German investment firm DEG revs up Vietnam business

DEG, the German government’s investment arm, has been ramping up its financing work in Vietnam.

The firm, part of the German state-run development bank KfW, has made a commitment equal to $27.53 million to private Vietnamese company Gia Lai Electricity JSC (GEC).

DEG said in a recent release the investment would be used to partially fund the Vietnamese electricity company’s equity capital needed for new power projects in the energy-thirsty country.

This follows the State Securities Commission of Vietnam’s approval in late December of GEC's offering of 64.2 million convertible shares to DEG for six years.

“This transaction supports GEC and Vietnam’s power industry to reach their goals in carbon dioxide reduction and enhances the transition from fossil fuel towards renewable energy in line with the renewable energy development strategy,” DEG noted.

GEC plans to expand its power generation portfolio to 1.7 gigawatts by 2025, mainly comprising solar and wind power, to meet Vietnam’s rising electricity demand and decarbonization goals. The country is seeking to reach its carbon neutrality target by 2050.

GEC, a power unit of Ho Chi Minh City-based TTC Group and listed on the Ho Chi Minh Stock Exchange as GEC, owns and operates hydro, solar, and wind power projects with a capacity of around 600 megawatts, including projects under construction.

GEC is the first power generation company in Vietnam in which the German firm has invested based on its environmental, social and governance (ESG) orientations.

In August, Japan’s largest power company JERA said it had acquired a 35.1% stake in GEC from the World Bank’s investment arm IFC and Armstrong S.E. Asia Clean Energy Fund Pte., but did not disclose the acquisition price. JERA is a 50-50 joint venture between Tokyo Electric Power Co. (Tepco) and Chubu Electric Power, and the acquisition made it the largest foreign stakeholder in GEC.

DEG has also financed Vietnamese firms in other areas like banking and property. ADB on January 11 signed a $25 million loan for Vietnam’s Tien Phong Bank to expand access to finance of women-owned and -led small and medium-sized enterprises (WSMEs) in the country. The funding was co-financed by DEG with another $25 million.

DEG in late 2019 financed $20 million for Vietnamese leading property developer Novaland to build Azerai Can Tho Resort in the Mekong Delta’s Can Tho city. DEG experts provided business support services to Novaland, consulted on environmental issues, and exploited available resources in parallel with ecological development.