The International Finance Corporation (IFC
) and Singapore-based Armstrong S.E. Clean Energy Fund (Armstrong) will make an equity investment in Gia Lai Electricity JSC (GEC), marking their first investment in Vietnam’s power sector.
IFC, the private investment arm of the World Bank
Group, will take a 16% stake in GEC while Armstrong, a dedicated renewable energy private equity fund, will own a 20% stake following the investment, IFC said in a statement, without unveiling the value of the deal.
As shareholders, they will help the company expand its hydropower portfolio and invest in other renewable energy segments such as wind and solar power, providing sustainable alternatives to fossil fuel-based power generation in Vietnam.
“Their investment is a vote of confidence in Vietnam’s hydropower sector potential and should help attract more international investors,” said Le An Khang, CEO of GEC.
“We believe IFC’s investment is an important step to encourage other investors to tap into the rich potential of Vietnam’s green energy sector, where participation by foreign investors is still modest,” said Hyun-Chan Cho, IFC head for Infrastructure and Natural Resources for Asia Pacific.
GEC is one of the largest private sector hydropower players in Vietnam with 84.4 MW of installed capacity across 15 run-of-the-river small-scale hydro power plants.
The firm earned an audited consolidated net profit of 92.67 billion dong ($4.12 million) in 2015 on revenue of $15.75 million, up 22% and 4.6% year-on-year, respectively. Its registered capital was $33 million as of the end of 2015.
Vietnam’s electricity consumption has outpaced two-fold the country’s economic growth rate over the past few years. With an average economic growth rate of around 6% over the past five years, Vietnam sees its power demand increase 10% annually.
The Vietnamese government has aimed to increase the country’s installed power capacity by 14% per annum between 2015 and 2030, diversify its energy mix and reduce its reliance on imported fossil fuels.