UPDATE 1-Petrovietnam units sign $1.2 bln coal-power plant deals

July 8, 2011
(Reuters)

HANOI, July 8 (Reuters) - State-run Petrovietnam has awarded two contracts worth a combined $1.2 billion to two subsidiaries to build a 1,200-megawatt, coal-fired power plant, which will boost its thermal coal imports from Indonesia and Australia, the government said.

Vietnam has also licensed Malaysia's Jaks Resources Berhad to invest $2.25 billion to build a coal-fired power plant in northern Vietnam, using domestic coal, a state-run newspaper reported on Friday.

The moves come as coal is expected to take over from hydropower as the leading fuel for new electricity generation in Vietnam in the next five years, a period when annual power consumption is set to rise by 15 percent, after supply had lagged demand by 3 percent in the past five years.

The contract signing for the first project in central Vietnam follows the country's first import of nearly 10,000 tonnes of Indonesian thermal coal this year, as it also continues to buy electricity from southern China to avoid outages.

These also come as Vietnam takes the initial steps towards opening up its power sector, by launching a pilot competitive generation market last Friday to encourage private power generators to boost supply.

The contracts for the Quang Trach 1 plant were signed with Petrovietnam Construction Corp (PVC) and Petrovietnam Investment Consultancy and Engineering Corp (PVE). Construction will start on July 19, the government said in a statement issued late on Thursday.

PVE said the contract awarded to the firm was valued at $17.6 million, the largest in Vietnam so far for a designing deal.

The plant would use coal imported from Indonesia and Australia, the statement said, adding that its use of pulverised coal-fired technology would be environmentally friendly.

Vietnam, a net coal exporter, is expected to import 6.5 million tonnes of the power-generating fuel annually by 2015, from around half a million tonnes a year in recent years, as domestic supply is declining, a minister was quoted on Thursday as saying.

The government said PVE would take the designing role and PVC will buy, install and test-run equipment, including two generators, at the plant in Quang Binh province's Quang Trach district, 410 km (255 miles) south of Hanoi.

The first generator is slated to start operation in June 2015 and the second in December 2015, with a combined annual output expected at around 8.4 billion kilowatt hours, the government's statement said.

Petrovietnam has been tasked to ensure it would supply 9,000 megawatt of designed power generating capacity between 2011 and 2015 in order to meet a quarter of Vietnam's electricity output.

It was not immediately clear how Petrovietnam is going to fund the Quang Trach 1 plant's project.

Last December, Petrovietnam said it would use its funds to meet 30 percent of the investment need to build the $1.2-billion Long Phu 1 power plant in the country's south, also using Indonesian and Australian coal, while taking export credit assistance funds for the remaining 70 percent.

Long Phu 1 and Quang Trach 1 would sell electricity to state utility Vietnam Electricity group (EVN).

Vietnam also plans to start building the country's first nuclear power plant in 2014 using Russian technology.

The country's electricity consumption would nearly double to 175 gigawatt-hours in 2015 from 98 gigawatt-hours this year while supply will increase to 196 gigawatt-hours from the current 110.8 gigawatt-hours, EVN has said. (Reporting by Ho Binh Minh; Editing by Ramthan Hussain)