The Ministry of Industry and Trade (MOIT) is unable to pull the plug on the two thermal power plants due to concern it might embroil the government in a dispute with private firm Tan Tao Energy (TEC), which claims to have already spent a massive amount of money.
In a report recently sent to the government, the ministry quoted the Kien Giang Province People’s committee as saying TEC had spent VND77.2 billion ($3.3 million) in 2009-2013 on land clearance for the Kien Luong Power Plants 1 and 2.
But TEC had earlier reported to the prime minister it had spent more than VND6.3 trillion ($270 million) on carrying out 146 legal procedures from the central to local levels, surveys, a feasibility study, land clearance, and installing technical infrastructure.
TEC received government thumbs-up for its investment plans in 2008.
It said it was ready to build the plants, arrange finance and coal supply and invite tenders from international EPC contractors.
The gap between the figures reported by the two parties needs close scrutiny by multiple state agencies, the ministry said.
The MOIT proposed two options, saying one is including the 1,200 MW Kien Luong 1 as a build-operate-transfer (BOT) project in the national power development plan for 2021-2030 if it is considered essential for power supply.
This option would help avoid possible legal disputes and demands for compensation from the company, it said.
But the MOIT noted that it also depends on whether Kien Giang Province wants to continue with the $2 billion project and the company’s capability.
It admitted however that implementing the project in BOT form would be difficult given that the tough public debt management laws would make it difficult for the project to acquire any government guarantee.
The MOIT said the second option is scrapping the project on the grounds the investor is entirely at fault and declining to negotiate for compensation.
But, especially given that the project had been converted from a build-own-operate (BOO) project into a BOT one, there is no solid legal basis for scrapping it, it said.
“There needs to be a solution that harmonizes the interests of the government, Kien Giang Province and the investor to avoid any dispute,” the ministry said in the report.
Originally approved as a BOO project, Kien Luong Power Plant 1 was allowed by the government in 2014 to become a BOT project.
In 2015 the ministry and the company signed a memorandum of understanding for building Kien Luong 1 in BOT mode.
Meanwhile, preparations for building Kien Luong 2 were not made since it was not listed in the amended Power Development Plan VII.
In 2016 Kien Giang urged the government not to include the two plants in the 2011-2020 power development plan and the coal sector development plan for until 2020.
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