Investors pull the plug on hydropower

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A file photo of workers and equipment on the construction site of the Dong Nai 2 Hydropower Plant in Dong Nai Province. The investor, Trung Nam Company, said it is selling its stakes in this hydroelectricity project and two others.

The ardor to build hydropower plants is cooling off, with investors trying to pull out because of low profits.

Construction firm Trung Nam announced it is selling its stakes in three hydroelectricity projects: the Dong Nai No. 2 in Dong Nai Province and Krong No Nos. 2 and 3 in Lam Dong.

The firm holds 90 percent of the stake in Dong Nai No. 2 after sinking VND3 trillion (US142.9 million) in it. The 70-MW plant is expected to begin generating power later this year.

The other two, with a combined capacity of 46 MW, are under construction. They were scheduled to go on stream last year but have been delayed due to a funds shortage.

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A Trung Nam executive said his firm wants to pull out of the projects because of the low returns on large investments.

He said 70 percent of the investment was from bank loans, which have been carrying high interest rates for a long time.

In July Hoang Anh Gia Lai Group announced that it sold its six hydroelectricity plants with a combined capacity of 211.7 MW in the provinces of Gia Lai and Thanh Hoa.

Four are already operational and two are under construction.

The company said hydropower plants in Vietnam no longer bring high profits, so it sold the plants to raise funds to build hydropower plants in Laos which could bring it higher profits.

It can earn VND1,278 from selling a kWH of electricty in Laos, but only VND800 in Vietnam.

Talking about the sell-off by some hydropower developers, an analyst said some had achieved big profits - of 100 percent or event 200 percent - from hydropower projects a few years ago, and many others rushed to invest in the field. But later investors could not find good locations for their projects, he said. 

High bank lending interest rates in the past few years have also hit profits. In 2011 interest rates stood at 20-25 percent, and they have gradually reduced to 9-10 percent this year.

Under the government's plan for stable development of the power industry, construction of small and medium-sized hydropower plants would not be allowed from 2017, only big ones, Tran Viet Ngai, chairman of the Vietnam Energy Association, said.

Dr. Dao Trong Tu, advisor to the Vietnam River Network, an open forum which works for protection of water resources, said: "We have too many hydropower projects because 5-10 years ago many investors, including some without much knowledge of the field, rushed to build hydropower plants because of the high profits.

"But they now no longer find it attractive even if the government encourages them because good locations for plants have been used up."

Hydropower accounts for 45 percent of the country's total generation, with most plants being small or medium-sized.

The electricity development master plan originally envisaged having more than 1,100 medium-sized and small plants, but the Ministry of Industry and Trade now plans to eliminate 338 of them to prevent excessive development.

The Central Highlands has the largest number of plants approved in the country - 485 - with a total capacity of nearly 10,000 MW. Of them 118 have been built already and 75 are under construction.

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