Vietnam coal plant pullout — a sign of things to come?

THE future of a massive coal-fired generating plant project in Vietnam is in doubt after Mitsubishi Corp. announced late last month that it was withdrawing from the project due to growing public concern about its environmental impact. The move might be a sign of things to come for developers of coal power facilities elsewhere, including here in the Philippines.

The 2-gigawatt capacity Vinh Tan 3 power plant is to be built in Binh Thuan province in southern Vietnam and advertised as featuring the latest ultra-supercritical “clean coal” technology. It had been planned to be operational by 2024, but that is now in doubt after Mitsubishi Corp. announced its withdrawal on February 25.

OneEnergy, a joint venture of Mitsubishi and Hong Kong’s CLP group, holds a 49-percent stake in the $2-billion project. State-owned Electricity of Vietnam owns another 29 percent. The primary financing for the project is being provided by a banking consortium led by the Industrial and Commercial Bank of China, and the construction, procurement and equipment delivery are mostly being handled by Chinese contractors.

Analysts have said Mitsubishi could withdraw from the project without serious contractual difficulties because even though Electricity of Vietnam has a significant interest in the power plant, it is not considered a “national” project, unlike the similar Vung Ang 2 plant, which is a joint venture of the governments of Vietnam and Japan. Construction on Vinh Tan 3 has also already been delayed due to the consortium’s need to find alternative funding after Standard Chartered Bank and HSBC earlier pulled out of financing the project due to environmental concerns, which also helped to give Mitsubishi an “easy out,” so to speak.

This is why the Mitsubishi pullout from the Vinh Tan 3 project should worry developers of other coal power projects in the region: Even though Mitsubishi stated “public concern” about the plant’s potential environmental impact — wellknown environmental gadfly Greta Thunberg has lobbied for the cancellation of both the Vinh Tan 3 and Vung Ang 2 projects — that’s not really how business at this large scale works; such expensive and complex projects, once they are green-lighted by the concerned government, are generally immune to something as fickle as public opinion.

Rather, Mitsubishi appears to have judged that its involvement posed too high an institutional risk. Public opinion might not be costly, but the opinion of major financing partners and other key institutions such as credit ratings bureaus certainly can be. These latter in particular have in recent months made not-so-subtle hints that they would begin considering environmental sustainability in their ratings analyses. From Mitsubishi’s point of view, replacing funding from the withdrawn Standard Chartered and HSBC for one project is not a serious problem, but a potential credit-negative judgment stemming from that one project is, because it could adversely affect all the company’s activities across its vast network of businesses.

Here in the Philippines, even though the Department of Energy (DoE) issued a moratorium on new coal plant projects last year, there are as many as 15 such projects in the pipeline that were approved before the ban and will continue. That is, unless some partners in those projects follow Mitsubishi’s lead, which they certainly could. Such a withdrawal could cause contractual difficulties, but on the other hand, public opinion would be decidedly in a departing partner’s favor, especially here in the Philippines where public sentiment overwhelmingly favors anything perceived as promoting environmental sustainability.

In spite of claims about “clean coal,” it is an undeniably inferior technology in terms of environmental impact than others that are readily available, such as natural gas, and renewable energy in the form of geothermal, hydroelectric, and solar and wind power. The best outcome from the minor controversy over Vietnam’s Vinh Tan 3 plant would be for the energy industry to recognize the increasing economic risk of pursuing coal technology and redouble its efforts to develop these alternatives.