Despite the importance of infrastructure for development, the limited potential supply of private finance has always been a challenge due to a restricted number of bankable infrastructure projects. Innovative financing mechanisms therefore play an important role to bring private investors in. The Swiss State Secretariat for Economic Affairs SECO is a funding member of the Private Infrastructure Development Group (PIDG), that support private investments with a number of specialized facilities
With the successful launch of the Coc San hydropower plant on 8 June 2016, the first foreign direct investment in hydropower in the mountainous Northern region of Vietnam has been realized. PIDG has been proven to be the right modality with sound measures to tackle this challenge and remains highly relevant in today’s infrastructure development world. Mr. Miroslav Delaporte, Country Director of SECO highlighted the importance of the tailor-made support through the PIDG company InfraCo Asia, which has substantially mitigated risks and thereby attracted private sector investment. Mr. Delaporte pointed out that this plant is a showcase on how bankable deals can effectively be structured in complex markets in lower middle-income countries like Vietnam.
Work to develop the Coc San Hydropower Project in the region’s terraced terrain started in 2011, but stalled when former investors expended their initial capital and the project was unsuccessful in securing long-term loan financing. InfraCo Asia assessed that plans for the plant were still viable and decided to provide donor-government backed development funding of US$7.54m in close partnership with the Lao Cai Provincial People’s Committee. This enabled the financing and completion of a project with a total budget of US$49.9m. A portion of total project funds mobilised was supplied by fellow PIDG-facilities including the Technical Assistance Facility (US$5m as viability gap funding) and InfraCo Asia Investments (US$10m bridge funding). All PIDG funding was provided through a special purpose investment vehicle, Viet Hydro Pte. Ltd
With the successful launch, Coc San hydropower plant will supply clean and affordable energy to 130,000 in the Lao Cai Province. In addition, it will improve power supplies to local industries – including iron mining, copper industry and fertilizer from apatite mines. 250 temporary jobs were created during construction and there will be 35 permanent jobs at the plant on an ongoing basis. Through this additional renewable energy supply, carbon emissions will be reduced by 76,000 tonnes per annum. Environmental studies carried out following World Bank standards have ensured minimal negative impact by the project with little land lost to surrounding communities and no displacement of people. The plant will contribute to satisfy Vietnam’s fast-growing electricity demand, which is currently increasing by 15% year on year and creating pressure on improvement of generation, transmission and distribution capacity.
