Image from the Thuong Kon Tum hydropower project site in Vietnam (Tuoi Tre newspaper)

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Vietnam ends Chinese firms’ contract for hydropower project

22 August 2014 | By Rod Sweet | 0 Comments

The operator of a multimillion-dollar hydropower project in Vietnam has terminated the contract with two Chinese firms for their failure to build the scheme as promised.

The Chinese contractors reportedly abandoned the project and returned home after failing to secure an extra $37.65m that was not part of the contract.

Joint venture partners Hydrochina Huadong Engineering Corporation and China Railway Construction Co Ltd. won the contract to build the $270m Thuong Kon Tum hydropower project in Kon Tum Province in 2009.

The plant was designed to produce 1.09 million kWh a year and to be operating at full capacity by the end of this year, but work has been severely delayed and the contractors had been refused their requests for additional funds.

On Wednesday the project operator, Vinh Son Song Hinh Hydropower JSC (VSH), said it had “rescinded the contract with the Chinese side”, Vietnam’s Tuoi Tre newspaper reported.

VSH said the Chinese contractors asked for a sum of $37.65m that was not included in the contract and on 25 May threatened to halt construction if the funds were not released.

“When they could not explain the rationale behind the requests, the Chinese contractors appeared deliberately stubborn regardless of the good will from Vietnam,” Vo Thanh Trung, VSH general director, told Tuoi Tre last week.

Tuoi Tre also reported that the Chinese firms had complained that Vietnamese workers quit work and that the site was not secure, claims that VSH and local police denied, Tuoi Tre said.

The project difficulties come as tensions are high between Vietnam and its much larger neighbour. Anti-Chinese protests erupted after China stationed an oil rig in disputed waters in May. A Chinese vessel reportedly rammed a smaller Vietnamese one, which sank, in the vicinity of the rig. The rig was withdrawn in July but in Vietnam factories have been destroyed in rioting and four workers have been killed.

Economically, China dominates its Communist neighbour, and Chinese contractors are believed to hold a major share of Vietnam’s construction and infrastructure projects. Le Hong Hiep, of Vietnam National University, told The Economist that that share will shrink as Vietnamese clients look elsewhere.

Meanwhile, Vietnam Electricity (EVN), the country’s state-run power company that holds a 30% stake in the project, said that a “more capable” contractor, possibly from Germany or France, would be found if the Chinese joint venture does not return to complete the work.

“Otherwise, Vietnam will select another contractor and impose fines on the Chinese firms as per the contract,” EVN’s deputy general director, Nguyen Tai Anh, told Tuoi Tre on Friday.