Toyo Ventures confirms termination of Song Hau 2 thermal power plant project in Vietnam

Construction News Vietnam
Song Hau 1 thermal power plant in Hau Giang province, southern Vietnam. Photo courtesy of CC1.

Toyo Ventures confirms termination of Song Hau 2 thermal power plant project in Vietnam

Toyo Ventures Holdings Bhd (KL:TOYOVEN), whose share price plunged to its lowest in over one month on Thursday, has confirmed the termination of the Song Hau 2 thermal power plant project by the Vietnamese government, according to its filing with Bursa Malaysia.

Toyo Ventures said its wholly-owned subsidiary, Song Hau 2 Power Company Limited (SH2P), had received a letter from Vietnam’s Ministry of Industry and Trade (MOIT) on July 1, 2024.

MOIT’s letter stated that the 90-day period since the issuance of the “Notice of Intention to Terminate” to the company had expired, however, “SH2P has still not remedied the financial arrangement” for the thermal power project.

This subsequently resulted in the termination of the build-operate-transfer (BOT) contract for the project by MOIT, in accordance with Article 23.4 of the BOT contract.

“At this time, the company is evaluating the implications of the notice and will be seeking legal advice to explore appropriate actions and remedies as per the terms of the BOT contract,” Tovo Ventures said.

“As the company navigates through this phase, any significant developments concerning the notice and/or the project will be promptly communicated through subsequent announcements,” it added.

Earlier this week, Toyo Ventures said it had postponed the commencement of engineering, procurement, commissioning and construction (EPCC) works for its thermal power plant project in Vietnam by up to six months.

Toyo Ventures said it had entered into a second addendum to the EPCC contract with Sunway Construction Group Bhd (KL:SUNCON) and Vietnam’s Power Engineering Consulting Joint Stock Company 2 (PECC2), which allows the extension for the issuance of the notice to proceed (NTP) on or before Dec 31, 2024, or such other date as the parties may mutually agree upon in writing.

Under the previous addendum to the EPCC contract inked in October last year, the NTP was to have been issued by June 30. The contractor, which is the consortium between Sunway and PECC2, will only commence work once the NTP has been issued.

Once the notice is issued, the project is expected to be completed in four and a half years. The initial EPCC contract, worth US$2.42 billion (RM11.41 billion), was signed in March 2023.

SunCon recently disclosed that EPCC works for the 2.12-gigawatt (GW) Song Hau 2 power plant project in Vietnam’s Hau Giang province had not yet begun. The consortium was waiting for Song Hau 2 Power Co Ltd (SH2P), a wholly-owned unit of Toyo, to issue the NTP.

This disclosure came in response to an article in the May 13-19, 2024 edition of The Edge Malaysia weekly, which reported Toyo Ventures as finding difficulty to secure sufficient financing for the project in time before the deadline.

The project’s exclusive mandated lead arranger, Export-Import Bank of Malaysia Bhd, which was appointed in November 2023, was to arrange the proposed syndicated financing facilities of up to US$2.42 billion for the project.

However, Toyo Ventures announced last month that SH2P had secured a US$980 million equipment financing facility from i-Power Solutions Pte Ltd to finance up to 70% of the invoice amount for the procurement of equipment required for the EPCC works of the project.

Toyo Ventures fell by as much as 35.2 sen or 25.51% on Thursday to RM1.03 — its lowest since May 25. At market close, it pared some losses to close at RM1.06, still lower by 32 sen or 23.19%, valuing the company at RM140.88 million.

Meanwhile, SunCon’s share price closed 0.72% lower at RM4.13 from RM4.16 at the close of the previous trading day. This values the company at RM5.3 billion.