Infrastructure & PPPs in Vietnam - Q3/2020 Update
VIETNAM continues continues to attract strong interest from local, regional and international developers in renewable energy projects. The government has also notified some changes to the PPA contracts for grid-connected solar farms and grid-connected rooftop solar systems; however, the mechanism to settle disputes, termination clauses and risk-sharing in the PPAs remain contentious issues. Another key sector – road expressway PPPs – continue to attract large interest in the country (as of now, limited to local Vietnamese developers as qualifying criteria).
Read the key developments in Infrastructure and PPPs in the country in our latest insight.
Vietnam approves HCMC-Moc Bai expressway PPP
Vietnam’s Prime Minister Nguyen Xuan Phuc has approved the Ministry of Transport's proposal on the investment policy for the 53.5km HCMC-Moc Bai expressway PPP. Ho Chi Min City (HCMC) People’s Committee is assigned as the state agency for the project, which will oversee investment decisions.
The planned PPP is a trans-provincial project between HCMC and Tay Ninh province, connecting Ring Road No.3 in HCMC’s Hoc Mon district and Moc Bai international gate in Tay Ninh province.
The estimated total project cost is more than D13.6 trillion ($586.75 million).
HCMC is aiming to launch procurement in March 2021 and complete construction by 2025.
Sumitomo to build smart city in Vietnam
Japan-based trading house Sumitomo is partnering with 5 Japanese companies to build a smart city in northern Hanoi in Vietnam.
The project is called Dong Ahn district and, according to local press, the companies involved are:
· information technology company NEC
· electric utility company Tepco Power Grid
· telecommunications company NTT Communications
· engineering company Mitsubishi Heavy Industries Engineering
· advertising agency Hakuhodo
The planning for the project includes:
· Tepco and Mitsubishi – infrastructure for a stable supply of electricity and balancing supply and demand
· NTT and NEC – manages securities technologies including facial recognition
· Hakuhodo – provides residential services
The project would take about 10 to 15 years to complete, during which time Sumitomo plans to start the development in 2021, and set up a project company by H2 2021.
The proposed location of the project is a 270ha of area in Dong Anh district between Noi Bai international airport and Hanoi.
The estimated total project cost is around ¥450 billion ($4.29 billion). Sumitomo and local developer BRG Group have formed a joint venture for the project, with a 50-year concession period.
Sumitomo and BRG are planning to begin construction on the project phase 1 in 2021, which includes about 7,000 condominium units, offices and commercial buildings.
Sumitomo also plans to implement transit-oriented developments in the project, as the proposed Hanoi Metro Line 2 would pass through the project area from downtown Hanoi to Noi Bai international airport.
Sapa airport PPP pre-feasibility study ongoing
The government of Vietnam has asked status & completion of a pre-feasibility study from the Lao Cai provincial Party Committee for the Sapa airport PPP in Lao Cai province, Vietnam.
The proposed project, 371ha of land in Cam Con commune in Bao Yen district, has an estimated total project cost of roughly D5.9 trillion ($254.27 million).
Proposed financing for Sapa airport PPP includes:
· state budget – D3.09 trillion
· local budget – D910 billion
· private investment – D1.77 trillion
The scope of the project includes:
· 2.4km runaway
· 2-level passenger terminal
· 6-lane road
The project has a planned capacity of around 3 million passengers per year and once complete will connect with the Noi Bai-Lao Cai expressway, which is used for civil and military purposes. Lao Cai’s People’s Party Committee had previously proposed the project under the PPP model, which Vietnam’s Transport Ministry approved in 2019.
Japan and Vietnam sign MoU for gas-fired power plant
A consortium of companies from Vietnam and Japan have signed a memorandum of understanding (MoU) to beging work on the 1.5GW Quang Ninh gas-fired project in Quang Ninh province, Vietnam.
The consortium comprises:
· PetroVietnam Power (PV Power), a subsidiary of state-owned Petrovietnam
· Vietnam Mechanical and Machinery Erection (Colavi)
· Japan-based Tokyo Gas
· Japan-based Marubeni
The consortium will use imported LNG to power the gas-fired project. The reported total project cost is around $1.9 billion, with the consortium anticipating that the project will start operations between 2026 and 2027.
Vietnam extends bids for North-South Expressway PPPs
Vietnam’s Ministry of Transport (MoT) has extended the bid period for 2 out of 5 sections of the North-South Expressways PPPs.
· 43.2km National Highway 45-Nghi Son (D6.333 trillion ($273.11 million)) – 2 pre-qualified bidders
· 50km Nghi Son-Dien Chau section (D8.38 trillion) – 2 pre-qualified bidders
MoT extended the bid period to 12 December 2020, as the government had not received bids for the projects.
If the projects still fails to attract bids, Vietnam’s National Assembly will then decide on the funding, according to local press. MoT plans to announce the successful bidders for the remaining 3 sections under PPP model in December 2020.
ADB approves $8 million loan for water treatment in Vietnam
Asian Development Bank (ADB) approved an $8 million loan to Vietnam-based Binh Duong water-environment (Biwase) for the Tan Hiep water treatment expansion project in Binh Duong province, Vietnam.
Biwase, the plant operator, has proposed the expansion of the project in 2 phases, with an estimated total project cost of around $46 million.
Scope of project phase 1 includes:
· expansion of the existing water treatment plant
· expansion of the existing raw water intake station
· installation of a 9km raw water transmission pipeline
The estimated total project cost for project phase 1 is around $16 million.
Project phase 1 is funded by:
· Japan International Cooperation Agency (JICA) – $8 million
· ADB – $8 million
Once completed, the project phase 1 would increase the water treatment capacity of the project from 119,500 m³/day to 219,500m³/day.
Project phase 2 involves an additional expansion of a 43,531.8m² area south of the existing plant. The total project cost for project phase 2 is around $30 million.
Kosy builds wind project in Vietnam
Vietnam-based Kosy Group is building the Kosy Bac Lieu wind power project phase 1 in Bac Lieu province, Vietnam. Kosy Bac Lieu Wind Power Joint Stock Company, a subsidiary of Kosy Group, is the project company.
The total capacity for the project phase 1 is 40MW, with a total investment of around D1.5 trillion ($64 million).
Kosy targets the project phase 1 to begin operation before 30 October 2021.
The project phase 1 would connect to the busbar of the 220kV transformer station in Hoa Binh wind power plant in Bac Lieu province, with the purchase price at $0.05/kWh.
Kosy plans to build the project, with a planned capacity of more than 200MW, in 3 phases:
· Phase 1 – 40MW
· Phase 2 – 50MW
· Phase 3 – 100MW
New Vietnam PPA models for solar become effective
Vietnam’s power purchase agreement (PPA) regime has long stymied the development of the market’s power sector. Vietnam’s Ministry of Industry and Trade (MOIT) issued regulations about new PPA models in July 2020 for grid-connected solar farms and grid-connected rooftop solar systems.
The government has not changed the second feed-in-tariff (FiT 2) regime from April 2020 for solar power projects. The FiT 2 regime covers projects that reach commercial operations date (COD) by not only the end of the year 2020 but also projects with a COD from 1 July 2019 to 31 August 2020.
Important elements of FiT 2 are:
· $0.0709/kWh – ground-mounted FiT
· $0.0769/kWh – floating solar FiT
· $0.0935/kWh – FiT for projects in Ninh Thuan, a southeastern province with high radiation
· 20-year PPA with state-owned electric utility Vietnam Electricity (EVN)
· capacity up to 2GW
A fillip for developers is MOIT’s removal of the restriction that sponsors provide at least 20% of the total project cost in equity capital. But provincial authorities might still insist on the requirement.
The ministry also now allows single investors to own multiple rooftop projects, with each up to 1MW connecting to different points with separate meters.
MOIT has also allowed third parties other than EVN directly to purchase power generated from rooftop solar power systems. However, domestic banks are less likely to finance projects with a small or lower tier, third-party offtaker. Credit committees are comfortable with EVN as a counterparty.
The government has also scrapped solar power development planning at the provincial level.
Developers agree to jointly develop a coal-fired power complex in central Vietnam
Quang Tri 1 is 1.32GW coal-fired power complex in the Quang Tri Economic Zone of Hai Lang in the north-central coastal province of Quang Tri. The three (3) consortium members – all Thai companies – signed a joint development agreement on the 2x 660MW, greenfield complex, splitting their shareholding of Bt26.88 billion ($862.6 million) in registered capital as follows:
· EGAT International – 40%
· RATCH Group – 30%
· Electricity Generating (EGCO) – 30%
Electricity Generating Authority of Thailand (EGAT) 100% owns EGAT International.
Vietnam Electricity (EVN) is the offtaker under a long-term power purchase agreement, though the consortium has not revealed the PPA’s duration.
The consortium members said the scheduled commercial operations date is 2025, according to a regulatory filing
Vietnam Port Logistics attracts more bidders
The Netherlands Development Finance Company (NDFC) and Belgian Corporation for International Investment (BCII) have expressed interest in the investing in the Cai Mep Ha logistics centre in Ba Ria-Vung Tau province, Vietnam.
The companies proposed to Vietnam’s prime minister Nguyen Xuan Phuc, that NDFC would finance 10% of the project and BCII would play a role in the investment, according to a local press.
The Ba Ria-Vung Tau authorities in July 2020 approved the project planning scheme.
The 1,763ha proposal includes:
· logistics center
· inland water port
· downstream Cai Mep Port
· office and trade center
· ecological reserve
· clean energy center
· water surface
The total investment value of the project is around $984 million.
The project management board in 2019 proposed 5 investment models for the project, including a PPP model which Vietnam’s Ministry of Transport took into consideration, according to the local press.
Banpu acquires Vietnam wind
Thailand-based Banpu has announced the acquisition of the 37.6MW El Wind Mui Dinh Wind farm in Ninh Thuan province, Vietnam.
Banpu renewable-focused subsidiary BRE Singapore signed the share purchase agreement with Ven-wind New Energy, a German JV of eab New Energy and Enercon. The total investment is around $66 million.
The feed-in-tariff (FiT) for the wind farm is $0.085 per kWh. The wind farm will sell electricity to Vietnam Electricity (EVN) for a period of 20 years.
The El Wind Mui Dinh wind farm on 23 April 2019 commenced operations with an installed capacity of 37.6MW.
The wind farm features turbines supplied by Germany-based Enercon. The order was for 16 E103/2350 wind turbines, under a 20-year full-comprehensive maintenance services agreement.
The transaction is expected to reach completion by the end of 2020.
Vietnam LNG-to-power to submit PPA heads of terms
Singapore-based Delta Offshore Energy (DeltaOE) is to submit the heads of terms PPA for the 3.2GW Bac Lieu LNG-to-power project in Vietnam.
DeltaOE attended a national meeting with the Government of Vietnam and received support to start negotiations for PPA completion with Vietnam Electricity (EVN).
The Government of Vietnam in January 2020 issued the investment registration certificate (IRC) to DeltaOE. IJGlobal reported that the sponsor expects to reach a final investment decision by January 2021.
DeltaOE has contracted the Institute of Energy, Vietnam's technical adviser under the Ministry of Industry and Trade, for the grid interconnection report, feasibility study and environmental impact assessment, as prerequisites for key approvals and agreements with the Government of Vietnam.
The project company is Bac Lieu Clean Energy (BLCE) and the project is the first for LNG gas-to-power in Vietnam to be fully private and foreign-owned. The total project cost is around D91.4 trillion ($3.9 billion).
The construction of phase 1, a 750MW combined cycle gas turbine (CCGT) unit, is expecting to begin construction in 2021 and complete by 2024. The project plans to upload the power to the national grid by 2024, while the whole project should be operational by 2027.
Launch of Vietnam focused infrastructure fund by Tecco and PHILUX
Vietnam-based Tecco Group joins PHILUX Global Funds to launch the first Luxembourg-based Vietnam-focused PHILUX Infrastructure Fund.
PHI Luxembourg Development, a subsidiary of US-based management consulting company PHI Group signed an agreement with the Vietnamese construction investment company Tecco Group.
Tecco Group plans to utilize the fund to support transport infrastructure, and development of ports, industrial zone clusters, and airport projects.
PHILUX Global Funds, activated by PHI Group, is a reserved alternative invest fund. It plans to create multiple sub-fund compartments for investment in real estate, infrastructure, renewable energy, and healthcare. It also aims to invest in the development of Chu Lai Open Economic Zone in Quang Nam Province, which would hold the proposed Chu Lai Multiple Commodities Center and the Asia Diamond Exchange.
Besides that, the fund also targets investment of about €100 million ($117 million) in housing projects in Hanoi, Ho Chi Minh, and Da Nang, Philux Global Funds told IJGlobal.
Vietnam plans new 130km Mekong Delta expressway PPP
Vietnam plans to build the Can Tho-Ca Mau section of 130km Can Tho-Ca Mau expressway under PPP model in the Mekong Delta region. The expressway, a 4-lane expressway connecting Can Tho City and Ca Mau province, would be built in 2 sections accordingly:
· Can Tho-Bac lieu section – PPP
· Bac Lieu-Ca Mau section – public funding
People’s Committee of Ca Mau has been tasked to prepare the project investment, including research on an investment socialisation plan for PPP investment for the period of 2021-2025.
The government expects the Can Tho-Ca Mau expressway to begin construction 2025 and complete by 2030. The total project investment is more than D47 trillion ($2 billion).
Vietnam approves 115km Dong Dang-Tra Linh expressway PPP
Vietnam's Prime Minister Nguyen Xuan Puc has approved the investment policy for the 115km Dong Dang-Tra Linh expressway PPP, connecting Lang Son and Cao Bang provinces near the China border. The People's Committee of Cao Bang Province should be the state agency of the project.
The project is a build-operate-transfer (BOT) model with a total investment of around D21 trillion ($901 million).
The project is expected to have 2 phases.
· Phase 1 (2020-2024) – 93km Tan Thanh border gate-Phuc Sen commune in Quang Hoa district
· Phase 2 (after 2025) – 22km Quang Hoa district-Tra Linh border gate
The project costs for phase 1 and 2 should be around D12.5 trillion and D8.3 trillion, respectively.
The state budget for the project is around D5 trillion (D2.5 trillion each from the central and the local government) for the construction of auxiliary works, site clearance, and resettlement. The local government aims to raise more than D7.5 trillion of investment for the project.
The implementation for the project has 3 components:
· 58km Van Lang-Thach An – D5.1 trillion
· 21.3km Thach an-Quang Hoa – D2.7 trillion
· 13.7km main route and 15.5km connecting route for Quang Hoa-Cao Bang city – D4.6 trillion
Vietnam cancels earlier $390 mn ADB loan and asks for new $1 bn ADB loan for HCMC MRT 2
Vietnam’s Deputy Prime Minister Pham Binh Minh has agreed to cancel the ADB $390 million loan before maturity for the Ho Chi Minh City Mass Rapid Transit (HCMC MRT 2); and the government of Vietnam has requested an estimated $1 billion loan from ADB instead.
The project is an 11.3km dual-track mass rapid transit from Ben Thanh to Tham Long.
The project was behind schedule, due to site clearance issues and investment capital disbursement procedures. The provincial government had to renegotiate the signed loan contract due to the failure of loan disbursement.
The People’s Committee of Ho Chi Minh City was assigned to allocate local budget to pay costs relating to loan cancellation.
North-South Expressway PPP bidders
Vietnam's Ministry of Transport (MoT) revealed the pre-qualified bidders on the Nha Trang-Cam Lam section of North-South Expressway PPPs. The list of pre-qualified bidders with updated estimated project value follow.
National Highway 45-Nghi Son (43.2km) – D6,333 billion ($272 million)
· JV of Cienco 4, Hoa Binh Construction, Thuan An Trading and Construction Development, Tan Thanh Do Group, and Engineering Construction No.18
· Licogi 16 with FECON, Dien Phuoc Construction, FECON Infrastructure and Urban Development, and 468 investment
Nghi Son-Dien Chau section (50km) – D8,380 billion
· Hoa Hiep with CIENCO 4, Nui Hong Investment, and Vinaconex 2
· Tan Nam Construction with Vinaconex, and Thai Son Transportation Construction
Dien Chau-Bai Vot section (49.3km) – D13,338 billion
· Hoa Hiep with Cienco 4, Nui Hong Investment, and Vinaconex 2
· Deo ca Group with Hai Thach Construction, Ha Thanh Concrete, Hoang Long Construction, and Tien Dai Phat
· Vinaconex with Tan Nam Construction, and HCJ
Nha Trang-Cam Lam section (49km) – D7,615 billion
· Vinaconex with Duy Tan Investment and Development, and Truong Long
· Cienco4 with Thuan An Construction and Trade Development, and Tan Thanh Do
· Son Hai Group (independent investor)
· Mien Trung Construction Group with Cuong Thinh Thi Construction Investment Group, CIENCO 1, 873 Transportation Construction, and 168 Vietnam Construction Investment and Import-Export
· Phuong Thanh Tranposrt Investment and Construction with Nguyen Minh Infrastructure Development Investment, Nhac Son, and Tu Lap Construction
Cam Lam-Vinh Hao section (79km) – D13,600 billion
· Cienco 4 with Hoa Binh Construction Group, Hoa Binh Construction, and Transport Construction 18, Phuong Thanh Transport Construction and Investment, Thuan An Construction, and Trade Development
· Vinaconex with Vietnam Energy Technology Development Education Investment, and FECON
· Deo Ca Group with Hai Thach Construction Investment, and 194 Construction Investment
· Trung Nam Investment Construction with Horizon Investment, Hai Dang, and Son Hai
AC Energy JV starts building 210MW Vietnam wind
AMI AC Renewables, a joint company between Philippines-based AC Energy and Vietnam-based AMI Renewables, is starting construction on a 210MW wind farm in Quang Binh, Vietnam.
The project, Quang Binh wind farm, is to be built in two phases, of 109.2MW and 100.8MW. According to AC Energy, it is the largest wind farm to date in Vietnam to enter construction.
The plan is for the project to commence operations by Q3 2021, to qualify for the current feed-in-tariff of $0.085 per kWh.
AC Energy is providing the full construction capital for the project.
AMI AC Renewables targets to invest in a total capacity of 1GW renewable energy in Vietnam by 2025. The Quang Binh project once built will bring AC Energy’s total renewables capacity to 1.2GW.
CFM and international partners build 78MW Vietnam wind
Climate Fund Managers (CFM), manager of renewables-focused facility Climate Investor One (CIO), is partnering with international investors to build a 78MW Hiep Thanh wind farm in Tra Vinh province, Vietnam.
The investors are:
· CIO – managed by CFM
· Korean-based ST International - previously named Samtan
· Singapore and Malaysia-based Janakuasa
· Vietnam-based Ecotech
The project company is Tra Vinh Wind Power.
CIO’s Construction Equity Fund, jointly invested in by CIO and ST International, is investing $71.2 million into the project company to develop the project. The project is expected to commence operation by Q3 2021.
CIP to build 3.5GW Vietnam offshore wind
Denmark-based Copenhagen Infrastructure Partners (CIP) will work with Vietnamese partners to build the 3.5GW La Gan offshore wind project in Binh Thuan Province, Vietnam.
The Vietnamese partners are:
· Novasia Energy
Binh Thuan People’s Committee signed a memorandum of understanding with CIP, Asiapetro and Novasia Energy. The La Gan offshore wind project, with a potential capacity of 3.5GW, is one of the first large-scale offshore wind projects in Vietnam.
The estimated project value is around $10 billion.
Copenhagen Infrastructure New Markets Fund I (CI NMF I), a fund focusing on greenfield renewable energy infrastructure projects, will invest in the project. The fund reached final close at $1 billion in December 2019. The investors in the CI NMF 1 include:
· Arbejdsmarkedets Tillægspension (ATP)
· Kommunal Landspensjonskasse (KLP)
· Lægernes Pension
According to Binh Thuan government news, the initial plan for the La Gan project is:
· around 600MW in 2020-2024
· around 3GW in 2026-2030
Copenhagen Offshore Partners, a subsidiary of CIP for its offshore wind projects, opened a new office in Hanoi, Vietnam, in April 2020.
Vietnam proposes airport and seaport PPPs
The Quang Nam province government in Vietnam has proposed PPP models for Chu Lai airport and Chu Lai seaport system in Quang Nam, said Le Trin Thanh, the chairman of the provincial government.
Thanh submitted the proposal to the National Assembly of Vietnam after a meeting with a government ministry. The projects will be open for auction, following the recent approval of Vietnam's new PPP law last month.
Both projects are among the expansion plan of the Chu Lai Open Economic Zone, a coastal economic area consisting of industrial parks, seaports, and airports.
Vietnam-based Vietjet Air and US-based Parsons Brinckerhoff (now part of WSP) had proposed a 3-phase master plan to upgrade Chu Lai Airport in 2016, after being commissioned to do a study. The government had approved the master plan in 2018.
The 1st phase construction cost is estimated at D2.5 trillion ($107.8 million).
The master plan aims to increase the capacity of Chu Lai airport to 5 million passengers and 4.1 million tonnes of cargo by 2030.
Meanwhile, the expansion project for the Chu Lai seaport system, including the Chu Lai Port and the Ky Ha port, will increase capacity to a total of 12.7 million tonnes cargos per year by 2030, and enable it to accommodate 50,000 deadweight tonnage ships.
The seaport system would also be expanded in order to receive cruise ships that visit tourism spots including the My Son Sanctuary, a UNESCO world heritage site, and Cham Island, Hoi An.
Thai manufacturer to buy Vietnam solar farms
Thailand-based BG Container Glass (BGC), a glass container packaging manufacturer, is negotiating with Vietnam investors to acquire solar farms. It has emerged that the company is looking to buy at least 2 solar farms, with capacity of 50-100MW, and to close a deal by Q4 2020. The budget for the deals is reported to be around Bt1-2 billion ($32 million-$64 million).
BGC plans to increase its capacity for electricity generation to 300-400MW by 2022.
In September 2019, BGC acquired Thailand-based Solar Power Management (SPM), which owns 2 Vietnam solar projects, Xuan Tho 1 and Xuan Tho 2, for roughly Bt1.26 billion.
The Xuan Tho solar farms are located in Phu Yen province with total installed capacity of 110MW. Both farms have already commenced commercial operations, on 11 and 12 June 2019.
The energy is sold to Electricity of Vietnam (EVN) over 20 years at a feed-in-tariff of $0.0935 kWh. The PPA is for 99.22MW capacity.
Gulf acquires Vietnam wind projects
Thailand-based Gulf Energy Development has acquired 100% shares in 2 50MW wind projects from Vietnam-based Dien Xanh Gia Lai Investment Energy (DGI). The onshore wind farm projects, Ia Pech 1 and Ia Pech 2, are located in Grai district, Gia Lai province, Vietnam.
The total combined project cost is around $200 million.
The projects have a total capacity of 100MW, and will sell electricity to Vietnam Electricity (EVN) for 20 years. The construction should start during 2021, and they would reach commercial operations date (COD) by Q4 2022.
Ia Pech 1 and 2 are among the 91 wind power projects approved by the Government of Vietnam in June 2020. The newly approved wind projects have a total capacity of 6,979.7MW.
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