Vietnam's Tan Tao Industrial Park Corp and London-listed Vietnam Infrastructure Limited fund will build a coal-fired power plant at a cost of up to US$800 million, executives of the fund said Tuesday.

The two have signed a memorandum of understanding under which the Vietnamese firm, known as Itaco, and the $402 million close-end fund, which started trading on London's Alternative Investment Market in early July, will build and operate a 600 megawatt power plant in the southern province of Long An.

Vietnam Infrastructure Chairman Don Lam said the total investment in the plant would range from $700 million to $800 million, of which the fund would contribute up to 40 percent.

Within that stake, the fund will use its own money to fund 30 percent and borrow the remaining 70 percent, Lam told a news conference prior to the signing in Hanoi.

Vietnam, with one of the world's fastest growing economies, joined the World Trade Organization in January, but foreign investors say the country needs to do much to improve infrastructure, mainly in the transport and energy sectors.

"Power is considered very urgent (issue) today in Vietnam, and we need to focus on the energy sector so the country can get back up to the speed," the fund's managing director, William Lean, said at the news conference.

Vietnam plans to double power generation capacity to about 28,000 megawatts by 2010 to meet forecast annual demand growth of about 20 percent as the economy continues to expand at a rate of 8.5 to 9 percent per year.

The communist government plans to build 60 additional power plants by 2020.

Lean said the venture between Ho Chi Minh City-based Itaco and the fund would start building the plant in 12 to 18 months depending on several negotiations, including a power purchase agreement with state utility Vietnam Electricity group.

The power plant would import coal from Australia or Southeast Asian countries for electricity generation, and 60 percent of its output would serve Itaco's projects while another 40 percent would be sold to the state utility group.

VinaCapital Investment Management Ltd manages the Vietnam Infrastructure fund, one of its four operational funds.

After its London market debut, the fund has paid $19.5 million to buy a 3.8 percent stake in Itaco, which has been operating the Tan Tao industrial park in Ho Chi Minh City, Vietnam's business centre, since 1997.

Source: Reuters