Trung Nam To Relinquish Hydropower Plants

By Saigontimes, August 27th, 2013

Dang Cong Chuan, deputy general director of Trung Nam Group, told the Daily on Monday that the group has become less enthusiastic about hydropower projects due to costly investments while the economic efficiency is not as high as before.

Trung Nam will sell part of its ownership in Dong Nai 2 hydropower plant project in which the group holds a 90% stake worth nearly VND3 trillion. The project is expected to start electricity generation later this year.

Meanwhile, the group is seeking partners to sell stakes in Krong No 2 and Krong No 3 projects under construction. Trung Nam started work on the projects several years ago but failed to put them into operation at the end of 2012 as scheduled due to difficulties in capital mobilization.

Each hydropower plant project costs around VND1 trillion, of which 30% is funded by the investor and the remaining 70% is funded by bank loans. It will take the investor 10 to 14 years to recover capital while profits cannot compensate for the interest sum and prolonged risks.

A week ago, Hoang Anh Gia Lai Company announced to sell six hydropower projects, saying that the sector was not as profitable as rubber planting or real estate.

Do Duc Quan, head of the hydroelectricity division of the General Department of Energy, said that investors are not interested in hydropower projects any longer as banks’ rising lending rates have pushed up investment expenses.

Meanwhile, hydropower plants, especially medium and large projects with capacity over 30MW, usually reach low sales price at only VND700-800 per kWh during negotiations with Electricity of Vietnam. As investment costs have increased, electricity sales prices must be from VND1,000 a kWh to help secure profits for project investors.

Chairman of the Vietnam Energy Association Tran Viet Ngai said that there are just a few locations for hydropower exploitation that can secure capital recovery. Those with high profitability have been virtually exploited already.

In addition, the State has policies to stop investment in medium and small hydropower projects from now to 2017. Therefore, investors should gradually withdraw from low-profit schemes, Ngai added.

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