On recordThis profile is no longer actively maintained, with the information now possibly out of date
Send feedback on this profile
Download as PDF
Created on: 2019-08-28 10:54:59
Last update: 2020-06-25 00:00:00
Share this page:
|Sector||Coal Electric Power Generation|
|This project has been identified as an Equator Project|
About Van Phong I
Van Phong I is a coal-fired power plant of which construction commenced in August 2019. The plant will install a capacity of 1320MW (two units of 660MW each). The electricity generated with this plant will be sold to Vietnam Electricity (EVN). The Van Phong I power plant will use supercritical technology, with an expected emission intensity of 750 grams - 850 grams CO2 per kilowatt-hour.
Why this profile?
The Van Phong I coal power plant is currently under construction, despite several unresolved issues. Through providing their support, several financiers of Van Phong I are either in violation of the OECD Sector Understanding and/or their own policies. On top of that, construction of the coal power plant will negatively impact local livelihoods and the climate.
What must happen
The financiers of Van Phong I should immediately withdraw their support for Van Phong I and leave the project.
Social and human rights impacts
The construction of the Van Phong I coal-fired power plant has caused the resettlement of the communities that were living on the proposed construction site of the power plant. It is however reported that little thought was given to alternative livelihoods for the farmers and fisherfolk.
In May 2019 it was reported that a 99-year-old grandmother refused to leave her plot of land after her house was destroyed by bulldozers. Reportedly, the land that she was offered is not suitable for farming practices.
FOE Japan reports that the Environmental and Social Impact Assessment (ESIA) has not been disclosed to the local people propertly. Stakeholders that were concerned have not been invited to consultation or informed about the ESIA. There has been no opportunity for them to participate in decision-making regarding the project.
Environmental and climate impacts
During the Environmental and Social Impact Assessment (ESIA) it has become clear that air pollution rates caused by the Van Phong I power plant will be much higher than the average Japanese coal-fired power plant. The plant will emit five times as much particulate matter, five times as much SO2 and nine times as much NOx.
Market Forces reports that JBIC and NEXI have agreed to support six coal plants globally (including Van Phong I) and that they are considering to support another six. Together, these plants would be responsible for emissions up to 71.3 million metric tonnes of CO2. This equals the per capita emissions of 7.4 million people in Japan. Building these coal plants would be fully incompatible with the Paris Climate Agreement. There is no room for any type of fossil fuel expansion, as this significantly decreases our chances of staying below 1.5°C of global warming.
Financial close was reached despite the fact that it would violate several standards and policies. Both JBIC and NEXI are violating the OECD Sector Understanding by supporting Van Phong I. SMBC, Mizuho and MUFG violate their own policies by supporting Sumitomo Corporation's Van Phong I.
The OECD Sector Understanding, to which Japan is a party of, prescribes that export credit finance is only permitted to projects larger than 500MW if they use ultrasupercritical technology or if they have an emission intensity lower than 750g CO2/kWh. Both of these conditions have not been met, which means that JBIC and NEXI are violating the sector understanding by financing Van Phong I.
SMBC has a coal power policy in which they rule out plants that do not use ultrasupercritical technology. As Van Phong I uses supercritical technology, this bank is violating its own policy. Both Mizuho and MUFG refer to the OECD Sector Agreement in their policies, which means that they are not eligible to provide finance to the project and by doing so are violating their own policies as well.
For more information, read this analysis by Market Forces.
Besides the financial instutions, the Japanese government is also contradicting itself by supporting the Van Phong I power plant. The government claimed it would only support power plants using ultrasupercritical technology. Funding Van Phong I therefore "blatantly contradicts Japan’s own energy plan."
Applicable norms and standards
DBS and OCBC rule out lending for new coal power plants, but continue to support Van Phong I
In April 2019, both DBS and OCBC updated their coal policies. Both banks committed not to finance any new coal power plants. Unfortunately, in their policies the banks make an exception for the coal power plants they are already involved with. This means that both banks continue to support the Van Phong I coal power plant.
The estimated costs of the Van Phong I coal power plant are USD 3 billion. According to IJGlobal, USD 2 billion will be covered through debt and USD 1 billion through equity. On August 26, 2019 financial close was reached.
SMBC (also acting as financial advisor), MUFG, Mizuho, Bank of China, DBS Bank, Sumitomo Trust and OCBC Bank provided a USD 799 million term loan to Van Phong Power Company Limited. The loan will be insured by NEXI.
JBIC provided the remaining amount of debt through a USD 1.2 billion export credit facility.
Construction Commences on Van Phong 1 Coal-fired Power Project in Vietnam
Japan shamelessly continues to finance coal ignoring the voices of the local people as well as international society JBIC and NEXI should stop supporting Van Phong 1
Project Finance for Van Phong 1 Coal-Fired Power Generation Project in the Republic of Vietnam
- January 2011 - the Van Phong Economic Zone Management Authority approved Sumitomo Corporation's plan to build Van Phong 1.
- August 2013 - the Finnish company Pöyry was contracted by Sumitomo Corporation to build the plant.
- November 2013 - plan for construction to start in April 2015, and for the plant to go online in 2019. This involved Sumitomo signing a BOT contract in early 2014. This contract was not finalized yet in November 2014.
- April 2016 - some families were still living on the project's site as Sumitomo Corporation struggled with compensation.
- August 2016 - the provincial premier met with the Ministry of Industry and Trade and pushed for the acceleration of the project. Construction was planned to have started by the end of 2017, and completion was planned for 2021.
- May 2017 - Sumitomo Corporation signed an investment agreement with the Ministry of Industry and Trade.
- December 2017 - Sumitomo Corporation received the investment certificate to start developing the plant, which was planned for 2018.
- March 2018 - the Environmental Impact Assessment was approved.
- April 19, 2019 - the Japan Bank for International Cooperation (JBIC) announced that financing for Van Phong I had been concluded.
- June 2019 - the completion date was delayed to 2023.
- August 26, 2019 - Sumitomo Corporation announced on its website that construction of the Van Phong I coal-fired power plant has commenced.