Powering up Vietnam’s energy transition
Societe Generale is working with the Asian Development Bank (ADB) to finance a wind power project in Vietnam that helps accelerate the energy transition in Southeast Asia.
Although many Asian companies have expressed a desire to meet a net-zero emissions target, rapid economic growth in Vietnam and across Southeast Asia has caused regional demand for electricity to grow by more than 80% since 2000, according to the International Energy Agency (IEA). In order to deliver on a competing goal for universal access to electricity, and despite good initial progress on development of alternatives, the region has responded by doubling its use of fossil fuels.
In a bid to tackle climate change and reduce its member states’ reliance on fossil fuels, the Association of South East Asian Nations (ASEAN) has set a target of 23% share for renewable energy in total primary energy supply in the region by 2025 – and achieving that goal requires bringing online some 35GW-40GW of additional renewable energy capacity by then.1 As such the race is on for ASEAN’s business community to figure out how to meet the growing demand for energy while delivering carbon neutrality at the same time.
Mobilising finance for the energy transition
Building any renewable infrastructure to generate this much extra electricity over the next four years means mobilising billions of dollars of capital – yet recent projects in Vietnam show that it can be achieved.
Societe Generale is working, alongside the ADB, to finance the construction of three wind farms in Quang Tri province – Lien Lap, Phong Huy and Phong Nguyen that are owned by Vietnam’s Power Construction Joint Stock Company No.1 (PCC1) and Japan’s RENOVA, Inc. (Renova).
These windfarms will have the capacity to generate 144 Megawatts (MW) of electricity, representing approximately 25% of the country’s installed wind power capacity as of December 2020, and will be able to respond to about a fifth of ASEAN’s electricity consumption.
The USD 173 million green project financing is certified by the Climate Bonds Initiative and includes an approximate USD 81 million syndicated ‘B’ loan in which Societe Generale participated.
Public and private sectors working together
Despite the disruption caused by the COVID-19 pandemic, Societe Generale worked closely with the ADB and other participating banks to close a transaction that will help Vietnam deliver a more sustainable energy mix in future.
“Capitalising on a long-standing relationship with the ADB, the PCC1 / Renova project financing is a ground-breaking example of how the public and private sectors can work together to accelerate the energy transition in Southeast Asia,” said Daniel Mallo, Head of Natural Resources and Infrastructure for Asia Pacific at Societe Generale.
“We were pleased that Societe Generale chose to be part of this milestone project, which demonstrates how private financing can be effectively mobilized to develop wind power projects in Asia and the Pacific,” said Jackie B. Surtani, ADB Private Sector Operations Department Infrastructure Finance Division Director for East Asia, Southeast Asia, and the Pacific.
“This transaction is our first wind power project. This is also the first time we directly engaged with a group of international finance institutions and commercial banks being syndicated by ADB, and Societe Generale is one of them” said Trinh Van Tuan, PCC1 General Director.
“We are delighted to partner with PCC1 on our first overseas renewable project and to work with ADB and other lenders, including Societe Generale, to support the renewable power sector in Vietnam,” said Yosuke Kiminami, RENOVA Founding CEO.
Asia’s race towards net zero
For Societe Generale, this project financing reflects a broader strategic commitment to supporting Asian clients as they navigate the energy transition necessary to meet the global goal of net zero emissions by mid-century, which is essential to meeting the target of the Paris Agreement.
The bank is a founding member of the UNEP-FI Net-Zero Banking Alliance and has undertaken to proactively manage its financing portfolios in alignment with trajectories that aim to achieve carbon neutrality by 2050, which is consistent with limiting global warming to the ambitious target of 1.5 degrees Celsius by 2100.
While accelerating the energy transition is critically important, Societe Generale recognises that the regulatory environment supporting decarbonisation is still in its early stages in markets like Vietnam. The Bank is committed to helping clients in Vietnam and across Southeast Asia as these markets progress towards net zero.