Vietnam coal project supported by Japan, South Korea, to continue despite investor pressure

European asset manager Nordea had urged firms involved in the Vung Ang 2 project such as Japan’s Mitsubishi and Korea’s Kepco to withdraw

Both say they will continue with their commitments, alongside Samsung C&T Corporation, but have vowed to not support future coal-fired projects

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Smoke rises from the chimneys of a coal-fired power station. More than half of Vietnam’s energy needs are met by coal-fired power stations Photo: AP

Published: 7:00am, 3 Mar 2021Updated: 7:11am, 3 Mar 2021

Rising investor and activist pressure to end fossil fuel financing led to Japan’s Mitsubishi Corporation pulling out from a US$2 billion power plant project in Vietnam last week, but a smaller project backed by both Tokyo and Hanoi still looks to be going ahead.

Mitsubishi holds a 40 per cent stake in the 1.2-gigawatt Vung Ang 2 coal-fired plant in Ha Tinh province, with the rest being held by South Korean state-run utility Korea Electric Power Corporation (Kepco) and Japanese company Chugoku Electric Power, according to the Netherlands-based finance watcher NGO BankTrack. Loans totalling US$1.7 billion have been extended to the project by the state-owned Japan Bank for International Cooperation (JBIC) and state-run Export-Import Bank of Korea, alongside other private institutions.

As one of the world’s fastest growing economies – even amid a global recession caused by the Covid-19 pandemic – Vietnam’s electricity demand has risen by about 12 per cent per year in recent years.

More than half of its energy needs are met by coal-fired power stations at present, though the country is a signatory to the Paris climate agreement and has pledged to reduce its dependence on coal to 27 per cent by 2030, while raising the share of non-hydroelectric renewable sources in its energy mix.

A couple takes a selfie at Hoa Binh hydroelectric power plant in Vietnam as the flood gates are opened after heavy rainfall caused by a typhoon. Photo: Reuters

JBIC’s decision to finance Vung Ang 2 through a US$636 million loan “was made by taking into account Japanese government policy as well as the energy policies in the partner country [of Vietnam]”, said spokesman for the bank, adding that JBIC had been “promoting the energy transition from coal to gas and/or renewable energy through direct dialogue with the Vietnamese government which we will continue to strengthen”.