Viet Nam: Mong Duong 1 Thermal Power Project - Tranche 2

Sovereign Project | 39595-033

Summary

1. Finance the contract for Engineering design, Procurement and Construction.

2. Finance the consulting service (project implementation consultant) for Tranche 2.

3. Fiinance the construction of the common facilities for MD1 and MD2 Thermal Power plant (MD2) to be built by private sector. These include the fresh water supply system for MD1 and MD2 and the coolinig water discharge channel.

Latest Project Documents

Consulting Notices

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Procurement Notices

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Procurement Documents

Title Document Date
Mong Duong 1 Thermal Power Project - Tranche 2 Apr 2014

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Project Name Mong Duong 1 Thermal Power Project - Tranche 2
Project Number 39595-033
Country Viet Nam
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2610-VIE: Mong Duong 1Thermal Power Project - Tranche 2
Ordinary capital resources US$ 902.85 million
Loan: Mong Duong 1Thermal Power Project - Tranche 2
Korea Exim Bank US$ 510.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Partnerships
Sector / Subsector Energy - Conventional energy generation
Gender Equity and Mainstreaming Some gender elements
Description

1. Finance the contract for Engineering design, Procurement and Construction.

2. Finance the consulting service (project implementation consultant) for Tranche 2.

3. Fiinance the construction of the common facilities for MD1 and MD2 Thermal Power plant (MD2) to be built by private sector. These include the fresh water supply system for MD1 and MD2 and the coolinig water discharge channel.

Project Rationale and Linkage to Country/Regional Strategy

Tranche 1 financed the preparation for the construction of the MD1, while Tranche 2 will finance the construction and commissioning of the power plant itself. Tranche 2 will in essence complete the work started by Tranche 1 to allow for the realization of the Project's expected benefits for socio-economic development in Viet Nam. The Project's rationale and justifications have been detailed in the Project's Report and Recommendation of the President to the Board of Directors and remains valid. The project supports the development of Vietnamese economy and again re-emphasizes the importance of the timely commissioning of MD1 project. This is discussed in the ensuing paragraphs.

Despite the negative impacts of the current global financial crisis, Viet Nam's electricity demand remains high and will continue to grow strongly in the long term. This is mainly because of the low base in use of electricity in the country compared to other ASEAN countries. Electricity consumption recorded 12.3% increase in 2007 and 13.2% in 2008. The first half of 2009 recorded 13% increase in electricity consumption comparing to the same period of 2008. This demand is mainly driven by increased consumption by the residential and service sectors. As the economy recovers and Viet Nam continues to industrialize and modernize its economy, electricity demand is expected to grow steadily after 2010 driven by the demand from the industry sector, which accounted for more than 50% of the electricity consumption in 2008 and is expected to account for 53% of the total electricity consumption by 2015, and 55% by 2025. Reliable, un-interrupted and high quality supply of electricity is indispensable to support the economic recovery, and continued industrialization and modernization of the Vietnamese economy.

On the supply side, power generation is still dependent on hydropower, which exhibits large seasonal fluctuation. At the end 2008, the share of hydropower capacity amounted to 37% of the total of 15,860 MW. While the dependence on hydropower has been reduced recently with the commissioning of thermal power plants, the system reserve margin during the dry seasons remains dangerously low. All large hydro reservoirs are multipurpose serving not only electricity generation but are equally important for irrigation purposes. The gas-fuelled power plants in the south (37% of the installed capacities) can supply only a part of north Viet Nam's power deficit. Viet Nam is importing about 800 MW from the People's Republic of China to make up for the deficit in the north during the dry season.

The delay in commissioning of new generating capacity, which was envisaged in the Master Power Development Plan VI (MPVI), has lead to a situation in which the power supply is not adequate to meet the demand. At the same time, the system reserve margin has diminished over the last two years. This situation is expected to continue over the next few years until new thermal generating capacities come on line. The low system reserve margin coupled with the high share of hydropower capacity in the generation mix exacerbates the power shortage especially during the dry season. Thus, timely completion of MD1 power plant will help improve the power supply and demand balance for northern Viet Nam.

The recent review by the Government Taskforce on the implementation of the MPVI revealed that among the 35 power projects under construction, 18 are behind schedule by 3 to 8 months. The remaining 17 projects are delayed more than 8 months. Also, according to the Taskforce, among the 18 projects whose constructions are planned to commence in 2009 2010, only four projects (including the ADB-financed MD1 and Song Bung 4) will meet the timeframe. Difficulties in mobilizing commercial private financing during the last two years, lengthy negotiations with build operate and transfer (BOT) developers on tariffs and provision of guarantees are among the reasons for the delays. Under such circumstances the Government considers timely construction of MD1 and Song Bung 4 very important.

Power market reform has taken new impetus pursuant to the Prime Minister Decision No. 26/2006/QD-TTg. The pilot competitive generation market with a single buyer began in January 2007. After a long preparation and internal consultation with stakeholders, the Electricity Regulatory Authority of Viet Nam proposed in December 2008 a plan to restructure the power industry and to set up a power market. The plan calls for establishment of four power generation companies, an Independent System and Market Operator, a National Power Transmission Company (NPTC) and regional/provincial distribution companies. Under the proposed market reform scheme, the four generation companies will compete to sell electricity. The Independent System and Market Operator will be in charge of operating the market and the power system. Power will be wheeled through the NPTC ensuring fair and easy access to both sellers and buyers. Regional/provincial distribution companies will buy electricity through NPTC, and will supply it to final consumers. A prerequisite for an effective operation of the competitive power market is that supply capacity must be sufficient to meet the demand at any time of the year with a required system reserve margin of 25%. Building MD1 with ADB finance is necessary to help meet this pre-requisite.

In 1997, the Government established the northern socio-economic special development areas covering Ha Noi, Hai Phong, Quang Ninh, Hai Duong, and Hung Yen provinces. In 2004, it was expanded to cover Ha Tay, Bac Ninh and Vinh Phuc provinces. Being parts of the special development area, investment, business and industrial development in these provinces have been particularly strong. Foreign Direct Investment in these provinces accounted for 90% in the northern region, and 30% in the total country. Hence, reliable supply of electricity is essential for the development of the northern socio-economic special development areas to help support the national economic development and improve living standard of the population.

Thus, financing and timely commissioning of the Project under Tranche 2 will be crucial in helping EVN to meet the demand growth and scheduled capacity addition. The Project will help reduce the power shortage and eventually ensure reliable supply of electricity in the northern region, including particularly Ha Noi, Hai Phong, Hai Duong, Hung Yen, Quang Ninh, Bac Ninh and Vinh Phuc provinces. The Project will add 1,000 MW generating capacity to the northern power system. The Project, together with ongoing ADB-financed transmission projects will strengthen the power supply grid around the northern socio-economic special development area thus ensuring reliable supply of electricity not only there, but also in the whole northern region and the country.

In addition, Tranche 2's financing will allow timely completion of the common facilities that will be used also for MD2 power plant (see para. 22 below) to be developed by a private sector joint venture between AES and Vinacomine under the build operate and transfer (BOT) scheme. Negotiation of the buying/selling electricity tariff is getting close to mutual agreement. It is anticipated that by December 2009 the Government and the joint venture will sign BOT contract, power purchase agreement (PPA), fuel supply agreement and Government guarantee undertakings. The first unit of MD2 is planned to be commissioned in 2015.

Impact Adequate and reliable supply of power to meet Vietnam's electricity demand in an environmentally sustainable manner.
Project Outcome
Description of Outcome Adequate system generating capacity to meet growing electricity demand in northern Viet Nam
Progress Toward Outcome The Project is at an advanced stage. Government of Viet Nam's support of the project has been consistent from the outset of the project.
Implementation Progress
Description of Project Outputs

A 1,000 MW CFB technology coal-fired power plant.

Common Facilities for MD2.

Status of Implementation Progress (Outputs, Activities, and Issues)

Ongoing. Expected commissioning dates of Unit No. 1 and Unit No. 2 of the Mong Duong 1 Thermal Power Plant Project are expected in April 2015 and October 2015, respectively.

Common facilities (freshwater supply system and cooling water discharge canal) and ash pond 1 are completed. Construction of fence between Mong Duong 1 and Mong Duong 2 ongoing.

Geographical Location Northern Vietnam
Safeguard Categories
Environment A
Involuntary Resettlement B
Indigenous Peoples A
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement Updated Resettlement and Ethnic Minority Development Plan for Fresh Water Supply component approved on 8 October 2012.
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Aruna Kumuduni Wanniachchi
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Viet Nam Electricity69 Dinh Tien Hoang Street
Ha Noi, Viet Nam
Timetable
Concept Clearance 29 Sep 2005
Fact Finding 11 May 2009 to 15 May 2009
MRM 22 Sep 2009
Approval 21 Dec 2009
Last Review Mission -
PDS Creation Date 24 Mar 2008
Last PDS Update 18 Mar 2015

Loan

Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 510.00 Cumulative Contract Awards
ADB 0.00 - 0.00 0.00 %
Counterpart 0.00 Cumulative Disbursements
Cofinancing 510.00 - 0.00 0.00 %

Loan 2610-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
21 Dec 2009 09 Nov 2010 12 May 2011 31 Dec 2014 31 Dec 2016 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 1,143.37 Cumulative Contract Awards
ADB 902.85 21 Dec 2009 844.77 0.00 94%
Counterpart 240.52 Cumulative Disbursements
Cofinancing 0.00 21 Dec 2009 761.57 0.00 84%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - - - -

Safeguard Documents

See also: Safeguards
Title Document Type Document Date
Mong Duong 1 Thermal Power Project - Tranche 2: Environmental Monitoring Report (January-March 2015) Environmental Monitoring Reports Apr 2015
Mong Duong 1 Thermal Power Project – Tranche 2: Resettlement Monitoring Report (October-December 2014) Social Monitoring Reports Jan 2015
Mong Duong 1 Thermal Power Plant Project - Tranche 2: Social Monitoring Report (November 2014) Social Monitoring Reports Nov 2014
Mong Duong 1 Thermal Power Project Tranche 1 & 2: Environmental Monitoring Report (January - June 2014) Environmental Monitoring Reports Aug 2014
Mong Duong 1 Thermal Power Plant Project: Resettlement Monitoring Report (January-March 2014) Social Monitoring Reports Mar 2014
Mong Duong 1 Thermal Power Plant Project: Income and Livelihood Restoration Program Report (February 2014) Social Monitoring Reports Feb 2014
Mong Duong 1 Thermal Power Project - Tranche 2: Environmental Monitoring Report (July-December 2013) Environmental Monitoring Reports Dec 2013
Mong Duong 1 Thermal Power Plant Project: Resettlement Monitoring Report (October-December 2013) Social Monitoring Reports Dec 2013
Mong Duong 1 Thermal Power Project: Tenth Independent Monitoring Report Social Monitoring Reports Dec 2013
Mong Duong 1 Thermal Power Plant Project: Resettlement Monitoring Report (July-September 2013) Social Monitoring Reports Sep 2013
Mong Duong 1 Thermal Power Project - Tranche 2: Resettlement Monitoring Report (March-June 2013) Social Monitoring Reports Sep 2013
Mong Duong 1 Thermal Power Project - Tranche 2: Environmental Monitoring Report (January-June 2013) Environmental Monitoring Reports Jun 2013
Mong Duong 1 Thermal Power Project: Ninth Independent Monitoring Report Social Monitoring Reports May 2013
Mong Duong 1 Thermal Power Project: Environmental Monitoring Report (July-December 2012) Environmental Monitoring Reports Dec 2012
Mong Duong 1 Thermal Power Plant Combined Resettlement Plan and Indigenous Peoples Plans Oct 2012
Mong Duong 1 Thermal Power Plant: Eighth Independent Monitoring Report Social Monitoring Reports Jul 2012
Mong Duong 1 Thermal Power Plant Environmental Monitoring Reports Jun 2012
Mong Duong 1 Thermal Power Plant Project: Seventh Independent Monitoring Report Social Monitoring Reports Sep 2011
Mong Duong 1 Thermal Power Plant Project: Sixth Independent Monitoring Report Social Monitoring Reports Sep 2010
Mong Duong 1 Thermal Power Plant Project: Fifth Independent Monitoring Report Social Monitoring Reports Apr 2010
Mong Duong 1 Thermal Power Plant Project: Third Independent Monitoring Report Social Monitoring Reports Nov 2009
Mong Duong 1 Thermal Power Plant Project: Fourth Independent Monitoring Report Social Monitoring Reports Nov 2009
Mong Duong 1 Thermal Power Project Resettlement Plans Jul 2009
Mong Duong 1 Thermal Power Plant Project: Second Independent Monitoring Report Social Monitoring Reports May 2009
Mong Duong 1 Thermal Power Plant Project: First Independent Monitoring Report Social Monitoring Reports Dec 2008

Evaluation Documents

See also: Independent Evaluation

No documents found.


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