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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.


Oct-20

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.

They are:

  • · 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

Sep-20

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 th