Private capital is key for Viet Nam’s energy development: WB report

Wednesday, Jan 16, 2019 17:01

Viet Nam’s energy sector needs private investment for more development. — Photo

New financial sources, especially from the private sector, will help Viet Nam further develop its energy industry, according to a new World Bank report on Viet Nam’s energy development.

The report on Maximising Finance for Development in Viet Nam’s Energy Sector said the changing macroeconomic and sectoral context in Viet Nam needed new financial sources for electricity and gas investment activities.

It presented an action plan on opening new sources of capital, especially from the private sector, based on a comprehensive analysis of investment demand as well as constraints in the existing legal environment including the capital and forex markets.

From now until 2030, Viet Nam’s electricity sector needs new investment of about US$10 billion annually, higher than the average of $8 billion for the 2011–15 period. Meanwhile, the development of the gas sector is estimated to require about $20 billion between 2015 and 2035.

While Viet Nam Electricity (EVN) and PetroViet Nam (PVN) will continue to play an important role in developing new infrastructure, the majority of new investment in the gas and electricity sectors will need to come from the private sector. This direction is in line with the Government’s strategy and finance goals for the energy sector in the future, according to the report.

Given the limited fiscal space and the reduction of concessional financing available going forward, it will be important for Viet Nam to step up the mobilisation of alternative capital resources for the electricity and gas sectors, said Ousmane Dione, the World Bank Country Director for Viet Nam.

He recommended that the Government address the constraints currently impeding the flows of domestic and cross border private capital into two of the most strategic segments of the Vietnamese economy.

Franz Gerner, the World Bank’s Lead Energy Economist and the study’s lead author, said private investors are interested in Viet Nam’s growing energy sector, particularly the development of renewable energy and liquefied natural gas.

What investors need is a transparent and stable regulatory environment which incorporates a proper risk-sharing mechanism among all parties, he said.

To remove limitations and maximise financing available for electricity and gas investments in Viet Nam, the report proposed a well-coordinated policy effort around three factors. The factors include developing a major PPP (private public partnership) programme or IPP (innovation partnership programme) for new power generation, to enhance the financial standing and credit worthiness of EVN and PVN so they can access commercial finance without government support, and to increase the availability of local currency financing that is critical for both project finance and corporate project finance. — VNS

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