LNG electricity, not easy to do

The fact that the Ca Na LNG Project, with a scale of about VND 51,000 billion, is not easy to find investment capital continues to show the challenge in implementing LNG power projects listed in the Power Plan VIII.

Much excitement

Mr. Tran Quoc Nam, Chairman of Ninh Thuan Provincial People's Committee recently said that at the 1,500 MW LNG Ca Na Project, the bidding process to select investors was slower than planned due to the implementation of new legal regulations on bidding.

"The appraisal of bidding documents has been completed, and it is expected that bidding documents will be issued in July 2024 according to regulations," said Mr. Nam.

Regarding the reason for the delay in selecting the investor, Mr. Nam said that Ninh Thuan had to bid internationally, so legal regulations had to be done very carefully, ensuring absolute safety from the first to the last stage, leading to the delay.

The 1,500 MW LNG Ca Na project has also attracted the attention of many investors.

Most recently, in May 2024, T&T Group Joint Stock Company and BP Gas & Power Investments Limited (UK) had a working session with the People's Committee of Ninh Thuan province to report and introduce their capacity, experience and interest in proposing to participate in this project.

Previously, in September 2021, the People's Committee of Ninh Thuan province also issued a decision to recognize investors who met the preliminary requirements on capacity and experience to implement the Ca Na LNG Power Center Project Phase I, with a capacity of 1,500 MW.

There are 5 groups of investors named on this occasion. They are the Korea Consortium, including Hanwha Energy Corporation – Korea Gas Corporation – South Korea Electric Power Corporation; Gulf MP Company Limited; Jera Company Inc; Consortium of Total Gaz Electricite Holding Franc – Novatek Gas & Power Asia Pte – PetroVietnam Power Corporation – Siemens Energy AG – Zarubezhneft Joint Stock Company; Trung Nam Construction Investment Joint Stock Company.

In the selection of investors at that time, many financial criteria were set by the People's Committee of Ninh Thuan province, such as having equity capital accounting for 15% of the total investment of the project under consideration and having participated in completed energy projects put into commercial operation within 10 years (from 2010 to 2020), with a total minimum capacity of 1,000 MW...

Challenging project implementation

According to the assessment of the Chairman of Ninh Thuan Provincial People's Committee, this is a very difficult project, because the whole country currently has 12 LNG projects, but only 1-2 projects are implemented, and the model is not the same as Ninh Thuan.

In fact, not only Ninh Thuan is facing difficulties with the LNG power project. Participants in the online meeting of the Minister of Industry and Trade with 15 localities and investors on thermal power projects using domestically exploited natural gas and liquefied natural gas (LNG) in the list of key investment projects of the Planning and Implementation Plan of the 8th Power Plan recently held certainly also saw many difficulties.

When the financial problem of EVN and investors has not been solved, it will be difficult to sign the Power Purchase Agreement.

Currently, only Nhon Trach 3 & 4 Power Projects are constantly changing because they are under construction, but even so, Nhon Trach 3 & 4 have not yet signed an official Power Purchase Agreement, although the negotiation process has ended and Vietnam Electricity Group (EVN) is reviewing it.

At other LNG power projects, the opportunity to sign a Power Purchase Agreement is not as quick as expected.

According to calculations by the Ministry of Industry and Trade, the cost of purchasing input electricity for EVN from power plants using LNG will be quite high (estimated at VND2,400 - 2,800/kWh). Due to the unstable geopolitical situation, if the minimum long-term electricity purchase rate is stipulated, EVN will have to purchase a certain amount of electricity (instead of being able to purchase other sources at a cheaper price), leading to high electricity purchase costs, putting pressure on increasing retail electricity prices.

When electricity prices are not adjusted, the purchase of committed output from gas-fired power plants will greatly affect EVN's finances. If we only calculate the cost of purchasing electricity for the low-cost output of the 2025 power system operation plan for Nhon Trach 3 & 4 Power Plants with the percentage of electricity committed through long-term power purchase contracts of 70%, EVN's electricity purchase cost could increase by about VND6,800 billion.

With only the exchange rate differences still pending from 2023 and the cost of purchasing electricity from Nhon Trach 3 & 4 Power Plants, by 2025, EVN still does not have the source to pay about 24,902 billion VND. That is not to mention EVN's loss of about 23,400 billion VND in 2023.

When the financial problems of EVN and investors have not been solved, it will be difficult to sign a Power Purchase Agreement. In that context, there is no financial institution to lend money to LNG power project developers.

Thus, even though the project has been licensed for investment for a long time, such as LNG Bac Lieu or later like LNG Quang Ninh, LNG Hai Lang, LNG Long An..., or LNG Ca Na is preparing for bidding, it is not known when there will be a plant to generate electricity.