The World Bank will loan energy-hungry Vietnam US$330 million to build a local hydropower plant.
The loan will fund the construction of the 260-megawatt Trung Son power plant in the northern province of Thanh Hoa. Construction is expected to begin this year and finish in 2017.
Besides the loan, the World Bank has also agreed to provide technical support to Vietnam Electricity, the state-run power company, in boosting the performance of its hydropower projects in dam safety and operations, as well as in adopting international students in social and environmental practices.
Report & Analysis: WB funding $330 mln for Vietnam hydropower plant [Saigon Daily, 28 June 2011]
The government hopes that the Trung Son plant will meet the country’s burgeoning domestic demand for electricity, as well as bring flood control and irrigation benefits to rural and poor communities in Thanh Hoa province. Hydropower currently generates more than a third of Vietnam’s power.
World Bank Director in Vietnam Victoria Kwakwa said that the project will help diversity Vietnam’s electricity supply and ensure energy security, as part of Vietnam’s long-term plan to develop resources of low-cost electricity and cut a million tons of carbon dioxide emissions every year.
According to the World Bank, the project includes programs to address the social and environmental impacts of the dam, such as human resettlement and biodiversity conservation.
Report & Analysis: US$400 million to build Trung Son hydroelectric power plant [VOV News, 28 June 2011]
Vietnam has experienced rolling power outages as it enters what has been called an “energy emergency.” The country has failed to meet demand for electricity by about 3 percent in the past five years, and electricity consumption is projected to nearly double by 2015.
Furthermore, the price that EVN pays to producers is still far below neighbouring countries, giving foreign investors no incentive to enter the sector.
Report & Analysis: Vietnam power demand seen up 15 pct/yr in next five years –EVN[Reuters, 22 June 2011]
Report & Analysis: World Bank funds its first Vietnam hydro project [AFP, 28 June 2011]
However, despite the dam’s contribution to energy security, the loan may be reason for concern given Vietnam’s existing levels of debt. According to a government official, the bad debt could pose a risk to economic stability in coming months.
Outstanding loans at the end of 2010 totaled US$125 billion, nearly 20 percent more than gross domestic product. Much of the debt has been attributed to the inefficient performance of state-owned economic groups.
Report & Analysis: Bad debt in Vietnam a big concern – govt official [Reuters, 28 June 2011]