Vietnam’s renewable energy, cement sectors attract Filipino investors

Large capital flows from the Philippines through a series of M&A deals worth trillions Vietnam dong have flowed into the country’s potential sectors including infrastructure, renewable energy or food and beverage.

Clean energy

Recently, AboitizPower Group announced the acquisition of Dam Nai wind farm of Mekong Wind in Ninh Thuan province. The M&A deal has a value of $46 million. It has been the first step for the Filipino investors to step into one of the most attractive energy consuming markets in Asia.

Established in 1998, Aboitiz Power Corporation is a well-known electricity company in Philippines. The deal enables AboitizPower to own a list of renewable energy projects comprising hydroelectric, solar, geothermal and wind power with total capacity of 1,200MW.

“This transaction is a milestone for AboitizPower and sets the tone for our expansion in the international market. We announced our intention to go international some time back and we have been prudent in looking for the right opportunity that will bring the best value for the company and our shareholders,” said Erramon I. Aboitiz, President and CEO of AboitizPower.

Long-standing Ayala Group, a competitor to AboitizPower, also plans to boost investment in Vietnam through M&A deals or joint ventures with domestic partners. The corporation has formed a joint venture with Bim Group to develop a largest solar power project in Southeast Asia with a capacity of 250MW.

Recently, the group also received $75 million bond investment from the International Finance Corporation to expand its investment in Southeast Asia with the ambition to increase the total capacity of renewable energy to 5GW.

It can be seen clearly that the Filipino investors are injecting capital into Vietnam. For best economies to invest ranking by US News & World Report, Vietnam has surpassed its Southeast Asian neighbors including Malaysia, Indonesia and Singapore for the 8th position, up from the 23rd place last year.

Being the most dynamically developing economy in the region, Vietnam is expected to introduce attractive investment opportunities, especially in essential sectors including energy since the government has policies to attract more investors into this sector.

As stated in the National Power Development Plan 2011-2020 approved by the government, the total capacity of power plants nationwide is expected to increase sharply from the current 47,000 MW to 129,500 MW by 2030.

However, it is estimated by the World Bank that Vietnam needs an investment of 148 billion US dollars to achieve this power goal.

Besides the important contribution by the Vietnam Electricity and Vietnam Oil and Gas Group, new investments in the electricity industry need participation from the private sector, the World Bank said in a report.

Cement is an option

Another core industry that attracts Filipino investors is cement. Recently, Phinma Corp spent 50 million US dollars to buy 60% shares of Song Lam Cement. The company has production capacity of 4 million tons per year.

Photo: baonghean.vn

Established 72 years ago, Phinma is one of the oldest companies in the Philippines with a diverse portfolio, including education, steel, real estate and energy.

After the acquisition, Phinma will make this Vietnamese member company a supplier of raw materials for itself, opening an opportunity for the corporation to expand in Vietnam market. Phinma predicts that cement demand will increase in Vietnam since several key infrastructure projects such as highways and airports are planned.

Opportunities are also from 30,000-35,000 hectares of industrial parks which will be added in the next three years. "These factors will continue to stimulate construction activities, especially industrial zones, so domestic cement demand will increase in the near future," Bao Viet Securities Company expected.

Currently, the cement industry is still in the strong restructuring period because the supply is still quite large as compared to demand. According to FiinGroup, a data analytics platform, the growing space for cement enterprises is still large.

"Vietnam's cement market will reach a state of equilibrium by 2028. Growing demand for cement is forecast to reach 5% from now until 2030," said FiinGroup.