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3 November 2020 (IEEFA Vietnam): Foreign investors will face higher-than-usual risks in concluding coal power projects in Vietnam, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

Author Thu Vu, Energy Analyst with IEEFA, says new regulatory and market challenges will likely prove too onerous for foreign investors in four of the 15 remaining coal power projects in Vietnam’s pipeline: Nam Dinh 1, Vung Ang 2, Vinh Tan 3 and Song Hau 2. These are projects which have yet to reach commissioning phase, with contractual agreements still pending official sign-off.

New regulatory and market challenges will likely prove too onerous for foreign investors

The new Law on Public-Private Partnership (PPP Law) coming into effect in 2021 creates new hurdles for foreign coal investors that fail to conclude build-operate-transfer (BOT) contracts, and government guarantee and undertaking (GGU) agreements, before the end of 2020.

“South Korean, Japanese and Chinese investors will likely struggle with changes brought about by the new PPP Law,” says Vu.

“There are risks of sovereign guarantee cutbacks and other bankability challenges. Resolving these issues will take time and add to project completion risk.”

Vu notes the change puts more pressure on Japanese and South Korean investors who are already pushing hard to close deals, as their governments and global financial institutions are signalling an accelerated exit from funding fossil fuel investments.

Japanese and South Korean investors are already pushing hard to close deals

Just last week the Japanese and South Korean governments both committed to reach net zero emissions by 2050, highlighting their pivot away from investment in fossil fuels. In early October, China also announced a 2060 net zero emissions target.

Foreign investment in fossil fuels is likely to encounter more opposition as these three major economies transition to cleaner, cheaper, deflationary renewable energies.

Vu says South Korean and Japanese financing of Vung Ang 2 is already facing unprecedented public scrutiny with several backers including Standard Chartered and OCBC Bank pulling out and investor groups describing the investment as an “irresponsible energy transition risk”.

Vung Ang 2 is already facing unprecedented public scrutiny

“Changes to Vietnam’s power market structure and emerging competition from alternative and renewable technologies are also facilitating a shift in focus away from conventional coal power investments,” says Vu.

“In provinces such as Binh Thuan where the proposed Japanese-backed Vinh Tan 3 will reside, renewable energy alternatives have been tried and tested in the past two years, with more solar and wind capacity awaiting in the pipeline. Vung Ang 2’s Ha Tinh province is also seeing a pick-up in renewable investments.

“Furthermore, local opposition to more polluting coal power in these areas is fierce, compromising the ability of project sponsors to mobilize local government support for their projects.

“This may be a risk to progress for the Vinh Tan 3 project, which was also hurt by HSBC’s decision to pull back from participating in the funding.”

Vinh Tan 3 was also hurt by HSBC’s decision to pull back

Emerging competition from renewable energy is a new challenge for foreign investors in coal power projects.

“The availability of new renewable technologies as well as a more diversified pool of investors and innovative financing solutions are paving the way for the Vietnamese government to adopt more modular system solutions,” says Vu.

“At the same time, mega scale LNG-to-power projects are also being proposed across Vietnam at a pace unseen before. The political and market considerations driving this support should not be underestimated. Some of these projects may progress more quickly than their coal competitors.”

Vu notes market analysts should not overlook political factors, however. The South Korean and Japanese governments as well as the large corporate project sponsors might leverage their industrial footprint in Vietnam as part of a final push for the remaining coal projects.

“Senior Vietnamese government officials will face a tough balancing act,” says Vu.

“The final choice might come at the expense of EVN as a business entity and Vietnamese ratepayers.”

Read the Report: New Regulations Threaten Vietnam’s Remaining Coal Pipeline – Foreign Investors Will Need Special Treatment To Avoid New PPP Law

Translation: ベトナムに残る石炭火力発電計画 を脅かす新規制

Media Contact: Kate Finlayson ([email protected]) +61 418 254 237

Author Contact: Thu Vu ([email protected])

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (

Thu Vu

Thu Vu is the energy finance analyst leading the Vietnam market coverage for IEEFA. Thu writes about policy developments and investment trends that facilitate the transition of Vietnam’s power sector towards a cleaner and economically sustainable future.

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