Ha Noi, November 8, 2012 - The Electricty of Vietnam, Power Companies and the World Bank today signed a credit agreement to fund the Vietnam Distribution Efficiency Project, which aims to provide electricity users across Vietnam with better quality and reliable electricity services, and to reduce greenhouse gas emissions through efficiency improvements.
The credit was approved by the World Bank Board of Director on September 11, 2012.
“The efficiency and modernization investments under this project will improve the reliability of energy supply to industries and households and contribute to Vietnam’s socio-economic development, said Victoria Kwakwa, the World Bank Country Director for Vietnam. “Successful implementation of this project will contribute to strengthen Vietnam’s competitiveness and environmental sustainability, which are also key pillars of the World Bank’s strategy for Vietnam in the 2012 – 2016 period."
“Reliable electricity supply will further reduce the need of households to use alternative and often more polluting fuels, such as coal and kerosene, to meet their domestic energy needs and should have positive gender and poverty impacts, said Hung Tien Van, Senior Energy Specialist and Task Team Leader for the project.
The project will contribute to meeting the objectives of the National Energy Development Strategy to 2020 by reducing investment needs in the power sector, strengthening energy security and contribute to climate change mitigation. The project covers the construction and reinforcement of electricity distribution networks, the introduction of smart grid technologies in distribution and a technical assistance and capacity building facility for the Electricity Regulatory Authority of Vietnam (ERAV) and the five power companies (NPC, CPC, SPC, HCMPC and HHNPC) to develop efficient electricity tariffs and design effective energy demand programs.
The total project cost is US$800 million. The World Bank contributes US$449 million and US$30 million comes from the Clean Investment Fund (CTF) to support the implementation of smart grid technologies. The Australian Agency for International Development (AusAID) provides US$8 million in grants for technical assistance and capacity building. The remaining investment of US$313 million will come from the Government of Vietnam in counterpart funds.
The World Bank has closely collaborated with the Government of Vietnam over the last decade to expand the power network and to provide electricity to all parts of the country. As a consequence, access to electricity has increased from 50% in 1996 to about 97% in 2011. Today the focus of World Bank assistance has shifted from providing new electricity connections to improving the quality of services to consumers.
Funding from the World Bank comes from International Development Agency (IDA), the concessional lending window for blend IDA countries, an interest rate of 1.25%, a service charge of 0.75% and a 25 year repayment period with 5 year grace period. The loan from the Clean Technology Fund (CTF) has a service charge of 0.75 percent per annum, a maturity period of 20 years and 10-year grace period.