AES has taken a significant step forward in the development of a coal fired power plant in Vietnam with the signing of two key contracts.
The USA-based independent power producer has signed a power purchase agreement (PPA) with Electricity Vietnam (EVN) as well as a supply agreement with the Vietnam National Coal Mineral Industries Group (Vinacom) for the 1200 MW Mong Duong II power plant. It says that the agreements will enable it to move forward with finance discussions for the project.
“Expanding into Vietnam is a key part of our strategy of pursuing new opportunities in Asia, where growth in demand for electricity is projected to outpace much of the rest of the world,” said Paul Hanrahan, President and Chief Executive Officer of AES Corporation. “In keeping with AES' heritage of leveraging our safe, efficient operations in new markets, the 1200 MW Mong Duong II power plant will provide a critical source of affordable power to Vietnam as it grows and expands in the global economy.”
Both of the contracts are for 25-year terms. The PPA allows for capacity payments and the majority of operations and maintenance payments denominated in US dollars. It also includes a fuel cost pass-through denominated in local currency.
According to AES, all local approvals including environmental permits for the project have been secured. Project execution company AES VCM Mong Duong Power Company is also making progress on financing as well as on engineering, procurement and construction contracts.
AES expects to achieve financial close in the first half of 2011, a which point it will invest its equity portion of $400 million.
According to estimates by EVN and published reports, demand for electricity in Vietnam in the last five years increased an average of 13.5 per cent each year and is projected to grow at an average of 15 per cent annually over the next decade.
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