In a significant move, Malaysian mechanical engineering firm Kejuruteraan Asastera Bhd (KAB) has secured a controlling stake in three operational Vietnamese hydropower stations. This strategic partnership was announced on June 28, with Singapore-based Janakuasa Pte., Ltd. acting as the facilitator.
The three hydropower stations, totalling 180 megawatts of installed capacity, are already generating electricity and have valid power purchase agreements with the Vietnam Power Company, extending from 2030 to 2039. These agreements ensure a decade and a half of revenue stability. Operations at these stations began between 2015 and 2019, making this deal a strategic investment in existing cash-flowing assets rather than a venture for new dam construction.
KAB’s subsidiary, KAB Energy Power Sdn. Bhd., will execute the acquisition process, with a special purpose company to be established for formal ownership.
Datuk Lai Keng Onn, the managing director of KAB, expressed excitement about the partnership, stating, “We are delighted to forge a synergistic partnership with Janakuasa, leveraging their expertise.”
KAB aims to expand its green energy solutions business and increase its influence across Asia. Janakuasa’s President, Ti Chee Liang, sees Vietnam as a promising rising star in ASEAN, citing its robust economic and population growth as drivers of exponential energy demand. This demand is a key focus, as Vietnam’s industrial boom has put strain on its power grid, leading to power outages in certain areas.
The government of Vietnam has set ambitious renewable energy targets, aiming to shift away from coal and gas. However, the country still requires reliable baseload power, which hydropower can provide due to its dispatchability, unlike solar or wind energy that can stop during night or calm weather.
The three stations KAB is investing in have already demonstrated their efficiency and reliability. KAB is not solely an energy company; it is a mechanical engineering firm. This transaction marks a strategic shift, with the company betting on its technical expertise in engineering translating to energy project management.
Janakuasa offers local knowledge and connections, providing an advantageous partnership structure. The timing of this deal is crucial, as Southeast Asia’s energy transition is accelerating.
Foreign investors are showing interest in Vietnam’s power market, but the regulatory environment can be complex, with issues like land rights, permits, and grid connection approvals potentially delaying projects. By purchasing existing assets, KAB can avoid these complications. Both KAB Energy Power and Janakuasa have expressed intentions to expand their renewable portfolios in Vietnam. They aim to assist the Vietnamese government in achieving its renewable energy goals as swiftly as possible.
The next phase is growth, with 180 megawatts a modest start compared to Vietnam’s total installed power capacity of over 80 gigawatts. However, the partnership serves as a template for future ventures, and if successful, more deals can be expected.
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