Malaysia builds power plant in Vietnam with Chinese capital

JAKS Resources Berhad from Malaysia will team up with Chinese CPECC Group in a joint venture to build a thermal power plant with capital of $1.87 billion in Vietnam. Vietnam lacks capital to build power plants and has called for foreign investment, which analysts say is not the best solution.

The Malaysian Star newspaper reported that the involved parties signed an agreement on July 7 on the Chinese group involvement in the project, to be implemented under the BOT (build, operate, transfer) mode in Hai Duong province of Vietnam.

CPECC received the Chinese government’s approval on the financial and securities investments in the project with a capital contribution ratio of 50 percent.

In 2011, the Ministry of Planning and Investment (MPI) granted the investment certificate on the power plant project to JAKS.

The project is expected to be implemented with 25 percent of stockholder equity and 75 percent of mobilized capital.

The construction of the power plant is expected to kick off in the first half of 2016 and be completed by 2020.

Dr. Truong Duy Nghia, chair of the Thermo Scientific and Technical Association of Vietnam, on July 8 said he wondered if the Chinese capital contribution to the thermal power plant in Hai Duong province had been ratified by Vietnam.

Under current laws, the investors of BOT projects, approved by the government of Vietnam, have the right to call for capital to implement projects provided that the capital contributors get the nod from the government.

In other words, JAKS can mobilize capital from other sources and cooperate with its partners to implement the project, operate the plant for 25 years and then transfer to Vietnam. However, it must report the capital contributors to the government of Vietnam.

Nghia cited the thermal power plant in Nam Dinh province developed by South Korea’s Taekwang as an example.

Many changes related to the investors and capital contributors have all been reported by Taekwang to the government for approval.

Most recently, the Prime Minister has agreed that Taekwang and the investor from Saudi Arabia will replace the joint investors of Taekwang & Korea East West Co Ltd.

Nghia noted most BOT investors can succeed with their BOT thermal power projects because electricity manufacturers do not have to spend money on ads and marketing. They just need to generate power and buyers will come.

Second, BOT investors can develop projects though they don’t have enough capital, because commercial banks are willing to provide capital to them. Third, Vietnam lacks capital to build power plants and needs foreign capital.