The Asian Development Bank has approved a $28 million first-stage loan for the Mong Duong thermal power project in Vietnam. The 1000 MW coal-fired power plant is being built in the northern coal hub province of Quang Ninh to help overcome soaring energy demand.

Total ADB funding for the project under the two-stage financing programme will be $931 million. The 25-year loan will finance 84 per cent of the power plant, with the remainder being met by Electricity of Vietnam (EVN).

Construction will begin in 2008, with completion scheduled for 2012. There are plans to eventually expand the plant to 2200 MW.

Viet Nam’s demand for electricity is growing at a rate of 16 per cent per year, according to the ADB. The country’s continued economic development hinges on its ability to keep up with this growing demand.

“There is not a single example of a modern nation significantly reducing poverty without dramatically increasing its use of energy,” said the director of ADB’s Southeast Asia Department Infrastructure Division, John Cooney.

“The only way we can fundamentally address the needs of the 8 million people in Vietnam who still live on less than $1 a day is to make sure we put all of the indispensable building blocks of development in place.”

Power shortages pose a serious and growing threat to Vietnam’s sustained economic growth. Power shortages impede job creation, industrial activities, telecommunications and commerce.

Power outages in Vietnam are becoming increasingly acute during the dry season due to low water levels in hydropower plants, which currently generate approximately 40 per cent of the country’s demand.

“Vietnam needs to diversify its energy resources to ensure a reliable, long-term source of power to fuel the nation’s development,” added Mr. Cooney. “Given its availability, and the fact that it is the most affordable source of energy in northern Vietnam, where this project is located, coal is a necessary part of that mix.”