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Plan to open water route, power plants on Vietnam’s Red River raises concern

Wednesday, May 04, 2016, 14:48 GMT+7

A local company is raising eyebrows with a proposed megaproject to open a water route and build as many as six hydropower plants on the Hong (Red) River, which flows through nearly ten northern Vietnamese provinces.

The developer, Xuan Thien Co., Ltd., a subsidiary of Vietnam’s Thai Group, has had its US$1.1 billion project backed by the Ministry of Planning and Investment, which has recently submitted the proposal to Prime Minister Nguyen Xuan Phuc for consideration.

Red River, earning the name from its heavily silt-laden, reddish-brown water, flows through provinces including Yen Bai, Phu Tho, Hanoi, Vinh Phuc, Hung Yen, Ha Nam, Thai Binh and Nam Dinh in northern Vietnam.

The river and its numerous tributaries spread out to form the Red River Delta, which flows past the Vietnamese capital before emptying into the Gulf of Tonkin. The delta encompasses a major agricultural area of Vietnam with vast area devoted to rice, and is also known for its violent floods and seasonal fluctuations in volume.

Ambitious plan

There are presently two water routes on the river, the Hai Phong – Viet Tri and Hanoi – Lach Giang. Viet Tri is the capital of Phu Tho, whereas Lach Giang is the watergate in Nam Dinh.

The developer wants to combine these two routes into one, connecting Hanoi to neighboring provinces through water transportation.

The proposed project will require dredging a 288km stretch of the river, building six dams and docks to increase water levels allowing major vessels passage, and setting up six hydropower plants at each of the dams.

The power facilities are expected to supply 1 billion kWh of electricity per year in total, according to the developer.

3resize-1444626902.jpgA part of Hong River in Lao Cai during flood season. Photo: Tuoi Tre

Xuan Thien said it can cover around 30 percent of the required investment for the costly project, and will borrow commercial loans for the remaining amount.

The developer plans to recoup investment over 25 years from operations, through fares charged against ships that will travel through its water route, and revenue generated by the hydropower plants.

The fares are expected to range from VND10,000 a ton to VND45,000 a ton.

The power plants revenue has been estimated at VND1,900 per kWh during its initial phase, and later up to VND3,500 per kWh. Such estimates are quite optimistic, as most existing power plants are selling electricity at only VND450-1,000 a kWh.

Xuan Thien said the megaproject will only affect some 600 local residents in Yen Bai and Lao Cai.

Experts cautious

Ta Van Huong, chairman of the Vietnam Clean Energy Association, said the proposal to build as many as six hydropower plants on the river should be carefully considered.

Studies should also be carried out to evaluate the environmental impact and technical issues of the megaproject, he added.

Huong said building dams and increasing water levels on the river will affect the lives of millions of people. “So we have to be really cautious,” he concluded.

An unnamed industry and trade expert also said the public’s opinions should be taken into account as the project may change their lives.

Nguy Thi Khanh, director of GreenID, a pro-green energy organization based in Hanoi, is concerned about the would-be power plants on the river

“We already have enough power facilities on the distributaries of the Hong River, which has reduced alluvium in the delta,” she said.

OTpib6UX.jpgA herd of buffalos is grazing on the bank of the Hong (Red) River in Hanoi. Photo: Tuoi Tre

Xuan Thien said it had sought consultant from relevant ministries and agencies on the project, with most feedback positive.

The Ministry of Transport backs the idea of opening the water route, saying it will “give the northern traffic system a facelift,” if successfully implemented.

But the Ministry of Finance is concerned about the financial capacity of the developer.

A company would need equity of at least VND7.3 trillion ($325.89 million) to be allowed to borrow 70 percent of a project, whereas Xuan Thien only has VND1.2 trillion ($53.57 million) as charter capital, according to the finance ministry.

The ministry also doubts that Xuan Thien will be able to sell its electricity at VND1,900 a kWh. “The anticipated revenue of the power plant is in fact a big financial risk,” it said.

Vietnam Electricity, the country’s monopoly power supplier, warned that the government approval for the power sector development does not include any projects to be built on Hong River.

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