes.

Meanwhile, the US Government, which does not give support to coal-consuming power projects, does not guarantee financing for such projects. This has forced AES to seek support and capital from other sources.

“With the joining of the two partners, we will feel secure about the capital mobilization,” he said.

Another South Korean group, Doosan, has been selected as the general contractor of the project.

Doubts have been raised about the feasibility of the project, since Vinacomin, the Vietnamese partner in the project, committed to provide coal to run the thermopower plant, has decided to quit the project.

However, Mr Ian Fox said that he has no reason to worry about that. “We had discussions and we have reached a consensus on some issues. Vinacomin is very professional and they have committed that their withdrawal will in no way affect the supply of coal,” he said.

Besides, Mong Duong 2 thermopower project is a BOT project (build – operation – transfer), and all the issues relating to the project, such as the input and output of the project, all have been thoroughly discussed and decided at the government level.

When asked to make comments about the recent move by the government to raise the electricity price which aims to make the investment environment more attractive to power investors, Mr Ian Fox said that the current electricity price still does not truly reflect the production cost, because the State still subsidizing the electricity price. However, he believes that the subsidization will not last for ever.

He thinks that Vietnam should raise the electricity price and accept higher price levels within 10 years. This will be a tough road for Vietnam, especially when it will badly affect the life of Vietnamese people. However, in return, Vietnam will have more investment projects, and together with the development of the national economy, the electricity price will become more reasonable.

Mong Duong 2 is the third power project in Vietnam which is being carried out under the mode of BOT, after Phu My 2.2 and Phu My 3. This shows that the power sector in Vietnam, though having potential, still has many barriers for investors.

Mr Ian Fox said that foreign investors are looking at the operation of Mong Duong 2 project to learn about Vietnam’s investment environment. It is expected that four or five projects under the mode of BOT will be licensed in the time to come. However, investors will still conduct  negotiations on many issues and clarify several issues with the government.

Source: Thoi bao Kinh te Vietnam