Power investor gets a shock

Korean Teakwang Vina Industrial is getting a grilling over high costs, fuel supply and waste treatment for its $2.48 billion Nam Dinh 1 coal-fired power project.

The Korean investor recently submitted a feasibility study for its 1,200 megawatt coal-fired power project in Hai Hau district, northern Nam Dinh province, which will see Teakwang Vina Industrial joining hands with Vietnamese partner Hashinco in development.

Teakwang Vina Industrial and Hashinco received the Vietnamese government’s nod to develop the Nam Dinh 1 power project in January, 2010. Three months later, the two partners signed a memorandum of understanding with the Ministry of Industry and Trade (MoIT) for the project development.

The Korean firm and its Vietnamese partner has set up a joint venture, in which the former will contribute 95 per cent of the plant’s total investment and the latter the remainder.

The 210 hectare plant will be built under the build-operate-transfer (BOT) form. The investors will operate the plant for 25 years and then transfer the running to the Vietnamese government.

The plant is a part of the Nam Dinh power centre, which will house two power plants with a combined capacity of 2,400MW.

Under the joint venture’s feasibility study with Vietnam-based Institute of Energy acting as consultants, it will cost the investors a supposed $2,070 to produce a kilowatt hour of power in the Nam Dinh 1 project.

But the Vietnam Heat Technical Science Association, which was assigned by the MoIT to examine the investors’ feasibility study, said the cost was much higher than other power projects developed in Vietnam.

“It is necessary to reconsider such an expensive investment, which is a very important index of the project and will be an initial input when calculating the price of power to be sold by the project in the future,” said the association’s general secretary, Truong Duy Nghia.

According to the investors, the total investment capital of $2.48 billion for the Nam Dinh 1 project includes construction costs ($505 million), equipment and machinery ($1.02 billion), site clearance compensation and resettlement ($28.6 million), consultancy fees ($37.7 million), standby fund ($442 million) and other expenses ($444 million).

The Korean investor will garner between 20-30 per cent of the total investment capital from its own budget with the remaining sum coming from international export credit and commercial loans.

Le Tuan Phong, deputy director of the MoIT’s Energy Department, demanded that the investors provide an exact figure for the investment sum per kilowatt hour of power, and not a supposed cost.

This exact figure would be based on concrete negotiations with other partners and sub-contractors for construction, equipment supply, operation and management and other expenses.

“This calculation must be done very specifically between the investors and consultant, and must be written out clearly in the feasibility study,” Phong said.

The investors are also supposed to fuel their plant with anthracite coal from Quang Ninh coal basin that Vietnam’s state-owned Vinacomin supplies and imported coal.

But Nghia said it was important for the investors to consider possible shortages in coal supply in Quang Ninh in the coming years, particularly when the basin was also in charge of providing coal for other thermal power projects in the northern region including the Mong Duong 1&2, the Quang Ninh 1&2, the Cam Pha 1&2, the Mao Khe and Son Dong plants.

“We ourselves [the examiners] are also aware of the supply-demand imbalance of anthracite coal [in the future], let alone the use of imported coal [to cover short supplied local coal] will demand different technology because of the differences in heat and type from domestic coal,” Nghia said.

The investors were also required to explain clearly and in detail what their solution was for coal residues from the plant – estimated to be about 1.82 million tonnes every year.

Teakwang Vina Industrial expects to obtain an investment license for the project from the Ministry of Planning and Investment in the second quarter of this year. – VIR

Tags: Vietnam electricity, Vietnam energy, Vietnam power shortage