Saigon Asset Management (SAM), a fund manager based in Ho Chi Minh City, has announced plans to establish and raise capital for the Indochina Energy Fund, which will acquire equity interests in thermal and hydropower projects and companies in Vietnam, Cambodia and Laos. In a statement, it said the fund will be launched in late September and will have an “expected initial size” of $300 million.
SAM points out that energy demand is increasing within the target countries at a rate of 2.0 to 2.5 times GDP growth within the ASEAN region. As a result, the countries are all planning significant investment increases in electricity generation capacity in order to keep up with demand.
The Vietnamese government recently announced its Master Plan 7 for National Power Development which calls for new investment of $48.8 billion to triple electricity capacity to 75,000 megawatts (MW) by 2020. The bulk of this new capacity is thought likely to come from thermal and hydropower plants.
With tariffs low, investment in Vietnamese power has been constrained. But energy shortages, blackouts and reliance on electricity imports from China have prompted new legislation, equitisation, deregulation and a transition to a competitive market – as a result of which, prices are expected to keep increasing and make the sector attractive for investors.
Cambodia has the highest energy prices in the region due to its heavy reliance on diesel-generated electricity. High tariffs, together with shortages, have constrained economic growth. However, a total of 15 new power projects have been approved, with five already under construction. All of the new entrants to the power sector are independent power producers (IPPs).
In Laos, power generation and distribution is the largest component of GDP, with the country aiming to capitalise on its huge hydropower potential. Laos has 73 power projects in various stages of approval, and power export supply agreements with Thailand, Vietnam and Cambodia. All the new projects are being undertaken by IPPs.
SAM claims that its fund will benefit from being an “early entrant” in the region’s power sector and will target “financially strong” hydro and thermal power projects on either a project basis or by direct investments into regional power firms.
Established in 2007, SAM is the existing manager of two funds listed in Germany. The Vietnam Equity Holding fund invests in listed, pre-listed and private companies exploiting the rapid growth of Vietnam’s middle class; the Vietnam Property Holding fund invests in real estate projects and companies focused on midde-end residential and retail projects.