Model infrastructure: on the ground in Lao Cai Province

Ids Groenhout has over 50 years of experience working in infrastructure, so it is intriguing that he singles out InfraCo Asia’s Coc San Hydro Power Project in Lao Cai Province, Vietnam, as a highlight of his professional life. Located in Vietnam’s far north, on the border with China’s Yunnan Province, InfraCo Asia’s Coc San Hydro Power Project will add 29.7 MW of new, clean, renewable energy capacity to the region’s stressed power grid. 

Ids (pictured in top image, fourth from right) is now the General Director of the Project owner and operator, Lao Cai Renewable Energy, and he was responsible for first identifying the hydro project as a perfect candidate for InfraCo Asia’s unique development model.

“The project began and wasn’t going as well as it could,” Ids—who was initially working with developer service provider, Nexif Management—explains.

Before InfraCo Asia stepped in, project implementation of Coc San had stopped in 2011 at an early stage. Initial capital was expended, the project company was unsuccessful in securing long-term debt financing, and insufficient due diligence and safeguard issues combined with difficult macro-economic conditions, all took their toll on the project’s viability.

Bridging the gap

/our stories/Coc_San_Dam3“I’ve seen countless worthwhile projects fail to get past the feasibility stage,” Ids says.

“InfraCo Asia’s mandate is to take the risk out of a project so that the private sector will invest. The company has taken a project that wasn’t likely to go anywhere, to a point where it is very close to becoming operational.”

While it is not the most complex development Ids has encountered since he first started working throughout Asia in 1981, he says Coc San is special.

“We’ve demonstrated a model of best practice for this project,” he says.

“That’s been recognised by the lender, the Saigon Hanoi Bank—a big player in the hydro sector. They recognise the documentation and the processes that we have put in place are all world class.”

The bridging work of InfraCo Asia to make Coc San attractive to private investment resulted in construction resuming at the end of 2013.

“To revive the project, we implemented recommendations to improve safety and ensured that the consultants, owners team and contractors were all working in the same direction,” Ids says.

With unified goals, and stronger systems in place, the Coc San project progressed quickly.

“There’s a lot of satisfaction in resolving problems. You start with plans and drawings and designs, and then to see it built progressively is really quite exciting,” Ids says. 

“You can see how it’s going to look, and it really is a thing of beauty.”

Indeed, ‘beauty’ has been an integral part of the hydro project, necessitating a world-class environmental approach.

“The project is probably in the most beautiful location I’ve ever worked in,” Ids reflects.

“It’s set in a lovely valley, with all this hill-terracing of rice paddies. Just near the project is the longest continuous series of terraces in the world.”

Environmental studies carried out to World Bank standards have ensured the impact of the Coc San project has been minimal, with relatively little land lost to surrounding communities and no displacement of people.

More than a construction site

/our stories/Coc_San_hillsideBest practice has also been applied to working with those living in proximity to the Coc San project.

“Our shareholders agreed to implement two programs to support the local communities,” Ids explains.

“The first is a community development program that runs for two years, and involves a host of small scale activities to help those communities.”

This ongoing program has so far achieved the rehabilitation of three schools and the construction of an access road, enabling easier movement of farm produce. Preparations are underway for small-scale irrigation projects to assist crop diversification. The second initiative is the livelihoods restoration program, designed to assist people whose land was impacted by the project to reinstate income-producing activities. 

“We’re providing training in construction, and we’ve implemented a program to assist with the production of higher yield crops,” Ids says. 

“We’re facilitating support from local agricultural departments, and providing seeds, fertilizer and insecticides. That’s already creating a difference in yield to a factor of five to ten times greater than previously grown.”

The livelihood restoration program also provides scholarships to children of poorer families to attend school and buy items like books and uniforms.

When asked whether this level of engagement with a project’s host community is normal, Ids reflects that it isn’t, but it should be.

“I think what we’re doing is more than most other developers in the region,” he says.

“It does give you an enormous feeling of satisfaction to see that happen. It’s an extra work-load for our staff, but they have all willingly done it. They all feel that social obligation.”

Private investment crucial to Asian development

Ids reflects that the co-development and multi-developer model employed by InfraCo Asia, and the role it plays in mobilising private sector participation, will play an increasingly key role in Asia.

“It was only when I started getting involved in the investing and financing of projects about 15 years ago, working with an engineering consulting firm, that I fully realised the enormous need for infrastructure in these regions, and the associated barriers,” Ids says.

“Governments don’t have enough capital, multi-lateral agencies like the World Bank don’t have enough. The only way it will get done is if the private sector gets involved.”

He points out that the element of risk extracted from projects by the likes of InfraCo Asia, ultimately creates a straightforward prospect for investors.

“Infrastructure projects produce reliable and regular revenue streams. Infrastructure is needed always, and will pay for it’s way, always.”

The Coc San project is on-track to become operational in March 2016, and is expected to provide more than 100 GWh of renewable energy per annum and reduce carbon emissions by about 76,000 tonnes per annum. Ids and his team have enjoyed marking little milestones along the way.

“We celebrated when the tunnel was finished and when the first concrete was poured on the dam. It has been an absolute pleasure to work with the Lao Cai Renewable Energy team, they’ve been hard working and dedicated,” he says.

“I’ve enjoyed this project more than any other I’ve worked on. It’s certainly special.”

Read the full Coc San Hydro Project case study here and view the fact sheet here.