Reaffirming that hydropower is an integral part of its approach to development, the World Bank recently approved a new US$330M loan to support the Trung Son hydropower project (TSHPP) in Vietnam. The mid-sized multipurpose scheme will help meet growing domestic demand for electricity and bring flood control and irrigation benefits to rural and poor communities in Thanh Hoa province.

“With 1.4B people without access to electricity globally and the impact of climate change increasingly evident, hydropower – when done well – offers a clean, affordable and reliable source of electricity to help drive growth, poverty reduction and sustainable development,” says Victoria Kwakwa, World Bank country director for Vietnam. “Trung Son will contribute to Vietnam’s energy mix and energy security as part of the least cost solution in meeting the country’s energy needs. Furthermore, it will also contribute to the climate change agenda by avoiding an estimated 1M tonnes of CO2 emissions per year.”

Electricity consumption in Vietnam has been growing at 15% annually over the past few years and Trung Son’s 260MW project will help meet the increased demand. It is expected to generate 1019GWh/yr out of the additional 10,000GWh/yr needed, according to conservative estimates following the 2008 global economic crisis. Through the project, the World Bank will also provide technical support to project owner Electricity of Vietnam (EVN), enabling it to improve its dam safety and hydropower operations as well as adopt international standards in social and environmental practices.

“Trung Son will be developed with the highest social and environmental standards to ensure that benefits flow to the people,” says Richard Spencer, project team leader. “Development of hydropower could have an important impact on Vietnam’s future emissions path, since the construction of Trung Son means it will avoid building new coal fired plants.”

Financing is being provided through the International Bank for Reconstruction and Development’s (IBRD’s) lending window – with 27 years maturity and six years of grace period for loan repayment. IBRD loans typically serve middle income countries, while low income countries with a per capita income of less than US$1000 are eligible to receive low or no interest loans and grants from the International Development Association (IDA). However, credit-worthy low income countries can receive a ‘blend’ of financial assistance from both IBRD and IDA. Vietnam is entering the category of blend countries, and the Trung Son hydropower project is the first investment loan by the World Bank to the country under IBRD terms of financing.

Project facts

Trung Son is a US$411.57M medium-sized hydropower and development project located in the Hoa Binh, Son La and Thanh Hoa provinces in northwest Vietnam. It includes the development, construction and operation of a run-of-river power plant that will use water from the Ma River and release it into the same basin. The main features of the project include:

• 84.5m high, 513m long concrete gravity dam on the Ma river.

• 38.5km long reservoir with an area of 13.13km2.

• Powerhouse containing 4x 65MW Francis turbines each designed for a maximum water head of about 72m.

• 65km long, 220kV transmission line to the Vietnamese national grid.

• 20.4km access road connecting the road system to the project site.

• Social, environmental and community relations programmes to mitigate project impacts on the affected population of about 10,600 persons, representing 2327 households. Of these 7012 people (1516 households) are impacted by the main project’s area.

The project is composed of four components and the IBRD funding allocation is distributed as follows:

• Dam and ancillary construction: the total cost is estimated at US$262.86M, of which IBRD will provide US$233.7M.

• Transmission line: IBRD will provide the full amount of US$18.61M.

• Social and environment impact mitigation: the total cost for this component is estimated at US$35.47M. IBRD will provide US$16.53M.

• Capacity development and scale-up: this scales up the impact of the environmental sustainability and socially responsible construction of the plant by leveraging the knowledge gained to other projects in Vietnam. The total cost is estimated at US$3M and IBRD will provide the full amount.

An estimated amount of US$58.1M has been included for physical and price contingencies as well as front end fees and other unallocated expenditures.

As of March 2011 the project had been appraised and consultation with project affected populations and civil society had taken place, along with a review of all safeguards triggered by the project. Following bank approval for the loan in April, project implementation is scheduled from May 2011 onwards with full operation expected by May 2017.

Community relations

Free, prior and informed consultation is of great importance in the development of any hydropower project. It has been pursued during project preparation at Trung Son and will be continued during implementation, according to World Bank reports. In practice this has meant that written, visual and audio materials have been distributed to audiences well in advance of consultations, which have been held at hamlet or village level and led by respected members of the community.

The management board of the hydro project say that consultations so far indicate broad support for the scheme. The firsthand experience of World Bank management staff during field visits also supports this. In the most recent during October 2010, several communities expressed continuing support for the project and requested acceleration of its implementation.

EVN in is keen to ensure effective communication. It wants all information to be accessible to all stakeholders in formats appropriate for the audiences, and that communication is candid and proactive. TSHP management board has established a web site ( on which key project documents are disclosed. The Bank’s web page for the project ( links to this page and is an additional access point for stakeholders.

A community relations program will also address concerns and complaints from people and communities affected by the project, help maintain information flow, and be the point of contact for the resolution of complaints and grievances. In addition to the formal grievance process required under Vietnamese law, an independent grievance panel (IGP) has been established as well.

Furthermore, in addition to publicly available documents, the new World Bank Access to Information Policy provides for further public reporting during implementation periods in its Implementation Status Report (ISR). The first ISR for Trung Son is expected to be issued in early summer 2011.

World Bank safeguard policies triggered by Trung Son

* Environmental assessment
* Natural habitats
* Pest management
* Physical cultural resources
* Involuntary resettlement
* Indigenous peoples
* Safety of dams
* Projects on international waterways

New rules

Electricity of Vietnam (EVN) is the project owner of Trung Son but during preparation it delegated day to day responsibility to Trung Son Hydropower Project Management Board (TSHPMB).
The imminent restructuring of EVN is expected to occur within the next 12 months and under new market rules, it is expected that EVN will be required to dispose of its generation assets except for strategic and multipurpose hydro plants.
As a consequence, TSHPMB will be incorporated and become TSHPCo, a special purpose company established as a wholly-owned subsidiary of EVN. Management, staff and the assets of TSHPMB will move to TSHPCo. The creation of the special purpose company allows the disposal of the asset while also ensuring that critical covenants for the performance of the project can be retained with the new owner. TSHPCo will sign a power purchase agreement with the Electric Power Trading Company.


Table 1