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Vietnam Today

WB: Private capital key to Vietnam's future energy development

Released at: 14:40, 15/01/2019

WB: Private capital key to Vietnam's future energy development

Photo: trangvangvietnam.vn

World Bank releases "Maximizing Finance for Development in Vietnam's Energy Sector" report.

by Doanh Doanh

The changing macroeconomic and sectoral context in Vietnam requires a new approach to financing electricity and gas investments, according to a new World Bank report entitled “Maximizing Finance for Development in Vietnam’s Energy Sector”.

The study highlights the unviability of the traditional financing model, which relies mostly on public investment by State-owned enterprises. Importantly, it presents an action plan on how to unlock new sources of finance, especially from the private sector, based on a comprehensive analysis of investment needs as well as constraints in the regulatory environment, including the capital and forex markets.

“Given the limited fiscal space and the reduction of concessional financing available going forward, it will be important for Vietnam to step up mobilizing alternative capital resources for the electricity and gas sectors,” said Mr. Ousmane Dione, the World Bank’s Country Director for Vietnam. “The government should comprehensively address the constraints currently impeding the flows of domestic and cross-border private capital into two of the most strategic segments of Vietnam’s economy.”

Vietnam’s electricity sector requires new investment of about $10 billion annually, frontloaded through 2030, which is higher than the average of $8 billion for the 2011-2015 period. Meanwhile, the envisaged expansion of the gas sector calls for an accumulated investment of around $20 billion between 2015 and 2035.

While Electricity of Vietnam (EVN) and PetroVietnam will continue to play important roles in developing new infrastructure, the vast majority of new gas and electricity investments will need to come from private players, the report argues. Moving in this direction is in line with the government’s strategy and objectives of financing the energy sector in the future.

“We observe large interest from private investors in participating in the vast growing energy market in Vietnam, especially in renewables and LNG development,” said Mr. Franz Gerner, the World Bank’s Lead Energy Economist and the study’s lead author. “They are willing to invest as long as projects are well-structured and bankable. What investors need is a transparent and stable regulatory environment that incorporates a proper risk-sharing mechanism among all parties.”

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