RENEWABLE ENERGY - Wind power investors have wind taken out of their sails.
Investors have described a long-waited draft on wind power project incentives as a load of hot air.
Electricity of Vietnam (EVN), the country’s sole power distributor, will have the responsibility for buying electricity from wind power farms at VND1,317 (about US6.9 cents) per kilowatt-hour, according to the draft, released by the Ministry of Industry and Trade earlier this month.
Wind power is a clean, green way to address Vietnam’s chronic power shortages
In addition, the government will subsidise VN185 (US1 cent) for each kilowatt-hour. That means wind power investors can get back 7.9 cents for each kilowatt-hour.
“This is low and not encouraging,” said Nguyen Tien Long, vice general director at Vietnam Renewable Energy Joint Stock Company (REVN), owner of the only operating wind farm in Vietnam.
Located in a subtropical zone with a long coastline, Vietnam is said to have great advantages for developing wind power. According to a World Bank survey, under the Asia Sustainable and Alternative Energy programme, 8.6 per cent of Vietnam’s soil is considered having potential for wind power development, totaling 513,360 megawatts.
The divergence in electricity selling prices between EVN and wind power investors is the biggest challenge for wind power development in Vietnam. While many wind power investors claim selling prices must be higher than 8.5 cents per kilowatt-hour, EVN said it could not afford to buy at this price, as the group resells to consumer at an average of 6 cents per kilowatt-hour.
“The draft has not yet tackled the biggest challenge for investors. We need more subsidy from the government,” said Long.
Long’s company is in purchase price negotiations with EVN, despite its $76.6 million wind power farm connected to national electricity transmission line nine months ago.
The price offered by REVN is 13 cents, in which EVN pay 9 cents and the government subsidises the remaining 4 cents. However, EVN has not accepted.
“The price and subsidy offered in the draft is just sufficient for maintain the operation of wind farms, but not for making profit,” said Bui Van Son, a representative of Swiss Aerogie.Plus Company in Vietnam, which is preparing to build a wind farm in central Ninh Thuan province.
Though the prices offered in the draft does not satisfy the expectation of investors, it is still considered as a milestone for wind power development. “They are better than nothing,” said Son.
Duong Manh Thao, former chairman of Vietnam Wind-Power Joint Stock Company, said said investors could survive at a price of 8 cents. The company is investing in four wind power farms in Vietnam.
“I think the draft offers better conditions for wind power development. This is time for investors to start the construction of projects. If they hesitate, they will miss investment opportunities because potential for wind power in Vietnam is not too high,” said Thao.
As the demand for power is sharply rising in Vietnam, many domestic and foreign investors are eyeing developing wind power, especially in central Binh Thuan and Ninh Thuan provinces where are said to be the most favourable places for wind mills.
According to Binh Thuan’s Department of Planning and Investment, about 12 private investors gained wind power investment certificates in the province. Some other investors like Belgium’s Enfinity and German Donier Aircraft Leasing Limited are also preparing to develop new projects in neighbouring Ninh Thuan province.
Norway’s SN Power recently set up a representative office in Vietnam to study the investment opportunities in renewable sector. NINH KIEU
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OIL - PetroVietnam delays to appoint EPC contractors for Nghi Son Oil Refinery project
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The National Oil and Gas Group (PetroVietnam - PVN) has announced to delay the deadline to submit the bidding profile for EPC Nghi Son Oil Refinery project by 2.5 months, instead of four months as requested by the contractors.
Up to now, there are three large contractors that have registered for carrying out Nghi Son Oil Refinery. These contractors are from Japan, France, Italy, South Korea, Spain and Taiwan.
Therefore, PetroVietnam will officially announce the main EPC contractor for Nghi Son Oil Refinery project in December 2010.
At present, the management board of Nghi Son Oil Refinery was working closely with Thanh Hoa province people's committee and the contractor of PetroVietnam Construction Joint Stock Corp in handing over 39-hectare ground for Nghi Son Oil Refinery Co Ltd in time for conducting EPC contract.
Nghi Son Oil Refinery is situated in Nghi Son Economic Zone, Thanh Hoa province with total investment capital of $7 billion. The main investors for this project include PetroVietnam, Kuwait International Petroleum Group, Japan's Idemitsu Koran Group and Mitsui Chemical Inc.
In the first phase, the oil refinery has designed capacity of 10 million tonnes of products per year. Once in commercial operation in 2014, Nghi Son Oil Refinery will supply the markets with 2.3 million tonnes of petroleum, and 3.7 million tonnes of heavy oil and LPG. VIETNAM PLUS
| Additional $1b to be poured in Dung Quat Oil Refinery
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According to the Circular that has been issued by Ministry of Finance, the ministry granted authoriry to Vietnam Development Bank to re-lend the credit worth $1 billion for Dung Quat Oil Refinery project.
The ministry announced that the lending terms for loans in Dung Quat Oil Refinery was within 16 years with annual interest rates of 3.6 percent. The investors are required to pay the principal and interest in US dollars at due date.
The loan of $700 million was taken from the capital source of the government-guaranteed international bonds that had been issued early this year. These bonds have maturity date in January 2020 and face interest rates of 6.75 percent per year. The coupon rates will be paid every six months.
Meanwhile, the rest of $300 million was offered by BNP Paribas with total lending term of 13 years (from 2007). The interest rate in the first two years was Libor +2 percent, and then applying fixed interest rates of 3.3 percent per year. VNNEWS
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Expert calls for strong shift to thermo-power supply
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| Vietnam needs to make a drastic shift to thermo-power generation and lessen its reliance on hydro-power sources if the country is to avoid widespread outage in the dry season, said an industry expert. | |
FINANCE - Vietnam's forex reserves may lose another 2.5 weeks of imports: MPI
The Ministry of Planning and Investment had forecast in its report at the government meeting in August that the overall balance of payments (BoP) deficit in 2010 could reach $4 billion, which has brought suspicion on the possibility of US dollar/dong exchange rates fluctuations in the rest of this year.
Earlier this year a representative of the International Monetary Fund (IMF) gave shocking information that the overall balance of payments deficit of $8.8 billion in 2009 has pulled in Vietnam's foreign exchange reserves to only seven weeks of imports.
Shortly thereafter, the credit risk insurance CDS (a kind of derivative stocks to insure a loan) of Vietnam's bond was up about 35 points after only one night and finalised a landmark moment passing 260 points, ranking Vietnam just above Greece, the country is still submerged in the public debt crisis.
In fact, the inflows of foreign direct investment (FDI), foreign indirect investment (FII) and external loans are declining in Vietnam.
FII capital through international balance of payments in Vietnam has dropped from $1.29 billion in the first quarter this year down to $510 million in the second quarter, according to the report of Nguyen Huu Nghia, Head of Monetary Statistics and Forecasting Department under State Bank of Vietnam.
Chair of the State Securities Commission Vu Bang also admitted that FII inflows in Vietnam have fallen in recent years.
He said that in 2007, Vietnam's stock market achieved about $11-12 billion of FII capital, but by the end of July 2010, the figure had fallen to only about $7 billion.
According to the Ministry of Planning and Investment, the real foreign direct investment (FDI) capital this year will only reach about $8 billion, compared to the estimated $9 billion.
In a related action, the second issuance of $1 billion international bonds by Vietnam with a coupon of 6.95 percent per year, higher than the Philippines and Indonesia by more than 1 percent per year, is believed to be the cause of the domestic macroeconomic risks, while Vietnam's credit rating is higher than the two above Asean countries.
As per the forecast figure of the Ministry of Planning and Investment, with $4 billion BoP deficit, the country's foreign exchange reserves may lose another 2.5 weeks of imports if compared with the turnover that has been officially published has always reached at about $ 7 billion a month in four recent months.
With a deficit from last year transferred to this year, the US dollar/dong exchange rate needed a new equilibrium. From the beginning of this year, the State Bank has adjusted the average exchange rate for interbank twice with the dong devaluation of about 5.5 percent.
According to Dr Le Xuan Nghia, vice chair of Vietnam's National Financial Supervision, the trade deficit plus the maturity of loans in US dollar credit will increase pressure on the exchange rate in late 2010.SG THIEP TI
CORPORATE BOND FRAMEWORK - VBMA asks for loosened rule over corporate bond issues
The Vietnam Bond Market Association (VBMA) representing 60 members active on the bond market has written to the Ministry of Finance asking for a loosening of rules in a forthcoming decree on corporate bond sales.
The Ministry of Finance is composing a draft decree replacing Decree 52 issued in 2006 on corporate bond issuances. The association suggests that the ministry consider allowing enterprises to issue corporate bonds for whatever legal purposes, rather than to comply with a set of rigid conditions that confine areas of permission.
"At other bonds markets, enterprises can even issue bonds to raise funds for hostile takeovers of other companies, in order to increase its manufacturing capacity," the association says, giving a comparison.
In addition, the association says big enterprises can issue bonds including short-term valuable papers to mobilise funds for working capital.
In the draft decree, the finance ministry regulates that bond sellers can only issue the debt paper if they have been established for at least one year, a provision harshly criticised by the association which calls for the ministry to scrap it.
If this provision stays, many enterprises that have been operational on the market for years will be stripped of the right to issue bonds if they have merged with others to create a new entity, according to the association.
The association also asks the ministry to take off the condition of profitability for issuers because it is not suitable with enterprises operating in the infrastructure and manufacturing sectors which can only earn profits after a long time of operation.
"As the bond market is a market for professional investors, we think investors can absolutely appraise the risks and payment ability of issuers," the association said.
In addition, the draft decree should not ask issuers, auditors, and credit rating agencies to be held responsible for the accuracy of information published as "this goes against international practices… and neither auditor nor credit rating agency will be willing to give comment due to this regulation," the association said.
VBMA and International Finance Corporation (IFC) will jointly issue a guidebook for their members on Vietnam's bond market in the fourth quarter this year. The guidebook will help members refer and apply international standard bond trading models with detailed instructions and methods for bond trading.VNNEWS
POWER - Power cuts loom as water levels at reservoirs decrease sharply
Water levels in many reservoirs have declined sharply compared to previous years, leading to possible electricity shortages.
Hoa Binh Reservoir, the biggest in the north, was at its lowest level for two decades.
The current water level stands at 99m, much lower than the reservoir's 117m capacity.
About 24.5 billion cubic metres of water flowed into the reservoir this year, 18.3 cubic metres less than the same period in previous years.
The National Hydro-meteorological Forecast Centre warned that the total amount of water flowing into the reservoir during the remaining quarter of this year would reach 9.4 billion cubic metres.
The reservoir's water level is estimated to decrease by 22.5 billion cubic metres by the year's end.
This year's severe drought was to blame for the problem, said Hoa Binh hydroelectric plant director Nguyen Van Thanh.
There has been one small downpour this year. In the past, there were between five and eight, he said.
"Over the past 23 years of operation, this is the first time the plant hasn't had to open the sluice gate," Thanh said.
Other reservoirs also face the same problem, with many of their water levels reaching 'death level' where turbines cease to safely function.
Son La Reservoir water level stands at 162m, 13m lower than the death level.
The water levels of Dai Ninh Reservoir in central Quang Nam Province, Ham Thuan Reservoir in central Binh Thuan Province and Tri An Reservoir in southern Dong Nai Province stand at just 0.2 m, 0.1m and 0.13m higher than death level, respectively.
Meanwhile, the monsoon season was set to end, worsening the water shortage situation, said deputy director of the centre Nguyen Lan Chau.
"Rains are forecast in the next few months, however the expected 20-30mm of rainfall will not be enough to make up for the water shortages," she said.
Low water levels may lead to electricity shortages.
CEO of the Electricity of Vietnam (EVN) Dao Van Hung said the company's electricity supply would be 5-10 percent lower than demand as a result of the droughts.
The Hoa Binh hydropower plant annually generated more than 10 billion kWh and this year intended to generate 8.5 billion kWh but the target might be decreased due to water shortages, he said.
The plant generated 42 million kWh per day in 2009, but the figure had dropped to 32 million kWh a day this year.
The plant's director Thanh said electricity generation was limited due to water shortages while the Hoa Binh Reservoir had to start to reserve water for electricity generation during the approaching dry season.
The low water level at the Hoa Binh Reservoir would affect the construction of Turbine No 2 at the Son La hydropower plant, meaning that the power's electricity generation would slow, according to EVN deputy director general Vu Duc Thin.
The water level needed to measure 113m to be able to transport the equipment, but the present level was 99m, he said.
All 17 key EVN reservoirs faced water shortages while hydroelectricity accounted for 6,500MW of the company's total electricity generation capacity of 16,000-17,000MW, causing difficulties for electricity generation which would continue well into next year, CEO Hung said.
The company planned to propose the Ministry of Industry and Trade to map out plans to avoid rolling power cuts, he said.
"Cement and steel production plants, which consume large amounts of electricity, will be required to change their production plans to save electricity," he said.
Other power sources such as thermo-electricity would be maximised to help make up for the electricity shortages, he added.
Petrochemical - Itochu in talks with Qatar on Vietnam petchem plant
Japanese trading house Itochu Corp said on Wednesday it is in talks with state-run Qatar Petroleum and Thailand's Siam Cement on building and operating a petrochemical complex in southern Vietnam.
The Nikkei business daily reported earlier that the roughly $4 billion project, which also involves Vietnamese state-run oil firm PetroVietnam, would aim to create a cracking furnace, with a capacity of about 1.4 million tonnes per year, on the island of Long Son with operations set to start in 2015.
The report, based on an interview with Qatar Oil minister Abdullah Al Attiyah, said the negotiations were in the final stages, but an Itochu spokesman declined to comment on specifics.ARABIAN BUS
WATER - Thu Duc water plant inaugurated in HCM City
Thu Duc Water BOO Corp on Monday began commissioning a long-awaited water treatment plant, thus easing the chronic shortage of running water in some parts of districts 7, 8 and Nha Be.
The plant will be able to supply 300,000 cubic meters of water a day for residents in the three districts.
This is the first water project in the city developed under BOO (build-operate-own) form with the total cost of over 1.7 trillion dong. The project includes a water pumping station in Dong Nai Province and a treatment plant in HCM City's Thu Duc District.
Saigon Water Corp, or Sawaco, has completed 25.7 kilometres of water pipe for the project, starting from Thu Duc and running through districts 9, 2, 4, 7 and 8 to Ba Chiem Bridge in Nha Be District.
The enterprise will extend the pipeline system in the future to supply more running water for Thu Duc, Binh Thanh and Go Vap districts.
Ly Chung Dan, Sawaco deputy general director, said Sawaco would distribute water from Tan Hiep water plant to districts 4 and 8 to supply water for districts 12, Binh Tan and Cu Chi.
Construction of the project began by the end of 2005 with the capital initially estimated at over 1.5 trillion dong.
HOTEL - Accor targets 30 operational hotels in Vietnam by 2013
Accor is striving to realise its new ambitious goal to operate 30 projects in three years' time, or almost three times higher than the current number of hotels the group is managing in Vietnam.
"Our first realistic objective is to have 30 hotels and we think we shall be able to have this network of hotels already open by the end of 2013," said Patrick Basset, Accor vice president of operations for Vietnam, the Philippines, Japan and South Korea.
Basset told the Daily after a press conference in HCM City on Tuesday to introduce the Pullman brand that Accor now operated 14 hotels under the Sofitel, MGallery, Novotel, and Mercure hotel brands in Vietnam. The rest of the projects under construction will be up and running in the next three years.
"The 30 hotels will have a quite balance of Accor brands," Basset said, adding that Accor would have about four Sofitel and five Pullman hotels, and six to seven properties under each of Mercure, Novotel and ibis.
The biggest international operator of hotels in Vietnam told reporters that it had just signed contracts to manage two new Pullman hotels, bringing the total number under this upscale brand in this fast-growing tourism market to five.
All the five Pullman hotels will be put into service by 2013, and the Pullman Hai Phong Flamboyant Island Resort and Pullman Danang Beach are the two new developments committed to Accor.
"We are very excited to announce Pullman Hai Phong Flamboyant Island Resort," he said.
The hotel in Hai Phong is the latest commitment for the brand in Vietnam. Situated on Flamboyant Island in Do Son District, this 300-room hotel will cater to the increasing number of travellers to the northern industrial and seaport hub of Vietnam, as this upscale hotel has a ballroom, meeting rooms, three restaurants, two bars, swimming pools, an entertainment centre, spa and an amphitheater.
Due to open in mid-2011, the Pullman Danang Beach will feature 207 guest rooms, four restaurants and leisure facilities including three swimming pools. The other Pullman projects scheduled to go online next year are in the southern city of Vung Tau and in Hanoi.
The 360-room Pullman Vung Tau, the first Pullman hotel planned for opening in Vietnam, will have a ballroom for 500 guests at a time, smaller functional rooms and other business and leisure facilities.
The 250-room Pullman Hanoi Horison under renovation will have event facilities able to accommodate up to 1,000 guests among others. Accor will operate more Pullman hotels to take advantage of the demand for upscale business and leisure facilities, he said.
"With sustained economic growth and significant investment in infrastructure leading to increased volumes for business travel and continued international and domestic leisure strength, opportunities continue for quality upscale hotel developments in Vietnam," Basset said.
Evan Lewis, Accor vice president of communications for Asia Pacific, told reporters that increasing foreign investment flows into Vietnam and continued economic growth would fuel strong demand for international quality upscale hotels in this country. This is why Accor introduces the Pullman brand to this emerging market.
But Basset predicted ibis would grow slightly bigger than the other Accor brands in the years to come because of the larger need for the hotel under this economy, new-concept brand in Vietnam.
Earlier this month, Viethan Hotel Joint Stock Co. started work on the first ibis hotel project in Vietnam. The company, founded by B.B. Dai Minh Corp., will inaugurate this three-star hotel in HCM City's Saigon South in about 20 months' time.
The $11 million property in District 7 will have 160 rooms as well as café, restaurant, gym and conference facilities.
Oliver Massmann
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