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Politics

Vietnam to ask Marubeni with help constructing $2.5bn thermal plant

Build-operate-transfer project to include Korea Electric Power

Rising demand for electricity is forcing Vietnam construct a new power plant.   © Reuters

DANANG, Vietnam -- Facing financial difficulties, Vietnam will embark on its first large, privately funded infrastructure development project.

The government will sign a contract on Wednesday with Japanese trading house Marubeni and Korea Electric Power to build a coal-fired thermal power plant in Thanh Hoa Province, in northern Vietnam, through a type of project called build-operate-transfer, or BOT.

Construction costs will total $2.5 billion with a contract of 29 years.

Vietnamese Prime Minister Nguyen Xuan Phuc is expected to ask his Japanese counterpart Shinzo Abe for cooperation to use private funds in a meeting on the sidelines of the Asia-Pacific Economic Cooperation Leaders' Meeting, which kicks off Friday in DaNang.

BOT projects allow private companies to build and operate facilities, then transfer them to the government after a set period of time. With no need for fiscal spending, countries can efficiently build infrastructure using the funding and expertise of foreign companies.

The contract will result in Vietnam's first highly efficient coal-fired plant with a generation capacity of 1.2 million kilowatts. Construction will begin next year, with operation scheduled to start in 2022.

The two companies will operate the power plant, earning revenue by selling power to Vietnam Electricity. The project will be financed by public financial institutions and other entities.

Only a few of the nearly 20 BOT power plant projects being considered by Vietnam have been undertaken. The move is likely to pave the way for similar projects in the future.

The government is also mulling introducing BOT projects to construct an expressway connecting Hanoi and Ho Chi Minh City, airports and bridges.

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