Vietnam’s 10-year electricity master plan calls for massive investment in the country’s electricity monopoly by Western aid and export credit agencies. Monopoly investments in a centralized grid linking big hydro, gas, coal, and nuclear power projects are based on central planning and political patronage, rather than market assessments and customer choice. By financing power projects that the private sector considers too large and risky, Western aid agencies will effectively crowd out viable private-sector energy investments in order to help win contracts for favoured exporters of engineering services and equipment. The absence of market discipline, public oversight, and enforceable property rights, makes power sector aid to Vietnam a breeding ground for corruption and electricity investments that damage the environment, victimize communities, raise electricity costs, sink citizens in debt, and cost taxpayers in aid-donor countries money.

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Master plan envisions multi-billion-dollar expansion of Vietnam’s electricity monopoly

The state-owned utility, Electricity of Vietnam (EVN), will keep its monopoly grip on the country’s electricity generation business over the next 10 years, judging from the Ministry of Industry’s latest electricity master plan.

According to Electricity Master Plan Number Five, released earlier this year, the electricity monopoly, EVN, will remain the country’s largest power producer and retain monopoly control over electricity purchases, transmission investments, and distribution to customers.

Private power producers, meanwhile, will be allowed to finance and generate no more than 20 percent of new supply, according to the plan.

The two largest capacity additions planned include a 3,300-megawatt expansion at the Phu My gas-fired complex in southern Vietnam, and a second massive hydro dam in the northern province of Son La, with an installed capacity of up to 3,600 megawatts.

Currently there are 19 power projects either under construction or in the pipeline for commissioning by the year 2005, to meet an estimated 12 percent annual growth in consumption during this period.

EVN estimates that national power output will increase as much as eightfold in the next 20 years, rising from about 27 billion kWh in 2000 to 50 billion kWh in 2005, 80 billion kWh in 2010, and up to 200 billion kWh in 2020.

EVN will need an estimated US$1.4 billion annually to finance its power projects and expand the transmission grid, and expects the bulk of funding will come from aid and export credit agencies, as well as local governments and communities.

Other highlights of the master plan include:

• By 2002, a pre-feasibility study for the country’s first nuclear power plant;
• By 2003, the country’s first privately-financed hydro dam, the $85-million Can Don project now under construction comes online;
• After 2005, 11 hydropower projects managed by EVN, 10 of which will have an installed capacity of 300 MW or less; and
• After 2010, transmission lines to three nuclear plants in southern Vietnam: Phu My, Cau Thai province, Nha Trang, Khanh Hoa province, and Bien Hoa, Dong Nai province.

The government also plans to commission studies for additional gas and coal-fired plants, as well as power exchanges with neighbouring Laos and Cambodia, and geo-thermal and wind power projects.

To meet electricity needs on islands and in remote, mountainous, and border areas, the plan calls for development of small-scale hydro, wind turbines, and solar power systems.

Electricity Master Plan No. 5 List of Power Projects

(Issued June 22, 2001)

1. HYDRO DAMS

1.1 Owned by Electricity of Vietnam Corporation (EVN)

• Yali – Gia Lai Province:
  Installation of the last two 180-megawatt turbines to complete the 720-MW hydro dam. Estimated total project cost: $730 million. Partly financed by the Russian government. Commissioning year 2001. 
• Ham Thuan – Da Mi – Provinces of Binh Thuan and Lam Dong:
  300-MW and 150-MW hydroelectric plants on the River La Nga. Ham Thuan is located in Binh Thuan province, Da Mi is located in Lam Dong province. Estimated total project cost: $700 million. Japan Bank of International Cooperation agreed to provide 85 percent of the financing in 1994. Construction began in 1997 but was set back by severe flooding in 1998. The dams are also intended to provide irrigation to rice lands in the Tanh Linh and Duc Linh districts of Binh Thuan. The project will flood 4,000 hectares of forests and displace about 1,000 households, according to the Ministry of Science, Technology, and Environment. Commissioning year 2001. 
• Dai Ninh – Lam Dong Province:
  300-MW hydro dam on the Dong Nai River, the main tributary to the Saigon River, flowing through Ho Chi Minh City to the South China Sea. Estimated project cost: $440 million. In the last decade, the Canadian government paid engineering consultants SNC-Lavalin almost C$1 million for the dam’s design. The World Bank declined funding for the dam in 1998 citing concerns about forced resettlement. Earlier this year, the Japan Bank of International Cooperation agreed to provide $80 million for procurement of Japanese goods and services for the dam. If completed, the dam will forcibly displace thousands of people. Commissioning year 2005. 
• Rao Quan – Quang Tri Province. 70-MW hydro dam on the Thach Han River. Norwegian hydro consultants, Norconsult, conducted a feasibility study for the dam in 1994. Estimated project cost: $140 million. China has reportedly promised financing for the project. Commissioning year 2005
• Son La – Son La Province. 3,600-MW hydro dam upstream of the country’s largest existing hydro dam, the 1,920-MW Hoa Binh dam. Estimated project cost:
  $3.75 billion. Sweco (Sweden) and Harza (United States) are involved in project planning and appraisal. If completed, the dam will displace more than 95,000 people. Commissioning year between 2006-2010 “to be executed in accordance with the Resolution made by National Assembly at its 9th Session.” 
• Se San 3 – Gia Lai Province. 273-MW hydroelectric dam downstream of the existing Yali dam. Estimated project cost: $292 million. Sweco of Sweden involved in project planning. The Asian Development Bank declined funding for the project in 2000, following complaints from environmental groups and citizens downstream that the dam would exacerbate damages to downstream communities caused by the existing Yali dam. This year, the Japan Bank of International Cooperation agreed to finance the project. Commissioning year 2006-2007.
• Plei Krong – Kon Tum Province. 120-MW hydro dam on the Kro Poco River, about 20 kilometres northeast of the Yaly dam. Estimated project cost: $256 million. Electrowatt of Switzerland conducted a feasibility study in 1993. EVN’s initial proposal was opposed by the Kon Tum People’s Committee because the dam would have displaced more than 10,000 people. The plans were revised following an August 2000 letter from the Kon Tum authorities to the Ministry of Industry and EVN requesting that the plans be revised to minimize the number of people displaced. The committee approved EVN’s revised plan in November 2000 (no further details available). Russia has agreed to lend $100 million for the project. Commissioning year 2007-2008.
• Na Hang (Dai Thi) – Tuyen Quang Province 300-MW hydro dam. Commissioning year 2006.
• Ban Mai – 260-MW hydro dam. Commissioning year 2007-2008.
• Dong Nai 3 & Dong Nai 4 – Lam Dong province 510-MW hydro scheme, part of the Dong Nai River master plan financed by Japan Bank for International Cooperation. Commissioning year 2008-2009.
• An Khe & Ka Nak – 155-MW hydro dam. Commissioning year 2008-2010.
• Buon Kuop – 280-MW hydro dam. Commissioning year 2008-2010.
• Ba Ha River – 200-MW hydro dam. Commissioning year 2008-2010.
• Tranh River 2 – 200-MW hydro dam. Commissioning year 2008-2010.

1.2 Build-Own-Transfer Schemes

• Can Don – Binh Phuoc province. A 72-MW hydro dam under construction since May 2000 by Song Da Construction Corporation. Song Da has a 25-year BOT contract with EVN to sell the dam’s output to EVN for 4.5 US cents per kilowatt-hour. The dam is also supposed to irrigate 4,800 hectares of farmland in Binh Phuoc’s Loc Ninh district. Estimated total project cost: $86 million. Vietnam’s first hydro dam to be financed domestically. Commissioning year 2003

2. GAS-FIRED POWER PLANTS

2.1 Owned by Electricity of Vietnam Corporation

• Phu My 1 – 1,090-megawatt gas-fired combined cycle plant, the first in a series of large gas-fired units in the Phu My industrial complex, located in the southern coastal province of Ba Ria-Vung Tau, 120 kilometres west of Ho Chi Minh City. Estimated project cost: $530 million. Financing provided by the World Bank and Japan’s Overseas Economic Cooperation Fund since 1993. Equipment supplied by Japan, Europe, and the U.S. Commissioning year 2001.All Phu My projects will be fuelled by natural gas from the Nam Con Son basin off the coast of southern Vietnam.
• Phu My 2-1 – a 56-MW steam turbine add-on. Commissioning year 2002.
• Phu My 4 – a 450-MW gas-fired combined cycle plant. Estimated project cost:
  $242 million. To be financed by local banks, approved by the Prime Minister in January 2001. Commissioning year 2002-2003 
• Phu My 2-1 – 143-MW steam turbine add-on. Commissioning year 2003.
• O Mon – 600-MW addition to an existing oil and gas-fired power plant in the Mekong delta province of Can Tho. Financed by Japan Bank of International Cooperation. Hitachi Corporation of Japan is bidding on equipment supply contracts. (Note: Vietnam Investment Review reported in November 2000 that JBIC had scaled back the project to 300-MW.) Commissioning year 2004-2005.
• Ca Mau – 720-MW gas-fired combined cycle plant in Ca Mau province. Part of the government’s plan to develop a gas-power-urea fertilizer complex in Ca Mau province. The project is to be developed as an independently-owned power project that would supply power to EVN, according to the plan. Commissioning year 2005-2006.

2.1 Build-Operate-Transfer Schemes

• Phy My 3 – 720-MW gas-fired combined cycle plant, part of EVN’s Phu My complex in Vung Tau province. Officially cancelled three times by the government, this is Vietnam’s first BOT project. Estimated project cost: $412 million. After more than four years of negotiations, BP/Amoco received a BOT license from EVN on May 22, 2001. A 20-year contract with tariffs averaging at 4.09 cents/kWh. Project is 100 percent owned by British Petroleum and will burn gas by the gas field discovered and developed by BP since 1993. BP plans to divest immediately and bring in an investor-operator. Construction set to begin mid-2001. Siemens has won the contract to supply and install the generators. Commissioning year 2003.
• Phu My 2-2 – 720-MW gas-fired combined cycle plant, part of EVN’s Phu My complex in Vung Tau province. To be built and operated for a 20-year period by a consortium led by Electricite de France, Sumitomo, and Tokyo Power of Japan. Under discussion since 1995, this is the World Bank’s model BOT project in Vietnam and is the first power project subject to open international competitive bidding. The World Bank provided a technical assistance grant to design the BOT contract and has offered to provide a $75 million loan guarantee to attract private investors. Electricity master plan no. 5 notes: “If the negotiations for Phu My 2-2 fail, EVN is to find other financing sources for its construction.” Commissioning year 2004.

3. COAL-FIRED POWER PROJECTS

3.1 Owned by Electricity of Vietnam Corporation

• Pha Lai 2 – 600-MW addition to an existing 440-MW coal-fired station in Hai Hung province, 65 kilometres northeast of Hanoi. Pha Lai is the largest coal plant in Vietnam, built with Soviet aid in the 1980s. Lack of spare parts has reduced performance and operating capacity since the collapse of the Soviet Union in the late 1980s. The UK has since provided technical assistance for Pha Lai 2. Financing for Pha Lai 2 provided by Japan’s Overseas Economic Cooperation Fund (renamed Japan Bank for International Cooperation) since 1994. When completed, it will be the first coal-fired plant in Vietnam to be designed and built using imported western technology. Commissiong year 2001.
• Uong Bi Extension – 300-MW addition to an existing 100-MW coal-fired station in Quang Ninh province, built in the 1970s using Soviet technology. The extension is being financed by Japan Bank of International Cooperation. Hitachi Corporation of Japan is bidding on equipment supply contracts. Commissioning year 2004-2005.

3.2 Owned by Vinacoal

• Na Duong – 100-MW coal-fired plant in Lang Son province, owned and operated by state-owned coal monopoly Vinacoal. Commissioning year 2003-2004.
• Cao Ngan – 100-MW coal-fired plant in Thai Nguyen province, owned and operated by Vinacoal. Commissioning year 2003-2004.
• Cam Pha – 300-MW coal-fired plant owned by Vinacoal. Commissioning year 2004-2005.

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Notes:

1. Probe International contracted the Ho Chi Minh City-based consultancy Mekong Research to collect background information and opinions from energy industry officials in Vietnam. The opinions expressed in this and other reports are entirely the opinions of Probe International and not the opinions of Mekong Research or the various officials that Mekong Research interviewed. Probe International bears full responsibility for the positions advocated and any factual errors in this backgrounder.
2. A BOT company can be either a joint venture or a wholly-owned foreign enterprise. The BOT contract binds the foreign investor to build and operate the project for a certain period, after which the project is to be transferred without compensation to the state or responsible agency designated by the government, in this case Electricity of Vietnam.
3. References available upon request.