Cleaning Up Their Act: Vietnam Energy Market is Hungry for Investments

Vietnam’s energy market is transitioning away from coal and oil, with the goal to replace existing power plants with solar and wind generating facilities. The new clean energy sector is hungry for investors, though some challenges exist. Dr. Peter Nhon Nguyen, CEO and Founder of CNM, a Vietnamese investment management and corporate advisory firm, discusses the pros and cons for foreign investors.

What is your prediction for the future of energy production in Vietnam? What is unique about that market?

The future is a bit clouded – Vietnam is facing certain problems concerning coal production. We export a lot of coal to China. However, the government faces some issues with investment in upstream production, and therefore some of the highlighted projected figures do not support sustained growth. Compounding the issue is that a few of the gas and power plants have been suspended, and that energy supply responsibility has been transferred to coal power plants. This has resulted in Vietnam facing a problem in getting the material for power plants.

Due to the economic recession, a few of the refinery plant projects were also suspended. We do not have enough capital to run the turbo power plants. The government is now planning for recyclable, sustainable energy, such as solar and wind energy plants. That will affect the power plan of the whole country, so we can say that in the next five years Vietnam’s energy resources will be in crisis. The government is aware, and some emergency plans have been laid to help with the changeover from coal to sustainable sources. However, it is still a bit unstable because of the commodity market.

How should someone looking to invest in future energies in that region get started? Any key advice you’d like to share?

Ten years ago Vietnam published a master plan for developing solar and wind energy within the country; however, because of the lack of investor interest, most of the resources allocated to that project were diverted to oil and coal power plant production. Recently the government realized that they’ll need to return to the original plan for renewable energy, and have invited General Electric to invest in the first wind energy power plant in the country.

I feel that solar and wind will develop at a healthy rate in Vietnam – I would tell prospective investors to consider placing their assets in those industries.

Vietnam is one of the fastest developing countries, and the government is actively encouraging foreign investors, especially into infrastructure, to help them keep up with the rapid economic development. This is especially true of the middle of the country where energy demands are skyrocketing.

Infrastructure is by far the best investment category at the moment.

What challenges should potential investors be ready to encounter?

I would advise any investor to work with a native firm to get the lay of the land and understand the specific company and laws affecting their prospective investment. Overall, however, it is a very dynamic country that is friendly to investment, and there are no major problems to be wary of.

I would caution investors directly to not invest in coal, as those plants are already at capacity. The government is actually working to phase them out, as they’re causing a significant environmental impact.

Is there a common misconception that you’ve noticed, or common mistakes that are made when foreign investments or capital are introduced?

So far we don’t really see any common mistakes, as most of the investment is done by a multinational company that has a representative office in the country. Overall they are usually very sophisticated and work to collaborate with the government to get the best incentives.

We don’t see many small investors – most are large, such as Mitsubishi Power, Kawasaki, General Electric. This is because investing in power here requires about half a million to start. The government is looking for large investors who can invest in 400-500 megawatt plants, and aren’t as interested in small ones.

It would be interesting to see several smaller investors partner to fund a new, clean power plant – I think that’s something that would be very beneficial to the market, if a bit unprecedented.

Dr. Peter Nhon Nguyen is the Founder and CEO of CNM, as well as the founder of Nhon Corporations, Nhon Industry Maintenance Service Co., Ltd., and director of Regal Dominion Associates Ltd.