Japan’s TEPCO makes first overseas hydro investment

The transaction marks InfraCo Asia’s full exit from the Coc San plant in Vietnam, six years after its initial investment.

Japan’s largest power provider, Tokyo Electric Power Company, has made its first investment in a hydropower asset overseas, buying InfraCo Asia’s minority stake in Viet Hydro, a Singapore-based holding company through which it indirectly owned 33.4 percent of the Coc San plant.

Viet Hydro is the majority shareholder of Lao Cai Renewable Energy, the plant’s operator.
The asset is a 29.7MW hydropower plant in the mountainous Lao Cai province, near the Chinese border, and has been operational since April 2016. The energy plant is backed by a 20-year PPA with Northern Power Company, a subsidiary of Vietnam’s state-owned Electricity Vietnam (EVN).

“TEPCO is interested in the possibility of improving the profitability and the efficiency of the Coc San hydropower plant by utilising the technologies and know-how cultivated by the company,” TEPCO told Infrastructure Investor.

In an official statement, the firm said that it is “newly pursuing the development of hydropower overseas” to develop “a total capacity of two to three million kilowatts of hydropower”.

The firm said that it is considering overseas business, mainly in Southeast Asia, due to its progress in developing hydropower projects, and the growing appetite for electricity in the region. The company also stressed Vietnam’s high level of economic growth, which it says is expected to continue in the future.

The company declined to disclose any other possible investment opportunities in the region. According to its website, TEPCO owns 163 hydropower stations in Japan, with a total output of approximately 8,980MW.

InfraCo Asia said TEPCO was one of the five final bidders for the project. Allard Nooy, InfraCo Asia’s chief executive, told Infrastructure Investor the Japanese firm was interested in acquiring a minority stake to “learn as they go”. Nooy said the sale raised interest globally, and was seen “as a stepping stone into what they regard as an attractive market for renewables”.

“As we have proved, we can make projects like this bankable with the right expertise, and also through capacity-building with local entities,” he said.

InfraCo Asia bought a majority stake in the project in 2012, after a previous Singaporean-Vietnamese partnership failed to finance its construction. The firm negotiated a new financing agreement with Saigon Hanoi Bank, and achieved financial close in late 2014. After the asset became operational in 2016, InfraCo Asia completed a refinancing that reduced interest costs by 150 basis points.

“This is a clear example of our DNA: we pick up projects where private players have either failed or are unwilling or unable to develop,” Nooy said. “We are here to crowd in private investors, not to crowd them out.”

InfraCo Asia declined to disclose the financial results achieved upon exit but said they were “close to meeting returns”.

The project granted a stable source of energy to the region, which used to import electricity from a coal-fired thermal plant in China, Nooy said.

Nexif Energy, a partnership between the private equity firm Denham Capital and Singaporean developer Nexif, currently owns a majority stake in the plant.