New Delhi: India’s Tata Power Co. Ltd has won an estimated $1.8 billion (around 10,240 crore) contract to develop two 660 megawatts (MW) coal-fired thermal power plants in south Vietnam against competition from South Korean and Russian companies, in a move that bodes well for the company’s own ambitions for South-East Asia and India’s so-called Look East policy.

The Long Phu 2 project is being billed as the largest Indian investment in Vietnam, an important constituent of the Association of Southeast Asian Nations (Asean) grouping with which India has been seeking to build closer ties.

The Tata group, the global journey of which began, in some ways, with the announcement of the acquisition of Singapore’s NatSteel in 2004, has significant business interests in Indonesia and is also looking to establish a presence in Myanmar.

“Tata Power has been awarded Long Phu 2 project by government of Vietnam based on the pre-feasibility studies. The capacity is 1,200MW as per the master plan. Tata Power is pursuing further steps including formalizing a memorandum of understanding," a statement emailed by company said.

The construction of the plants is expected to start in 2019.

The company will now need to complete financial closure and draw up a power purchase agreement, according to a person familiar with the development.

In a 21 May letter addressed to Ranjit Rae, the Indian ambassador to Vietnam, that was reviewed by Mint, Tata Power executive director S. Ramakrishnan thanked the Indian envoy for “the support to Tata Power which has enabled the award of this project to come in our favour in such a short period".

“This is a milestone in a way for India," said Charan Wadhva, an economist with the Centre for Policy Research in New Delhi.

“The Tata group is India’s No. 1 multinational company; they have the capacity and reputation to do such projects. This will help anchor India’s Look East policy," he said, referring to India’s attempts, begun in the early 1990s, to develop strong economic linkages with high-growth South-East Asian economies. “Vietnam is one of the dynamic countries in the region and is considered as one of the major growth areas of the world," he added.

A news report on the Vietnam Investment Review website said Tata Power made the pitch to invest in the project in January, although it started showing its interest in this project in early 2012. Long Phu 2 will be one of three plants at the Long Phu thermo-electricity centre planned by the Vietnamese government through 2025, the report said, adding that the first plant—Long Phu 1—being built by state-run PetroVietnam, is scheduled to start commercial operations in 2015.

“Tata Power’s preparations indicate that the Tata group still eyes Vietnam as a destination for investment, despite the deadlock of a $5 billion integrated steel project in the central Ha Tinh province," the report said, referring to unsuccessful attempts by Tata Steel Ltd to get clearances for the plant. In 2007, Tata Steel first proposed the steel project to the Vietnamese government, but the plan has been stuck since then as the investor and the local government have failed to reach an agreement related to the site clearance cost.

According to the website of India’s external affairs ministry, “Vietnam continues to be an attractive investment destination for Indian companies. As of December 2011, India has 62 investment projects with total registered capital of $234 million. If investments by Indian companies from third countries are included as well, India has 86 projects with total investment capital of $868 million."

“Indian companies are investing in oil and gas exploration, mineral exploration and processing, sugar manufacturing, agro-chemicals, IT (information technology), and agricultural processing," the website said. Oil and Natural Gas Corp. Ltd’s (ONGC) overseas investment arm ONGC Videsh Ltd, Venkateshwara Hatcheries, Philips Carbon Black Ltd and McLeod Russell (India) Ltd are some of the major Indian investors in Vietnam, it said.

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