Vietnam's Cavico moves from hydro to wind

Hanoi, Vietnam-based construction firm Cavico is pursuing one of the country's first major wind energy projects, a 30-megawatt wind farm in Vietnam's south central region.

Cavico, the largest non-state-owned infrastructure construction company in Vietnam, does most of its work building hydropower projects for the government, with participation in 90 percent of the country's hydropower plants.

But thanks to a government directive earlier this year that established a market for renewable energies including wind and solar, Cavico is looking to put its infrastructure construction experience to work in developing wind farms on land in remote areas of the country, said Hung Manh Tran, one of the founders and director-executive vice president of Cavico.

Cavico has secured 1 hectare of land in the Lam Dong province, leaving significant room for expansion if the initial $56.6 million project is successful. Cavico plans to start construction in the middle of 2009 and complete it in mid-2011. Solar could also be a component of the wind farm, Tran told the Cleantech Group.

Cavico is planning to use 1.5 to 1.65 MW turbines from a supplier still to be determined.

Some aspects of the project remain in question. Energy generation projects typically get between $0.04 and $0.05 per kilowatt hour, but Cavico plans to negotiate with the utility for rates between $0.08 and $0.10 for the wind farm. If that happens, Cavico expects to receive $7 million a year in revenue from a power-purchase agreement.

Additionally, the government has promised to compensate investors for any losses on renewable energy projects as a form of subsidy, guaranteeing they will meet an established return-on-investment, Tran said.

"The government has made a commitment in the field," Tran said. "That's why we've committed." 

There's currently one wind farm operating in Vietnam, with a capacity of half of a megawatt. Tran said there are other investors alongside Cavico now, attempting to get local authorities' approval for turbines.

"Very soon if we are a success in our project, I think wind will develop very quickly in Vietnam," Tran said.

Vietnam has been strong in the hydropower sector because the dams gave the country a way to control the flooding associated with monsoons and a way to supply irrigation during dry seasons.

The benefit if wind power is that it would typically generate power in the dry season, when hydropower isn't contributing much to the supply, Tran said.

"Wind farms are very simple compared to many types of energy," Tran said. "Hydropower is very, very complicated."

A downside of the wind industry there is that it lacks data on wind above 30 meters. But Tran said initial surveys prove the market could be very lucrative.

"We have lots of high land areas, and there's many vast windy areas undeveloped that could be used for wind farms," he said.

Cavico is also restricted by Vietnam's state-controlled interest rates and credit market. 

"This is the most difficult year to be doing this because of the high inflation, and the government controlling it by establishing high interest rates," Tran said. "They also control the debt market very strictly so it's very hard to get capital."

Tran is currently seeking partners to help build the wind project. Cavico is also pursuing a $100 million, 70 MW hydro project in Laos and is seeking a partner and co-developer that could supply $30 million in equity.

Cavico has about 3,000 employees, with some deployed to mining and road-building projects in Australia and Algeria.