Infrastructure & PPPs in Vietnam - Q3 2023 Update
VIETNAM has seen major pilicy and regulatory changes to promote private sector participation in infrastructure development (including the New Bidding Law in Jun'23). There is a positive market sentiment with large number of JVs/ partnerships between local & international investors/ developers. Clean Energy Transition sub-sectors have seen a good project pipeline across EaaS, BESS, C&I rooftop etc. and is also driven by the New Energy Master Plan for 2021-30.
Read the latest developments in Infrastructure and PPPs in Vietnam in our Q3 2023 insight.
VIETNAM APPROVES DEVELOPMENT RESOLUTION FOR HO CHI MINH CITY
The Vietnamese government has signed a resolution approving 44 special mechanisms and policies for the development of Ho Chi Minh City. The administration intends to introduce a transit-oriented development (TOD) model for the city’s infrastructure, allowing the buildout of property projects around public transit stations and terminals. It also intends to use the build-operate-transfer model for road projects.
The resolution enables district authorities to allocate 2-4% of their budgets for additional development expenses previously not included in their initial estimates. Ho Chi Minh City has also been authorized to issue local bonds as well as borrow from domestic financial institutions and other sources to finance new infrastructure.
VIETNAM PROVINCE PLANS AIRPORT PPP
A Vietnamese provincial government plans to develop an airport on Ly Son Island as a public private partnership. The government of the south-central Quang Ngai province has asked the provincial transport department to lead the development. Quang Ngai Provincial People's Committee signed a document directing the local agencies to work on the airport master plan for the 2021-2030 period, with a long-term development vision for 2050, as approved by the prime minister. Ly Son is a popular holiday destination and volcanic island surrounded by a ring of reefs in the northeast of Quang Ngai.
The local government will also conduct a thorough assessment of the needs, conditions, and feasibility of the airport project. When the detailed plan is ready, it will be submitted to the Ministry of Transport for consideration and report to the Prime Minister for feedback and additional decisions. The province’s transport department will also help manage the funding of the project.
KOREAN CONGLOMERATE SK LAUNCHES VIETNAM OFFICE FOR RENEWABLES FOCUS
SK E&S, the energy arm of South Korean conglomerate SK Group, has opened an office in Vietnam's Ho Chi Minh City to focus on renewables. The office will oversee the operations and management of SK's existing clean power assets in Vietnam as well as develop new business.
SK operates a 131 MW solar facility in Ninh Thuan province in southern Vietnam, as well as 50 MW and 100 MW offshore wind plants in the Tien Giang region. SK E&S launched Solwind Energy - a joint venture with Vietnamese conglomerate TTC's subsidiary GEC, which aims at expanding its renewables business. The venture is currently developing a rooftop solar project in Tay Ninh in Southeast Vietnam and a 756 MW onshore wind project close to the border with Laos. Vietnam is seen as a good location for solar and wind power generation due to abundant sunshine and offshore wind resources.
KEPPEL TO DELIVER ENERGY-AS-A-SERVICE IN VIETNAM
Singapore-based Keppel Corporation has secured USD 70 Mn worth of contracts to deliver energy-as-a-service (EaaS) in Vietnam. Under the scope of works, Keppel will provide its services to Republic Holiday Inn, Republic Suite Plaza, and Estella Place in Ho Chi Minh City, as well as Grand Mercure Hotel and Resort in Quang Binh province. The EaaS model will allow businesses to enter into a supply-and-service contract for energy usage without requiring upfront capital investments.
Keppel will also undertake the design and upgrade of existing cooling systems to improve energy efficiency. Once completed, the projects are expected to offset 3,500 tonnes of emissions per year.
NEW FACILITIES COMMENCE SUPPLY OF ENERGY TO VIETNAM’S GRID
Vietnam Electricity (EVN) reported that 15 new projects, collectively generating 735 MW, are in commercial operation in July 2023 and providing energy supply to the national grid. These facilities produce a daily average output of approximately 3.2 Mn kWh, contributing around 0.4 % of the total power supply.
These projects are among the 85 transitional renewable energy projects, totaling over 4,600 MW, which missed the feed-in-tariff (FIT) deadline at the end of 2020.
FEASIBILITY STUDY PLANNED FOR RAIL LINK BETWEEN THAILAND AND VIETNAM
The Ministry of Public Works and Transport has announced that a feasibility study is in the pipeline for the development of a rail line between Thailand and Vietnam through Cambodia. The proposed cross-border rail line will link Poipet town in Banteay Meanchey province, Siem Reap, Kampong Thom, Kampong Chhnang, Phnom Penh, and Bavet town in Svay Rieng with plans to connect to Ho Chi Minh City via Moc Bai.
The Ministry also intends to convert the existing Northern and Southern Railway Lines into high-speed rail, enabling trains to reach speeds of up to 160 km/h.
IMPACT OF NEW BIDDING LAW ON INVESTOR SELECTION FOR INFRASTRUCTURE PROJECTS
The National Assembly of Vietnam officially adopted a new bidding law ("New Bidding Law") on 23 June 2023. The New Bidding Law, which contains 96 articles divided into 10 chapters, will come into effect on 1 January 2024. The New Bidding Law makes a number of changes to the Current Bidding Law that are aimed at addressing certain issues in the bidding process to select investors for the implementation of projects, including investors of power and infrastructure projects, in Vietnam.
Key takeaways from the new bill:
The scope of application of the New Bidding Law answers the question of whether it is compulsory to apply the bidding mechanism under the New Bidding Law when selecting investors for projects.
The following 5 significant new inclusions in the New Bidding Law will impact the bidding process to select investors in projects:
A new approach to the scope of application of international bidding.
New criteria to assess bids and select winning investors.
New detailed regulations on the list of key provisions of project contracts.
New requirements regarding contract performance security.
New conditions for project transfers.
PERTAMINA EXPLORES RENEWABLE OPPORTUNITIES IN VIETNAM
PT Pertamina Power Indonesia (Pertamina NRE) is exploring renewable energy opportunities in Vietnam. The subsidiary of Indonesia state-owned Pertamina Group considers Vietnam to have a compelling renewables potential given the availability of such resources there.
Vietnam has the potential to generate 160 GW of power from renewable energy, opening up investment opportunities in this sector for foreign investors. Investors that are looking for renewables opportunities in the country include Thailand-based public utility power firm WHA Utilities and Power, which plans to acquire wind and solar projects.
VIETNAMESE GROUP PROPOSES PRIVATE FINANCING FOR USD 630 Mn EXPRESSWAY
Deo Ca Group Joint Stock Company has submitted a document to the Vietnamese Ministry of Transport proposing to fully fund the upgrade of the VND 14.9 Trn (USD 621 Mn) Ho Chi Minh City - Trung Luong - My Thuan Road without using public money. Its upgrade is included in the highway network development plan approved by the Vietnamese Prime Minister in 2021 with a target to complete by 2030.
The project runs past 3 adjacent locations - Ho Chi Minh City, Long An and Tien Giang provinces. The expansion is mainly aimed at widening the 4-lane project to an 8-lane motorway with a higher designed speed to meet the growing traffic demand in the area.
The upgrade of the Ho Chi Minh City – Trung Luong section will have a total estimated investment of VND 5.4 Trn (USD 225.3 Mn), of which the state has budgeted about VND 2.6 Trn (USD 108.6 Mn). The expansion of the Trung Luong-My Thuan section will cost about VND 9.5 Trn (USD 396.9 Mn), of which the state funding is about VND 4.7 Trn (USD 196.3 Mn).
VIETNAM APPROVES NATIONAL ENERGY MASTER PLAN FOR 2021-30
Vietnam has approved the National Energy Master Plan for 2021-30, with a vision towards 2050. The plan aims to ensure energy security, support economic and social development, and improve living standards while protecting the environment. It targets 155 Mn tonnes (mt) of oil equivalent in primary energy supply by 2030 and 294 mt to 311 mt of oil equivalent by 2050.
It emphasizes renewable energy sources, aiming for 15-20% share by 2030 and 80-85% by 2050. The plan also focuses on greenhouse gas (GHG) emissions reduction and efficient utilization of domestic energy resources. The projected GHG emissions are about 399-449 mt by 2030 and about 101 mt by 2050. The goal is to cut emissions by 17-26% by 2030 and about 90% by 2050 compared to the normal development scenario.
DEALS SIGNED TO BOOST GREEN ECONOMY AND INNOVATION IN SINGAPORE AND VIETNAM
The Governments of Singapore and Vietnam have signed agreements to boost cooperation in sustainable infrastructure, green economy, and innovation. Both sides have expanded the scope of the Singapore-Vietnam Connectivity Framework Agreement, which was previously signed in 2005, to include energy trade, sustainability, digital solutions, and innovation. In line with this, 3 memorandums of understanding (MoU) have been signed, with the first agreement promoting innovation through collaboration of small and medium-sized manufacturing enterprises and start-ups from both countries.
Meanwhile, the second MoU will focus on promoting skill development through knowledge sharing, adoption of technology-enabled online training, the integration of green and sustainable skills into training programs and ensuring occupational safety and health. The third MoU will focus on promoting the green economy through collaboration of sustainable urban development and infrastructure projects.
GULF ENERGY EYEING RENEWABLES INVESTMENT IN VIETNAMESE PROVINCE
Thailand’s Gulf Energy Development Public Company (Gulf Energy) is looking to invest in renewables, technical infrastructure, and liquified natural gas (LNG) projects in the Vietnamese province of Thanh Hoa. The LNG and renewables sectors are Thanh Hoa’s priority development areas, and the Nghi Son Economic Zone provides attractive investment opportunities.
The central Vietnamese province is currently focusing on drawing investors to education, healthcare, and infrastructure of industrial parks, among other sectors.
VIETNAM’S USD 1.8 Bn INLAND CONTAINER DEPOT PLAN SECURES APPROVAL
Vietnam has signed off on a proposal to develop the country’s inland container depot network by 2030. The plan is estimated to cost between VND 24.7 Trn (USD 1 Bn) and VND 42.3 Trn (USD 1.7 Bn), adding that it is targeting an annual handling capacity of 11.9 Mn 20 ft equivalent units (TEU)-17.1 Mn TEU.
The proposal entails the gradual development of a depot system nationwide in order to meet import and export transportation demand, boost seaports’ handling capacity, and improve container conveyance. Priority will be accorded to some depots along the transport corridors linking major seaports.
VIETNAM TO STUDY USD 1.09 Bn HIGHWAY PPP FEASIBILITY
Vietnam will set up a panel to conduct a feasibility study on a USD 1.09 Bn highway project to be implemented in the public-private partnership mode. Funding will be provided via the state budget (USD 421 Mn) and the provincial budget (USD 170 Mn) with the remaining amount being mobilized from investors. The 129 km long stretch between the towns Gia Nghia, of the Dak Nong Province, and Chon Thanh, in Binh Phuoc is part of the North-South Expressway.
CHINA EVERBRIGHT PREPARES BIDS ON SOUTHEAST ASIAN EFW PROJECTS
China Everbright Environment Group, the country’s largest environment conglomerate by assets, is planning to bid on greenfield energy-from-waste tenders in Southeast Asian countries. The countries that the state company is now looking at include Vietnam, Malaysia, Thailand, Indonesia, and the Philippines, where it has been following up on many potential projects with some awaiting regulatory procedures from the host country governments to proceed to the next stage. The group is preparing for bids in view of the rising market opportunities in the region, and the welcoming attitude towards Chinese investors and close trade ties has also contributed to Everbright’s decision to push into the Southeast Asian waste market.
Everbright Environment is also exploring waste project development opportunities in Hong Kong, with a focus on EfW and organic waste treatment. The company is interested in participating in government tenders and is also keen to help the Hong Kong government with the city’s overall new roadmap to combat climate change, which could involve the launch of new solar and electric vehicle charging projects.
CHINESE FIRMS INTERESTED IN CROSS-BORDER VIETNAMESE RAIL PROJECT
The China Railway Construction Corporation (CRCC) and Power China have expressed interest in investing in the Lao Cai-Hanoi-Haiphong railway. The planned 388 km railway will link Vietnamese cities with the border county of Hekou in China.
The remarks were made during recent meetings between the two firms and the Vietnamese prime minister in China where it was discussed developing rail and power projects in the country. Highlighting the global footprint of CRCC, the Vietnamese government encouraged foreign corporations, particularly those from China, to expand their investment and business operations in Vietnam.
ATHEIN PLANS FUND STRATEGY TO ACQUIRE APAC OPERATIONAL RENEWABLES
Singapore-headquartered renewables platform Athein Holding is planning to launch a fund strategy to acquire operating power projects in the Asia Pacific. As part of the strategy, based on a Variable Capital Company (VCC) structure in Singapore, Athein will raise sub-funds to acquire the clean energy assets across markets such as India, China, and Australia and Athein will act as an advisor and asset manager for the acquired assets. A separate fund manager will manage the VCC funds.
The first sub-fund is set to raise about USD 90 Mn and will acquire the assets in India. Athein will start marketing the first sub-fund by November this year 2023. The fund will target backers looking for smaller tickets worth about USD 500,000 from rich individuals, small and medium size businesses, and other investors.
VIETNAM PLANS CARBON EMISSION TRADING SCHEME
The Vietnamese government is developing carbon pricing instruments and an emission trading scheme (ETS). This involves the creation of a legal framework for carbon credits and allowances. The ETS will be piloted in several sectors by 2025 or earlier and will be fully operational and integrated with similar international systems by 2028. In January 2022, Vietnam proceeded to issue a decree that provided detailed guidelines for GHG emissions reduction and the formation of the market, which would be a driver in the region. Only 3 groups of entities would be legally allowed to take part in the domestic carbon market.
The first group comprises GHG-emitting facilities that have been made subject to regular GHG emission monitoring. There are currently 1,912 entities in this group.
The second encompasses entities that have managed to generate carbon credits and get the credits traded in other ETSs, such as JCM (Vietnam-Japan Joint Crediting Mechanism).
The third consists of those whose activities are closely related to the trading of carbon credits and carbon allowances in ETSs. These entities include banks, custodians, and consultants.
ARDIAN’S GREEN YELLOW RAISES DEBT FOR VIETNAM ROOFTOP SOLAR PORTFOLIO
Ardian-backed Green Yellow has secured a financing package of up to USD 13.8 Mn from the Asian Development Bank (ADB). The loans will be used to support the development of rooftop PV solar systems with a peak planned maximum installed capacity of 32.3 MW in Vietnam.
The package comprises a USD 3 Mn ‘A’ loan from the lender’s ordinary capital resources and USD 10.8 Mn parallel loans from FMO, a climate fund managed by responsAbility Investments and Societe Generale, with the ADB as the mandated lead arranger. A USD 3 Mn grant from the Climate Innovation and Development Fund, administered by the ADB, will also be provided. This is the ADB’s first financing of a rooftop solar portfolio for the commercial and industrial segment in the Southeast Asian nation.
SUMITOMO SEEKS TO DEVELOP LNG PROJECTS IN VIETNAM
Sumitomo Corporation is planning to invest in a liquefied natural gas (LNG)-to-power project chain in Vietnam. Representatives of Sumitomo and the state-owned Petro Vietnam Gas met to discuss their capabilities and establish mechanisms on how to jointly develop the project.
Sumitomo also seeks to promote the LNG business in Vietnam given the recent passage of the country's Power Development Plan (PDP) VIII. The USD 2.58 Bn project is being developed in Khanh Hoa on a build-operate-transfer (BOT) basis. The power generated by the plant will be transferred to the national grid across 500kV transmission lines from the on-site Van Phong switchyard, which is already available for use. The plant’s electricity output will be sold to state-owned utility Vietnam Electricity.
List of Key Transactions - Q2 2023
Source: YOG INFRA analysis
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