Sumitomo has decided to transfer 50% of the Japanese giant's equity interest in its wholly-owned operator of the $2.58 billion Van Phong 1 coal-fired power plant in Vietnam’s central province of Khanh Hoa.

Following the transfer, Van Phong Power Company Limited (VPCL), established by Sumitomo in 2018, will be reclassified from a consolidated subsidiary to an equity-method affiliate, Sumitomo said in a statement on May 1.

The transfer execution is planned in the fiscal year of 2026 or later, subject to satisfaction of certain customary closing conditions.

Speaking of its decision, the Japanese company said it will continue to provide stable energy supply while shifting its resources toward power generation portfolio with lower environment impact.

VPCL broke ground on the Van Phong 1 coal-fired power plant in 2019 and achieved commercial operations in 2024. The project was developed on a build-operate-transfer (BOT) basis and is scheduled to be transferred to the Vietnamese government after 25 years of operation.

It is set to contribute 8.5 billion kWh yearly to Vietnam’s national grid, equivalent to 3% of the country’s power generation.

The generated energy will mainly serve the southern region and part of the northern region once the 500 kV Van Phong-Binh Dinh transmission line is completed in 2027.

In the fiscal year of 2024, VPCL posted pre-tax profit of $111.5 million, up from $70.68 million from previous year.

In addition to the Van Phong 1 project, Sumitomo has also invested in the Phu My 2.2 thermal power plant in the southern province of Ba Ria-Vung Tau. With a total investment of $400 million, the project was backed by three global energy giants, France’s EDF and Japan’s Sumitomo, and JERA.