At a ceremony in Quang Ninh province northeast of the capital Hanoi, government and company officials in hard hats broke ground for the coal-fired Mong Duong 2 plant worth almost $2 billion.

US-based power producer AES Corp, a Fortune 500 company, has a 51 percent stake in the project, which is being developed under a build-operate-transfer framework, meaning it will move into government ownership after 25 years.

"Mong Duong 2 will be Vietnam's first coal-fired BOT project and the largest private-sector power project in the nation to date," the project operator, AES-VCM Mong Duong Power, said earlier.

Other investors in the project are subsidiaries of South Korea's Posco Power Corp, which has a 30 percent stake, and sovereign wealth fund China Investment Corp, which has 19 percent.

The two-unit facility, near the tourist destination of Halong Bay, is expected to begin commercial operation in the second half of 2015 with total capacity of more than 1,100 megawatts.

Foreign investors complain about power blackouts and say construction of new electricity plants has not kept pace with a 12 percent annual rise in demand.

But administrative burdens, a relatively undeveloped legal system, and insufficient government backing against risks deter investment in infrastructure projects, a World Bank-backed forum said in a report earlier this year.

The country draws more than one-third of its electricity from hydropower but is trying to diversify its supply through coal-fired plants and other sources, including planned nuclear stations.

Agence France Presse - September 16, 2011