Vietnamese firm proposes ambitious $1.1bln plan for Red River power plants, man-made waterway

Xuan Thien Company Limited, a subsidiary of Vietnam’s Thai Group, is seeking the government’s approval to invest VND24.5 trillion (about $1.1 billion) in the project. The Ministry of Planning and Investment has submitted the proposal to Prime Minister Nguyen Xuan Phuc for consideration.

The Red River begins in China’s Yunan province and flows down through Hanoi and several provinces in northern Vietnam before emptying into the Gulf of Tonkin. The river and its numerous tributaries spread out to form the Red River Delta, which encompasses a major agricultural area mainly devoted to rice, and is also known for its violent floods and seasonal fluctuations.

Xuan Thien said the project will help boost trade between Vietnam and Yunan. “The project will not affect defense or security, but strengthen the relationship and border security with China,” the company said.

The project is necessary given the fact that the value of imports and exports between Vietnam and China in 2015 stood at more than $45 billion.

Ambitious project

Xuan Thien aims to combine the existing Hai Phong – Viet Tri route (in Phu Tho province) with the Hanoi – Lach Giang route (in Nam Dinh province) into one, connecting provinces and cities in the delta to mountainous areas.

The plan is to dredge a 288km stretch of the river and set up six hydropowers dams to increase water levels and allow big vessels safe passage. Total electricity output from the power plants is expected to reach 912 kWh per year.

Xuan Thien said it can finance 30 percent of the required investment for the project, while it plans to raise the remainder from commercial loans.

The company plans to begin the project this year and complete it by 2021. The investment is expected to be recouped in 25 years through fares charged for vessels using the waterway and revenue from electricity sales.

The fares are scheduled to range from VND10,000 a ton to VND45,000 a ton for domestic goods. The fares for foreign goods will be two times higher.

Sales of electricity are estimated at VND1,900 per kWh during its initial phase, and will increase in the following stages.

The company’s plan to construct six hydropower plants across the river comes at a time when several hydropower projects have been suspended due to the record drought. As of mid-March this year, operations at 15 out of Vietnam’s 51 hydropower plants had been put on hold as the drought grew in severity in the Central Highlands. It is widely acknowledged that hydropower plants are not prefered as they are dependent on the weather.

The construction of the hydropower plants may also alter the current and water levels, affecting agriculture in the Red River Delta.

In a report submitted to the government, the Ministry of Planning and Investment said “the water levels in the proposed dams are expected to be lower than the levels during the rainy season, and are unlikely to cause more floods. The effects [of the dams] to the environment will be limited.”

The Ministry of Planning and Investment sought advice from various ministries before submitting the proposal to the prime minister. Below is some of the feedback:

The Ministry of Finance said the investor should assess the effects of the hydropower plants on ports. It also needs to evaluate the effects of the construction of the dams to existing bridges along the river.

The ministry also expresses concerns about the financial capacity of the developer. Xuan Thien, which has VND1.2 trillion of charter capital, will need to prove it is able to borrow the remaining 70 percent of the total investment (more than VND17 trillion).

The ministry also doubts the estimated revenue from sales of electricity as the hydropower plants will have to compete with several coal-fired power plants set to be built in northern Vietnam.

The Ministry of Industry and Trade said it agrees with the project and will consider adding the power plants to the country power development plans. Electricity of Vietnam, which holds a monopoly on the country's power sector, said it will comment on the power plants when it has seen detailed information about the plan.

The Ministry of National Defense basically agreed with the project but asked the investor to cooperate with army officials in the localities to deal with issues involving defense.

The Ministry of Construction asked the investor to take measures to minimize effects to the environment and flood gates.

The Ministry of Natural Resources and Environment said the project is necessary but the investor should assess the impacts of the project on water resources and possible changes to river bed before constructing the dams and power plants from Lao Cai to Viet Tri.

The Ministry of Agriculture and Rural Development wants the investor to make clear the possible effects of flooding in upstream areas and level of sediment flowing downstream, as well as what it could mean to people living by the river. The project also needs to conform with water resources and power development planning.

The Ministry of Transport said it will consider adding the ports to the national plan for waterway transport.