Investors trying to withdraw from unprofitable hydro-power projects
Investors trying to withdraw from unprofitable hydro-power projects
After rushed investment decisions, several hydropower investors in Vietnam have been struggling to sell their investments as a result of inefficient business practices.
There are several reasons for these investors to sell their investments, including loss-making brought about by the possible end of the exploitation of wood in the forest for uses designed to earn profits.
Economists said that it would be not easy for them to sell such investments without any additional bonuses.
Recently, some major hydropower investors have successfully sold their projects.
In mid-July, Hoang Anh Gia Lai Group (HAGL) announced that they had sold six hydro-power projects including Daksrong 2, Daksrong 2A, Daksrong 3A, Daksrong 3B, Ba Thuoc 1, and Ba Thuoc 2.
The group claimed that the decision came as a result of inefficient investment. A part of the proceeds, according to them, would be pumped into hydro-power projects in Laos where electricity selling prices are averaged at VND1,278 per kWh compared with only VND800 per kWh in Vietnam.
HAGL also sold a 5% stake in its subsidiary, Hoang Anh Gia Lai Hydropower JSC, in the fourth quarter of last year.
Currently, Nam Trung Group is speeding-up a plan to sell a part of its stake in Dong Nai 2 hydropower project where its investment reached nearly VND3 trillion (USD141,643), accounting for 90% of the project’s total capital. The plant is expected to be ready for operation by the end of this year.
The group is also trying to find partners to sell a part of its stake in Krong No2 and Krong No 3 hydro-power projects. Construction of these plants started a few years ago, and even though they were expected to begin operations late last year, construction is at a standstill due to the lack of investment.
Several experts have claimed that these moves may ignite a trend of withdrawing investment from hydro-power projects among other investors.
Pham Viet Ngai, Chairman of Vietnam Energy Association, said it’s obvious that investors pull out of hydro-power projects but at the moment it's hard to find a new partner if that happens.
Ngai said at a recent hydro-power seminar that several hydro-power investors have complained about losses.
“Frankly speaking, private investors don't make a profit from hydro-power projects in the same way that major and efficient projects, like the state-owned Electricity of Vietnam Group (EVN) projects have,” he commented.
According to him, most private investors have realised that it’s really hard for them to repay bank loans with such modest revenues from the projects, let alone recovering their initial investment. The situation becomes worse when their plants start to generate electricity but EVN refuses to buy it or will only buy it at very low prices.
Another reason for their rushed withdrawal is a policy about the sustainable development of the energy industry. The policy stipulates that after 2017 no new hydro-power projects would be licensed for construction and only major and efficient projects would be allowed to continue their operations.
The situation is also a result of the uncontrollable licensing of hydro-power projects in the past. Many small and medium-d projects are inefficient.
There are rumours that several investors just took advantage of hydro-power projects in order to take wood from the forests to sell for profit. Such investors tend to withdraw from projects after realising that purpose.
Recently, the Ministry of Industry and Trade proposed cancelling 507 hydro-power projects due to their modest profit potential and their serious negative impact on the environment.
Currently, the country has a total of 899 hydro-power projects with a combined capacity of 24,880 MW, including 260 operational ones.
vietnamnet
