Delayed BOT projects threaten to disrupt future power supply

11:00 | 11/06/2020
A series of build-operate-transfer power projects are lagging behind set schedules by as much as a year due to the global pandemic, threading concern into the power supply issue in the coming time.
1495p10 delayed bot projects threaten to disrupt future power supply
Delayed BOT projects threaten to disrupt future power supply

A build-operate-transfer (BOT) power developer who declined to be named told VIR that his venture is facing delays of more than six months due to supply chain disruptions, unavailability of manpower, and issues in obtaining project financing due to the coronavirus.

“Our project is under negotiation and has not started construction. The recent lockdown and movement restrictions imposed to control the spread of COVID-19 have contributed to our delay,” the developer said. “The longer the project is delayed, the harder it is for our project as lenders have started to restrict or phase out financial support, even though we committed to using the most advanced technology.”

Meanwhile, South Korean national power company Korea Electric Power Corporation’s (KEPCO) poor track record was noted by the director of Energy Finance Studies Asia and author of the report “Question Time for KEPCO’s Board” as it witnessed poor performance, also due to the pandemic. Its share price shot down 22.8 per cent year-to-date, creating questions for their overseas investment and BOT power activities in Vietnam, including the 1,200MW Nghi Son and the potential 1,200MW Vung Ang 2.

Over the past few decades, there has been a craving for public-private partnership in the development of large-scale energy and infrastructure ventures across Vietnam. However, along with the revised Power Development Plan VII (PDP7) that has not been implemented as expected, the BOT power sector has moved slowly, with long preparation times. There are currently 15 BOT power projects, including three projects on track (in particular, Vinh Tan 1 started power generation six months earlier than planned) and others being delayed or are unidentified due to certain obstacles in negotiation (see chart).

For instance, the 1,200MW Hai Duong BOT power plant in the northern province of Hai Duong, licensed in 2011, remains under construction through a joint-venture between Malaysia’s Jaks Resources and China Power Engineering Consulting Group. As per the initial plan, this power project was expected to start commercial operations in 2016 with the first turbine and in 2017 for the second.

Hai Duong, where the project is located, has already requested the prime minister and relevant authorities several times to urge the foreign investors to implement construction on schedule as previously committed. The province also asked the prime minister to issue measures for the continuous delay for many times.

Industry insiders said that financial arrangements are not a straightforward assignment for power projects that require huge capital and must take environmental concerns into account. Looking back on the progress since the release of BOT bidding documents of Nghi Son 2 in the central province of Thanh Hoa, it took about 10 years for the thermal power initiative to complete all procedures in order to reach financial closure. BOT Nghi Son 2 is invested by a consortium consisting of Japan’s Marubeni Corporation and KEPCO. The $2.79 billion project started construction in 2018 and was expected to be completed next month.

Some other BOT schemes under negotiation include India’s Tata Power for Long Phu 2, Thailand’s EGAT Quang Tri 1, and Toyo Ink’s Song Hau 2.

The Ministry of Industry and Trade (MoIT) admitted in a document, “The negotiation of BOT contracts and investment licence issuance take time due to the complex involvement of many related ministries. Obstacles have been mainly incentive policies, foreign exchange, early termination of contract, and more. It usually takes a long time for other authorised agencies to review and provide comments. The MoIT is not able to take control of contract negotiation and signing. BOT plants such as Vung Ang 2, Vinh Tan 3, Long Phu 2, and Song Hau 2 are facing such problems.”

Last year, a representative of the BOT Van Phong 1 thermal power investor told VIR that the delay in the implementation of BOT projects in the industry “is due to the terms of related contracts, electricity trading, land lease, and government guarantee,” adding that it takes time to negotiate to ensure the ability to arrange financing from foreign credit institutions.

Earlier this year, the MoIT released its latest report on the implementation of power projects in the revised PDP7. Some 47 of the 62 approved plants are behind schedule to various degrees, ranging from a few months to as long as five years. Delays in many power projects in particular threaten shortages in the coming time.

The total capacity of all power sources likely to be operationalised over the course of 15 years (2016-2030) is expected to reach about 80,500MW, over 15,200MW less than the figure forecast in the revised PDP7 for 2011-2020 with a vision towards 2030.

Vietnam is currently reviewing and building an eighth PDP. The prime minister also urged the MoIT and related agencies to take measures to promote key power projects and recommend solutions for power projects that are falling behind schedule.

The MoIT also reported that relevant agencies have to prepare carefully to minimise power outages across the country, especially in the southern region. In some cases, it is required to mobilise electricity that is generated by oil and diesel as well as raise the awareness of energy conservation among residents. Many solar power plants, meanwhile, are also expected to be soon put into operation, which will also contribute to address the shortages.

Under Directive No.20/CT-TTg released last month on saving electricity during 2020-2025, the prime minister has called on the whole country to save at least 2 per cent of total power consumption each year.

Administrative agencies must work with electricity suppliers to save 5 per cent of total consumption each year. Public lighting operators were required to save 20 per cent of total electricity consumption during the period. Power-saving technology must be used in public lighting.

Hospitality providers, office centres, and apartment buildings were asked to cut 50 per cent of outdoor advertising lighting capacity at night.

Households are being asked to use equipment with energy-saving labels, economically and effectively use power, and install solar panels on roofs where possible.

By Nguyen Thu

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