Study on Private-Initiative Infrastructure Projects

in Developing Countries in FY2007

Study on Coal-fired Thermal Power Projects in Southern

Vietnam

SUMMARY

March 2008

Electric Power Development Co.,Ltd.

(J-POWER)

1 Background of the Project

MP6 for developing power plants and transmission lines from 2006 to 2015 was approved by the

Prime Minister on the 18th of July in 2007. The MP6 is the power generation plan which was

drawn up to ensure the supply of electricity enough to meet the demand of electricity, which is

expected to increase at the annual rate of 17% (or 20%), based on the GDP growth of 8.5 to 9%

(or higher). To satisfy rapid electricity demand, many power stations, especially coal fired thermal,

will be developed near future.

And these electric power development projects will require an enormous amount of capitals, and

the MP6 may not probably be financially accomplished in the conventional way in which EVN

has developed most of the power projects planned in master plan. Therefore, the Vietnamese

government expects to entrust the development of power plants to the other state owned

companies, the joint stock companies between EVN and the other state owned companies, or

foreign companies.

The development of coal-fired thermal power plant projects will be promoted in the south part of

Vietnam. The sites have been presented in the MP6. In these power plant sites, however, the site

conditions, especially port conditions are not favorable at all as, if coal imports are supposed. In

the other words, it is considered that the construction of breakwater dams and the development of

ports such as dredging navigation channel are more or less required at each of the coal-fired

thermal power plant sites in the south part of Vietnam, as selected in the MP6.

Thus, it is supposed that the coal-fired thermal power plant development plan in the south area

will require a great amount of capitals for port development projects such as the construction of

breakwater dams and dredging navigation channel. However, the power tariffs that are lower in

Vietnam than in the neighboring Southeast Asian countries may be a difficult obstacle that

prevents overseas companies from making investments in electric power generation projects.

To improve the environment where private companies can easily participate in the investment

projects for the construction of coal-fired thermal power plants in Vietnam, therefore, this survey

draws up the basic plan of coal center (C/C) and reviews the basic plan of combined electric

power plant and public port development investments in order to make recommendations on the

scheme to reduce the construction cost for common infrastructures including the related port

development projects, as included in the electric power tariffs, by the investments made by private

capitals in electric power plant projects as well as the construction of call centers in the same sites,

which is required for the electric power development in the south part of Vietnam.

Coal fired thermal power projects listed in 6th Master Plan are shown in below table.

2 Basic Approach of Project

Table 1 is development schedule on coal fired thermal power projects in southern Vietnam

Table 1 Development Schedule on Coal fired thermal power projects in southern Vietnam

Installed Capacity (MW) Project Phase Unit Owner

2011 2012 2013 2014 2015 2016 2017 2018

Vinh Tan I #1 CSG/BOT 600 I #2 CSG/BOT 600 II #1 EVN 600 II #2 EVN 600 III #1 EVN 1,000 III #2 EVN 1,000

Son My #1 BOO/BOT 600 #2 BOO/BOT 600 #3 BOO/BOT 600 #4 BOO/BOT 600

Tra Vinh I #1 EVN 600 I #2 EVN 600 II #1 EVN 600 II #2 EVN 600 III #1 EVN 1,000 III #2 EVN 1,000

Soc Trang I #1 EVN 600 I #2 EVN 600 II #1 EVN 600 II #2 EVN 600 III #1 EVN 1,000 III #2 EVN 1,000

Kien I #1 BOO/BOT 600 I #2 BOO/BOT 600 II #1 BOO/BOT 600 II #2 BOO/BOT 600 III #1 BOO/BOT 1,000 III #2 BOO/BOT 1,000

Source: MP6

Because there is no coal mine in southern Vietnam, basically importing coal from Indonesia,

Australia and others is considered as fuel for above power projects in southern area. Especially

Soc Trang project and Tra Vinh project cannot receive imported coal directly from overseas to

project site by large scale coal vessel due to topographical condition in that site. And so those

power stations need a coal center where imported coal is transshipped from large size vessels to

small size vessels.

In selecting a project site of coal center, we considered that Son My site has a possibility to

become one of the reasonable sites for coal center based on following criteria

In this study, we decided to drew up basic plan that coal center and power stations is developed at

same location in Son My

Criteria on site selection of coal center

− Close to power stations which are supplied with coal

− Located next to power stations or other industries

− Better port condition

3 Outline of Project

(1) Son My site

The Son My site has two original project sites: one is the site selected by EVN (PECC2) under the

MP6, and the other one is the alternative site recommended by the Binh Thuan province.

The chapter considers the optimal site position and the layout of the complex facilities by using

the currently available information from the viewpoints of the construction and operation of the

Complex considering the above original two sites.

Recommendation Site by BinhThuan Province

Original Site planned by EVN

Fig. 1 Original Project Site Planned by EVN and the Alternative Site Recommended by

Binh Thuan Province

(2) Outline of Coal Center

The coal center considered in this study will be designed to supply the Soc Trang and Tra Vinh

projects. Each has a planned power generation output of 4,400 MW for a combined total of 8,800

MW, which will require about 22.1 million tons of coal for power generation as shown below. If a

single coal center is to handle all such amount, various problems will occur: that is, limitations on

the vessels’ coal loading capacity for supply to power plants imposed by the draft limit set by the

Mekong (the Hau River), which situation would require a huge number of coal vessels to shuttle

between the coal center and power plants; such a large number of vessels and voyages would

make any ship and navigation management unrealistic for a port. Another problem would be the

centralization of coal center operations at one place, which will not be desirable from the

viewpoint of energy security. So we decided that the coal center under study should be of a size

that is capable of handling the amount of coal to cover up to Phase 2 of the Soc Trang and Tra

Vinh projects.

(3) Outline of Son My Power Plant

Son My Power Project has 4,400MW (or 3,600MW) capacity which consists of three phases. The

project is built by BOO/BOT project as coal-fired thermal power complex and will be operated

from 2012 annually. For the Son My power plant, it would be advisable to utilize the

once-through type of boiler with super-critical technology.

(4) Outline of Port Plan and Total Layout

The areas needed for the land facilities of the Complex are:

Power Plants: Approx. 70 to 80 ha (per one plant of 1,200MW to 2,000MW)

Coal Center: Approx. 80ha (30 days’ storage of coal for 4,800MW power plant)

Furthermore, big and deep sea port, which has about -15m depth, into which 70,000DWT coal

transportation vessel can enter is needed offshore. Based on the results of the above review, the

layout of the Complex can be planned as shown in Fig.2 and 3.

Fig. 2 Overall Layout of Son My Complex (Coal Center and Coal Thermal Power Station)

Fig. 3 Overall Layout of the Complex (Magnified View)

(5) Total Project Cost

(a) Funding Source

The scheme combined public funding project and private funding project, is explained as an

effective solution to develop larger scale infrastructure project, such as the project at Son My, with

enhancing private investment. The scheme in this report is that coal centre and common

infrastructure, such as port development and land reclamation, are developed by Vietnam

government, like EVN, with public fund such as ODA fund and, on the other hand, power stations

are developed by private fund based on BOT/BOO.

Table 2 shows an idea of funding source divided into public funding section and private funding

section.

Table 2 An idea of Funding by Public Part and Private Part

By Public fund By private fund Port facilities

− Dredging of Navigation Channel − Breakwater dam

Land reclamation − Revetment − Land filling − Common Road

Coal center facilities − Coal storage yard − Coal handling equipment − Coal loading equipment

Power Station (P/S) − Equipment of P/S − Coal storage yard (for P/S) − Coal handling equipment (P/S) − Coal unloading berth（for P/S） − Ash disposal yard − Road (for P/S)

(b) Total Project Cost

Table 3 is construction cost of public funding section

Table 3 Construction Cost of Public Funding Section (Unit: US$ mil)

Item Construction Cost

Port Development 270

Land Reclamation and Road 300

Coal Centre Facilities 400

Total 970

Table 4 and 5 is results of estimated construction cost.

Table 4 Estimated Construction Cost per kWh

Classification Super Critical

Civil and Building 220

Turbine and Balance of Plant 335

Boiler and Auxiliary of Boiler 550

Coal Feeder Facility 80

Measurement Facility 25

Generator and Electric Device 90

Total 1,300

Table 5 Construction Cost (600MW x 2 Units)

Classification Super Critical

Civil and Building 264,000

Turbine and Balance of Plant 402,000

Boiler and Auxiliary of Boiler 660,000

Coal Feeder Facility 96,000

Measurement Facility 30,000

Generator and Electric Device 108,000

Total 1,560,000

(6) Outline of Financial and Economic Study

This study considers Son My thermal power plant which is a target of private investments.

(a) Total Project Cost

Table 6 is the breakdown of the total project cost.

Table 6 Total Estimated Project Cost

Items Cost

EPC Cost US$ 1,560 mil.

Interest During Construction, Contingency, Development Cost, Others

US$ 470 mil.

Total US$ 2,030 mil.

(b) Fuel Cost

We have calculated the fuel cost by plant efficiency and current Indonesian coal price. We have

assumed the same inflation rate applied for other O&M cost.

(c) Operation and Maintenance cost other than fuel cost

Including the regular maintenance cost, we have assumed approximately 3% (including staff cost)

of the EPC cost as rough estimate for O&M cost per year.

Table shows the base case EIRR resulted (calculation made for 30year of operation period).

Table 7 Sensitivity of EIRR

Item Result

EIRR 15.00%

Table 8 shows result of sensitivities.

Table 8 Result of Sensitivities

Detail of sensitivities EIRR

Base case 15.00%

5% increase in O&M cost 14.81%

10% increase in O&M cost 14.61%

1.0% increase in interest rate 14.38%

5% increase in EPC cost 13.93%

5% increase in coal price 13.97%

By this analysis, we can understand that increase in EPC cost and coal price will give more

significant impact to the project economics, as compared to the increase in O&M cost. Action to

avoid cost overrun during the construction and appropriate measures for coal price fluctuation are,

therefore, essential.

(7) Environmental and Social Study

Following counter measures should be carried out for the environmental and social impacts due to

development and operation of a coal thermal power plant.

(a) Counter Measure for Emission Gas

Table 9 is standard emission value of the coal-fired thermal power plant.

Table 9 Standard Emission Value of the Coal-fired Thermal Power Plant

Item Criterion Regulation after K factor is corrected Son My Site (Designed)

NO2 (mg/m3N) 650 455 Less than 450 SO2 (mg/m3N) 500 350 Less than 350 SPM (mg/m3N) 200 140 Less than 50

Source: ENTEC Report

－ NO2

It is considered that low-NOx burners can reduce the emissions of NOx to the level of

150-400 ppm

－ SO2

It is estimated that these desulfurizers will be able to limit the emission at the outlet of a

chimney to the level of 103.6 – 207.2 mg/m3N (at the desulfurizing efficiency of 80 to 90%),

which satisfies the emission standard of 350 mg/Nm3.

－ SPM

EP may limit the emissions of soot and dust at the EP outlet to the level of max. 180mg/m3N.

(b) Counter Measure for Waste Water

－ Wastewaters from the power plant

To take the measures to improve the quality of wastewater from the power plant premises, it

is planned to provide the plants with the synthetic wastewater treatment equipment and the

circulation system to recycle the slurry water used for ash transfer. The general wastewater

such as rainwater will be treated in accordance with the national wastewater standards and

released into drainage canals.

－ Cooling water

To release the cooling water used by condensers from the cooling water systems, it will be

necessary to take the appropriate measures against warm water and drained water. To

minimize the influences of the wastewater on the ecosystem in seawater areas, the

appropriate measures will be taken to keep the temperature difference between the taken

water and the released water below 7 °C.

(c) Counter measure for dispersion of coal dust

To prevent the dispersion of coal dust in the environment, it will be necessary to take the

appropriate measures using any water spraying equipment and wind barriers. When coal is

transported (by any means such as belt conveyer) in the projected power plant premises, it will be

also necessary to take the appropriate measures against the dispersion of coal dust and the drop of

coal. The Project plans to install shield fences, anti-dispersion equipment (such as sprinklers),

conveyor covers.

(d) Counter measure on vibration

The ordinary noises produced by heavy equipment such as generators and turbines may be

reduced to 65dBA around the boundaries of power plant sites by installing the equipment indoors.

The non-ordinary noises produced by devices such as safety valves may be reduced to a certain

extent by taking the appropriate measures using devices such as silencers or shields.

4 Project Implementation Schedule

Table 10 and Table 11 are Project Implementation Schedule.

Table 10 Preliminary Schedule

No. Item Start date End date Period

1 Engineering work (basic study, design concept

and financial model) 2008/10 2009/3 6 months

2 Pre Environmental Impact Assessment

(Pre-EIA) 2008/10 2009/3 6 months

3

Submission and provisional approval of the

Project by Ministry of Industry and Trade

(MIT) and Peoples Committee (PC)

2009/4 2009/6 3 months

4 Engineering work (detail) and EIA 2009/7 2010/3 9 months

5 Approval of Government and PC 2010/1 2010/6 6 months

6 Negotiation and signing of Power Purchase

Agreement (PPA) with EVN 2010/3 2011/2 12 months

7 Negotiation and signing of Coal Supply and

Transportation Agreement (CSTA) 2010/7 2010/12 6 months

8 Preparation, negotiation and signing of O&M

Agreement 2010/7 2010/12 6 months

9 EPC bidding, Negotiation and Agreements 2010/3 2011/2 12 months

10 Negotiation of Financing Models and

Agreements with Lenders 2010/4 2011/3 12 months

Table 11 Milestone of EPC Works Schedule

No. Item Start date Unit 1 Unit 2

1 EPC contract and design of the main EPC

work

Unit1: 2011/3

Unit2: 2011/9 0 month (Base)

2 Civil work and Piling works for power

house building work

Unit1: 2011/7

Unit2: 2012/1 4 months 10 months

3 Structural steel erection Unit1: 2012/8

Unit2: 2012/1217 months 23 months

4 Boiler Hydrostatic Unit1: 2013/11

Unit2: 2014/5 32 months 38 months

5 Power Receiving Unit1: 2014/2

Unit2: 2014/8 35 months 41 months

6 Boiler Initial Firing Unit1: 2014/8

Unit2: 2015/2 41 months 47 months

7 Initial Steam Admission to Turbine Unit1: 2014/10

Unit2: 2015/4 43 months 49 months

8 Synchronization and Commissioning Work Unit1: 2014/11

Unit2: 2015/5 44 months 50 months

9 Commercial operation date Unit1: 2015/3

Unit2: 2015/9 48 months 54 months

10 Final Certificate after two years

maintenance guaranteed period

Unit1: 2017/3

Unit2: 2017/9 72 months 78 months

5 Project Implementation Scheme

Fig 4 shows one of the expected project schemes in case of IPP project which foreign companies

can invest.

PORT OWNER(EVN/Coal Center)

* MOI : Ministry of Industry* EVN : Electricity of Vietnam* MOF : Ministry of Finance* JBIC : Japan Bank for International Cooperation

EVNP/S PROJECT OWNER

( Shareholders )

Japanese Co. Others

EPC Contract

Completion Guarantee

Power Purchase Agreement

Implementation AgreementImplementation Agreement

Reputable

Manufactures

Loan Agreement

Multilateral Financial Institutes

JBIC Loan Agreement

Commercial BanksLoan Agreement

MOI

Imported Coal

Companies

O&M

Government of Vietnam

Fuel Supply Agreement

O&M Contract

Government Related

Key Agreement

Guarantee

(Overseas Investment Loan)

Governmental Guarantee UndertakingIn-Direct Guarantee

Port Lease Agreement

JBICLoan Agreement

Yen Loan (ODA)Yen Loan (ODA)

Private Sector

Public Sector

Fig. 4 Project Implementation Scheme

The scheme shows that the project company which is established by Japanese companies and

other foreign companies or Vietnamese local companies, raises fund based on project finance

from JBIC, the export credit agencies, the multilateral development banks or other commercial

banks. And the company executes to construct and operates power station and earns profits by

wholesaling electricity generated from the power station to EVN.

Port uses pay the port administrative company the fee of port developed by public fund.

6 Technical Advantage of Japanese Company

(1) Participation as an Investor

It is estimated that the yearly growth rate of electricity demand in Vietnam is more than 17%. To

satisfy such rapidly increasing demand, it is necessary to reduce the time to develop the power

stations as possible. It is thought that PPP scheme, which combines public funds for building

common infrastructure and funds for constructing power plant, can contribute developing

effectively infrastructures in Vietnam. This report proposes the scheme which can execute the port

and coal center development in power project site by utilizing public funds.

(2) Participation as EPC contractor (Equipment supplier) and Port Constructor

Chinese boiler manufactures are recently expanding to overseas projects. But if the project

decides to use Indonesian and Australian coal for fuel, it is considered that Japanese boiler

manufactures have advantages to supply their equipment because only some Japanese and Korean

companies have track records to supply the boiler which can burn such type of coal and has been

operated for long term. This project requires quickly developing large and deep port which can

accept large coal vessels, and artificially reclaiming land from the sea. However there are not so

many projects of large port construction in Vietnam and Vietnamese local companies don’t have

much experience in such large scale port construction projects. From this point of view, it is

considered that Japanese construction companies which have much experience have advantages in

participating in such port construction.

(3) Participation as Operator

If the power project in Vietnam installs high technology like Super Critical technology, it is

expected that Japanese companies which have much experience to operate such high technology

plants have advantage to participate the project as plant operator. Japanese company also can

contribute Vietnam by utilizing simulator for coal fired thermal power plant.

(4) Participation as Coal Procurement

Vietnam has been a traditionally coal-exporting country, and has no experience in importing coal

from foreign countries. It means that the country lacks an appropriate means to procure coal in the

international market, and participating in the market as a newcomer will be extremely difficult.

On the other hand, Japan has many years of experience in importing steam or coking coal. As of

2005 Japan is the world’s greatest coal importer. Japanese companies should therefore be able to

help Vietnam procure coal worldwide.

7 Location of Project Site

Fig 5 is location of Project Site.

Son My

Fig. 5 Location of Project Site