Dragon Capital, an investment group partly owned by the International Finance Corporation, and Tam Long Power, a Hanoi-based trading company, today announced the full commissioning of their 29-megawatt Hoa Phu hydropower plant in Vietnam.
The facility, Dragon Capital’s first hydro project in the country, will have a low impact on the population and environment thanks to its small diversion dam, daily regulated operation and minimal water storage area, the firm said in a statement. It is estimated that the scheme will generate about 53,000 Carbon Emission Reductions (CERS) per year.
“We are extremely happy to announce that the Hoa Phu Hydropower plant is now fully commissioned. It has generated 41.6 million kilowatt hours (kWh) of electricity since it came into operation and it is set to play an important role in the development of the Buon Me Thuot region,” said Gavin Smith, director of clean development at Dragon Capital.
“A tremendous amount of work has been done by the Tam Long team to successfully complete the construction and commissioning of the plant. This is a very exciting project and we look forward to sharing its continued success with our partners.”
In June 2012 Dragon Capital invested $3.6 million in the Tam Long Power Joint Stock Company (Tam long Power Co JSC) through its Clean Development Fund with a view to supporting the development of the plant near Buon Me Thuot in the central highland of Vietnam. Upon completion, the project will generate 135 million kWh of clean energy each year to feed the Vietnamese national grid.
Tam long Power Co JSC secured debt finance for the project from Vietcombank with the support of the World Bank's Renewable Energy Development Program (REDP), which is co-managed by Vietnam's Ministry of Industry and Trade.
The Hoa Phu power plant has been in operation for eight months. It is located between two existing hydropower projects and close to existing roads and power lines.
In an interview with Infrastructure Investor, Smith explained the appeal of Vietnam’s small “run-of-the-river” projects for the firm’s clean energy fund, which has mandate to invest in the Mekong region in river projects of between $1 million to $7 million.
Run-of-the-river projects, which typically generates below 30MW, enjoy a standardised power purchase agreement in Vietnam.
“The pricing of the PPA is reviewed every year by the power ministry of industry and trade, which provides some separation from the monopoly buyer of power in Vietnam which is EVN,” said Smith.
The annual review is done under a set of published criteria which includes the overall power production cost of a basket of energy in Vietnam from the previous time period, which affords the asset manager some tariff predictability.
“The key advantage is that they are easy projects to execute and they have simpler processes to get started, which is a major risk in countries like these. They also fit nicely with the scale of capital that we have to deploy. A 29MW hydropower facility will cost you about $35million to build,” Smith added.