Shake-up for BOT model

Vietnamese authorities are working on a new tender model for build-operate-transfer power projects in Vietnam. The move is an attempt to select the best investor and shorten the document transaction time, usually a major obstacle for projects to come online.

The Ministry of Industry and Trade (MoIT) will next month issue bidding documents to select an investor for the 1,200 megawatt Nghi Son 2 coal-fired power project.

The $1.5-2 billion Nghi Son 2 project is a part of the Nghi Son power centre in Thanh Hoa province, which has two power plants with an accumulative capacity of 1,800MW. The Nghi Son 1 thermal power plant is invested by the Electricity of Vietnam (EVN).

The Nghi Son 2 project will be implemented on a build-operate-transfer (BOT) basis pursuant to a 20-year BOT contract and power purchase agreement (PPA). According to the International Finance Corporation (IFC), the transaction advisor to the MoIT for the preparation and implementation of a tender for the project’s development, one of the tender’s new features is bidders must agree on a set of the contractual arrangements up front with the government before the submission of their bids.

The contractual arrangements include the government guarantee, BOT contract, PPA and also other contracts on coal supply, land lease and water supply. “[It means that] all bidders have a chance to pre-negotiate the deal with the government. This would avoid post bid-award negotiation which would be usually lengthy and at the same time allow the government to outset a common level playing field for all bidders whose bids will be evaluated on the same terms and conditions,” said Simon Andrew, IFC regional manager for Vietnam, Cambodia, Lao PDR and Thailand.

“Bidders will be selected on a single bid parameter, the lowest level tariff,” Andrew added. Negotiations for BOT, fuel supply, land lease and PPA contracts have been problematic in Vietnam, which have lengthened the time for BOT power project’s construction and commissioning.

There have been four successful international investors in reaching those agreements with local authorities for the development of the BOT power projects in Vietnam, including the Phu My 2.2 & 3, Mong Duong 2 and Hai Duong thermal power projects.

Investors in the Phu My 2.2 & 3 projects spent seven years reaching PPAs with EVN, the sole power buyer and distributor in Vietnam. Malaysia’s Jaks Resources Bhd took nearly a year to reach a deal for the 1,200MW Hai Duong coal-fired plant.

Jaks Resources, however, has yet to sign a BOT agreement with Vietnamese authorities. The US-based AES reached the land, water, coal supply and power price deals with local authorities after five years in negotiation, which started in 2005.

“This tender exercise is the first of its kind in Vietnam whereas only investors who pass the pre-qualification could participate in the bid,” Andrew said.

Out of nearly 20 investors who joined the pre-qualification, the MoIT has selected eight short-listed bidders who are all leading international firms with strong track records in development of green-field thermal power plants worldwide.

“We expect the winning bidder will be announced during this year’s third quarter,” Andrew said. The Nghi Son 2 project is scheduled to be commissioned in 2015. The winning investor will have normally around 12 months to arrange finance for the project and 36-42 months for construction.

VIR

Tags: Nghi Son 1 thermal power plant, Nghi Son 2 coal-fired power project, Vietnam energy, Vietnam power plants