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Created on: 2017-03-07 12:29:05
Last update: 2019-08-15 10:57:13 BankTrack
Yann Louvel, Climate and Energy Campaign Coordinator at BankTrack
Hong Hoang, CHANGE
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Why this profile?
The planned construction of the Vung Ang II power plant will negatively impact local livelihoods as well as the environment. The construction of the plant and the coal ash it produces will negatively impact local farming land. Increased coal plant emissions will also increase the number of deaths that are already caused by such emissions. The environment will be affected by the power plant's emissions; air pollution will worsen and aquatic ecosystems will be destroyed. The fact that Vietnam is able to supply its entire electricity demand from renewable energy shows that there is no need for this plant.
About Vung Ang II coal power plant
The Vung Ang II thermal power plant is part of the Vung Ang thermal power centre and is the second complex of the coal-fired electricity generating plant located in the Vung Ang industrial zone, Ky Loi commune, Ky Anh district, Ha Tinh province in Vietnam. Vung Ang II will be constructed adjacent to Vung Ang I which is already under operation. It consists of two turbines with a total capacity of 1200MW. The first unit is expected to be operational in 2021, the second one in 2022. Both will be fueled by imported anthracite, hard coal.
- In 2007, the Vung Ang II Thermal Power Joint Stock Company (VAPCO) was established to build and operate the power plant, a joint venture between OneEnergy Ltd and the Hanoi based Refrigeration Electrical Engineering Co. (REE). OneEnergy Lts is a 50:50 venture between the Hong Kong based CLP and the Tokyo based Mitsubishi Corp. with the aim to expand business in Southeast Asia;
- The plant was approved in 2009, its environmental and social impact assessment was signed off in January 2011, and the plant was expected to begin operating in 2013, according to Vietnam’s Power Development Plan VI (PDP VI). The plant was delayed and its operation was moved to 2018 in PDP VII, and subsequently 2021;
- In 2017, the PDP VII was revised, in which Vung Ang II is planned to operate in 2021;
- After eight years of negotiation, on 16 January 2017, the agreement to build the plant was signed by the General Directorate of Energy (under Ministry of Industry and Trade) and VAPCO, the project sponsor.
What must happen
The construction of the Vung Ang II power plant stands in contrast to the aspirations of the Vietnamese Government and the Paris agreement. The Vietnam government demanded serious efforts to reduce global warming and should, hence, live up to its ambitions and withdraw the permission for new, not yet constructed coal power plants - a step that Prime Minister Nguyen Tan Dung announced in 2016. The Vietnam Sustainable Energy Alliance (VSEA) has, in cooperation with the WWF, published a study according to which Vietnam can receive 100% of its electricity demand from renewable energy.
JBIC should immediately pull out of the project because it does not comply with its own standards as the project lacks social and ecological acceptability. The engineering company REE should take its promise to "constantly align profitable growth with social responsibility and environmental protection..." seriously and pull out of the Vung Ang II power plant. Commercial banks must not participate in the financing of this project in any way.
The plant will impact livelihoods of local residents because the construction of the plant and its coal ash area will affect local farming land. A study published in the Environmental Science and Technology Review has analyzed the impact of Southeast Asian coal power plants emissions. Its authors estimate that coal plant emissions account for 19,880 deaths annually. With increasing reliance on coal power and the continued construction of coal plants, this number will rise drastically during the next decades.
The project sponsor promises that the plant will create jobs for local people, but these will mainly be temporary, low wage jobs during the construction phase. Furthermore, during the operation phase, it is likely that the plant discharges waste water at high temperature, which will affect local aquaculture.
The Vietnamese government has demanded serious efforts to reduce global warming. In 2016 it announced that it would drop plans for further coal-fired power plants. The Vietnam Sustainable Energy Alliance (VSEA) has, in cooperation with the WWF, published a study according to which Vietnam can supply 100% of its electricity demand from renewable energy, proving that there is no need for the plant in the first instance.
The plant will cause severe impacts on air quality. Major air pollutants from the plant include fine dust, SOx, NOx, CO2 and mercury. While the plant will be equipped with systems to control fine dust, SOx and NOx, there are no measures to address CO2 and mercury. In addition to smoke, the plant will create a huge amount of coal ash, which is likely to be dumped in open pits, as has happened at other sites in Vietnam, thereby worsening pollution.
The methodology of drafting Environmental Impact Assessments is often inaccurate and has in the past led to environmental disasters and pollution, according to the former Deputy Minister of Natural Resources and Environment Nguyen Manh Hien. The Minister for Resources and Environment, Hong Ha, said that the "current regulation on EIA has proved infeasible, making it hard to have high-quality EIA reports." For the Vung Ang II power plant, no EIA is publicly available.
Water issue is another environmental concern. The plant will use sea water for cooling and the heated water will be discharged back into the sea. This discharged water is usually between 5 and 11°C hotter than its original temperature. This “thermal water” will kill aquatic life and threaten ecosystems.
The construction of the Vung Ang II complex poses serious risks for health and life of local peoples. According to a recent study by Harvard University, emissions from Vietnamese coal power plants are responsible for 4,300 deaths. For children especially, the risks that stem from the pollution of carbon dioxide, mercury and arsenic are high and can cause lung injuries, lead to nerve diseases and cardiovascular infections.
Importantly, the environmental and social impact assessment that was signed off in January 2011, does not align with international standards. First of all, the assessment does not demonstrate that the local community was consulted properly. Furthermore, the affected communities were not informed about the basics of the project. During a survey, 136 out of 186 households said that they did not know who the owner of the project was, where exactly it would be constructed and what type of project it concerned.
In light of the marine life disaster in 2016, which was caused by the disposal of toxic waste from a steel factory run by Formosa Plastics, and ongoing heavy air pollution by coal power plants, local people are very sensitive to new projects that pose environmental risks. Protests, blockades and repression of activists have often been the result. In protest against similar coal power plants, protestors have been met with police aggression and teargas attacks.
Responsible investment and financing
Environmental Policy Statement, Human Rights Policy Statement, and Environmental and Social Policy Framework
Completion date delayed
In June 2019, the Ministry of Industry and Trade reported that the completion date for Unit 1 is delayed to 2023 and the completion date for Unit 2 is delayed to 2024.
Vung Ang II is going to use ultrasupercritical technology
In March 2019, OneEnergy reported that the Vung Ang II coal power plant is going to use ultrasupercritical technology, instead of supercritical technology.
Ministry of Planning and Investment refuses to grant an investment registration certificate
In June 2018, it was reported that REE transferred its entire holding in VAPCO to OneEnergy. This led VAPCO to apply for authorisation for OneEnergy to become the sole owner of Vung Ang II. In July 2018, the Ministry of Planning and Investment refused to grant an investment registration certificate to OneEnergy to develop the power plant. This decision was based on Decree 63/2018 which says that authorities shall not issue investment certificates for projects executed under the public-prive partnership model. Besides that, the Ministry found several issues in OneEnergy's dossier. Several conditions appeared not to have been met. First of all, the environmental impact assessment for the project was approved by the Ministry of Natural Resources and Environment over two years ago, which means that the assessment is no longer valid. Furthermore, OneEnergy requested an area of 94.6 hectares for the project, while only 86 hectares had been approved by the Ministry of Industry and Trade. Lastly, it was found that OneEnergy does not meet the requirements regarding investment and equity capital. The equity needed is set at USD 555.5 million, 25.4% of the total investment. However, in 2018 the equity was only USD 26.37 million.
These findings led the Ministry of Planning and Investment to ask the Ministry of Industry and Trade and OneEnergy to consider the opinions from relevant ministries and agencies and then develop the project in compliance with regulations.
The blacklist: Vietnam names and shames projects with high pollution risks
Vietnam’s Ministry of Industry and Trade has announced projects which it considers are potentially risky to the environment. In a statement, the ministry listed 28 plants which need “special monitoring”, with nearly half of them being coal-fired power projects invested by state power utility Electricity of Vietnam (EVN) and national oil and gas group PetroVietnam. One of the plants in the list, the 1,200MW Vinh Tan II project, grabbed headlines last year due to the environmental pollution it caused (source Vnexpress.net).
The Vung Ang II project requires an investment of USD 2.2 billion. The expected debt-equity ratio is 77:23. The banks lining up to provide financing for this project include MUFG, Mizuho, SMBC, Sumitomo Trust, DBS, OCBC Bank and Standard Chartered. BNP Paribas acts as the financial advisor, but will not finance this dodgy deal.
The responsible venture for the thermal power plant is the Vung Ang II Thermal Power Co. Ltd (VAPCO) which is owned by OneEnergy Ltd. and the Refrigeration Electrical Engineering Co. (REE). OneEnergy's parent companies are the Hong Kong based CLP Group, formerly known as China Light & Power and the Mitsubishi Corp.