June 12, 2020

Joint Statement“Negative profitability” found for planned Vung Ang 2 coal-fired
power plant in Vietnam by Korean government think tank:
Japanese corporations and banks may risk lawsuits if they moveahead with project despite projected losses

Japan Center for a Sustainable Environment and Society (JACSES)
Friends of the Earth Japan
Mekong Watch
Kiko Network
350.org JapanA pre-feasibility study for the Vung Ang 2 coal-fired power plant project in Vietnam, which
Japanese governmental agencies and private companies have been working jointly to promote,found that the project would lose 158 million dollars (approx. 17 billion yen).1 With a profitability
index of 0.96, the project was below a crucial threshold to go ahead with investment (must beabove 1 to be profitable). In response to this news, we environmental NGOs once again callupon the Japanese parties to terminate their involvement in the project.
Current investors in Vung Ang 2 include Mitsubishi Corporation (40%), Chugoku Electric PowerCo. (20%), and CLP from Hong Kong (40%), but at the end of last year CLP stated that it would
withdraw from the project due its newly adopted decarbonization policy. Korea Electric Power
Corp. (KEPCO) is considering acquiring CLP’s stake, as proposed by Mitsubishi Corporation.
In Korea, any investment project above 50 billion won by a public institution is required toundergo a pre-feasibility study to determine whether or not the project should go ahead. For theVung Ang 2 project, in which KEPCO (a public body) is considering participating, the study wasalso conducted by the Korea Development Institute (KDI), a governmental think tank.
The review found that for the period of KEPCO’s expected involvement (2020 to 2048) 2 the netpresent value of revenues and expenditures would result in a loss of 79 million dollars (95.8billion won) for KEPCO, or about 8.6 billion Japanese yen. 3 KDI produced these results in
1 The Korea Times, June 11, 2020.

KEPCO Vietnam investment 'feasible' despite expected losses
http://www.koreatimes.co.kr/www/tech/2020/06/515_291062.html
2 See footnote 1.
3 asiatoday, June 11, 2020.
“Rep. Kim Sung-whan: KEPCO should withdraw from unprofitable overseas coal-fired power plant project” (in Korean).
http://www.asiatoday.co.kr/view.php?key=20200611010007282

March, but a portion of the data was released publicly by a Korean member of the National
Assembly on June 11th.
KDI reportedly stated that “KEPCO has not provided detailed breakdowns of project costs andhas not yet conducted due diligence on the entire project,” 4 which indicates that additional costs
could be incurred.
Meanwhile, the costs of renewable energy are dropping steadily, while coal-fired power plants
are expected to become less profitable. If anything, the negative profitability of this project islikely to grow in the future, not shrink.
Mitsubishi Corporation and Chugoku Electric Power Co. are expected to invest in this project,and financing is anticipated from the MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking
Corporation, and Sumitomo Mitsui Trust Bank, but if this project goes ahead despite analysis
showing negative profitability, corporate management could be facing shareholder class action
lawsuits in the future.
As financial institutions of the Japanese government, the Japan Bank for International
Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI) are currently
considering providing financing and insurance, but projects that are expected to lose money
should not be receiving public support. Vietnam is a country with enormous renewable energy
potential, including solar, onshore and offshore wind power, and many renewable energy
projects are being implemented or planned in the area around the planned project site.
Japanese public and private sector players alike should withdraw from Vung Ang 2 and support
decarbonization in Vietnam.

Contact:
FoE Japan
1-21-9 Komone, Itabashi-ku, Tokyo 173-0037, Japan
TEL: +81-3-6909-5983
Email:info@foejapan.org
Mekong Watch
1-12-11 Taito, Taito-ku, Tokyo 110-0016, Japan
TEL: +81-(3)-3832-5034
E-mail: info@mekongwatch.org

4 Kyunghyang Shinmun, June 11, 2020.

KDI: “KEPCO coal-fired power plant project in Vietnam expected to have negative earnings” (in Korean)
biz.khan.co.kr/khan_art_view.html?artid=202006112054015&code=920100