Assessment of Financial Feasibility of Vietnam Hydro Power Plant

Renewable energy development has experienced rapidly growth in the world energy market as a result of both fast growing energy demand and rising concern in global warming. Renewable energy also plays a key role in many developing countries´ energy master plans since it is vital for these countries´ sustainable economic growth. Apart from wind, bio, solar and geo-thermal energy development, hydro power is still the most predominant forms of new developments. This could be largely due to both the economical and geographical factors. One of such typical countries is Vietnam who has 40% electricity generated by hydro power plant. Due to the huge shortage in Vietnam power supply, which is 600 million kwh for 2007 as a result of fast economic growth, Vietnam has also undergo a fast development of new hydro power plant. It is projected that the load demand will reach 90 TWh/year and the installed power generation capacity to be doubled to 20 GW by year 2010. This will imply an annual installed capacity growth rate of 16%. The total investment capital is estimated to be 19 billion USD comprising 12 billion for power generation and 7 billion for transmission. Among which 20% will be expected from private financing. Therefore a fair financial value valuation in project feasibility studies will determine project realization. This paper will present a case study of a recent development of 28MWH hydro power plant in central Vietnam. The various key financial aspects such as FIRR, NPV will be assessed and main risks such as foreign exchange risk will be addressed in the financial sensitivity studies. These assessments will also incorporate the most recent move in Vietnam´s change in policies and direction in energy sector.