Tan Tao faces capital troubles for $6.7 billion thermal power project

Oct 3rd at 14:20

03-10-2013 14:20:10+07:00

The future of the $6.7 billion Kien Luong Thermal Power Project which was suggested by Kien Giang provincial authorities for being revoked was the major content at a regular press conference of the Ministry of Industry and Trade on Monday.

According to Deputy Minister Le Duong Quang, the authorities had many meetings with Tan Tao Group – the project investor to find solutions for this huge project.

Tan Tao proposed to have the government guarantee for foreign bank loans, but Quang said this request is "unprecedented." As a rule, the Government cannot guarantee a credit to a private enterprise. In addition, the investor must have 20 percent of capital to be considered. The official said Tan Tao’s request may not get through.

However, as Tan Tao said that it invested a lot of money in this project, the Ministry of Industry and Trade should still take the opportunity for this group. "If Tao cannot really implement this project, we will consider choosing other investors," said Deputy Minister Quang.

Southern Kien Giang Province authorities were impatient with the long delay in building a huge thermal power plant in Kien Luong District. Recently the province's administration proposed the government to withdraw license for this project.

Earlier, the province ordered the planning and investment and industry and trade departments to work with the UK's Graham Bell and Associates Ltd to look for new investors for the US$6.7 billion Kien Luong thermal power project.

The deadline for starting work – by current licensee Tan Tao Investment and Industry Corporation (ITACO) – is June end, and the company seems unlikely to do so.

In mid-April, after knowing the status of the project, GBA wrote to the Kien Giang People's Committee, asking for an opportunity to study it and find new investors. The committee then ordered the departments to meet with GBA representatives on May 20.

The three-stage project includes a 4,400 – 5,200 MW thermal power plant and the Nam Du Deep Sea Port on An Son Island, 60km from the plant.

The proposed $800 million port, which can berth ships of 150,000DWT and handle 50 million tons of coal for the proposed plant and others in the south, has also been a non-starter.

At a meeting in late April, Minister of Industry and Trade Vu Huy Hoang told Kien Giang authorities to seek approval from the Government to revoke the license issued to ITACO and find a new investor.

Hoang was quoted as saying that investors from Australia, France, India, Russia, and South Korea with the required financial and technological capability have shown interest in the project.

In late April deputy chairman of Kien Giang, Pham Vu Hong, said the project was likely to be halted if ITACO fails to raise funds for the power plant by June 30.

Despite being licensed five years ago, the project has barely made headway. The first phase of the project was scheduled to go on stream at the end of this year.

ITACO, a subsidiary of Tan Tao Group, said land acquisition for Kien Luong 1 was completed over 18 months ago, but the project has made no progress due to lack of funds.

ITACO's general director, Thai Van Men, said the bank has agreed to provide credit for the project, but requires a Government Guarantee and Undertaking which has not been forthcoming so far.

Le Khac Ghi, director of the provincial Department of Planning and Investment, said the investor of a project must bring in at least 20 percent of the cost to be eligible for a loan.

"Regardless of loans and credit, the investor must bring in at least 20 percent of the cost of the project. Therefore, Tan Tao must provide at least $1.4 billion."

The stalled project presents a major obstacle, hindering the country's economic and energy development and making it difficult for the province to attract other investors with deeper pockets, he said.

vietnamnet