HANOI - Vietnam has broken ground on a 1.2 billion dollar coal-fired power plant, state media reported Monday, as the fast-growing economy seeks to stem power shortages.

The Nghi Son 1 project, to be fully operational by 2014, will have a capacity of 600 megawatts, the Vietnam News reported.

Japanese aid is providing 85 percent of the 22.26 trillion dong (1.2 billion dollar) cost of the development in Thanh Hoa province more than 150 kilometres (90 miles) south of Hanoi, the report said.

Prime Minister Nguyen Tan Dung, who attended Saturday`s groundbreaking ceremony, said the development will help power a planned oil refinery and other factories in the area, the Vietnam News said.

Many parts of Vietnam have been hit by periodic power outages prompting the energy-short nation to diversify its energy sources.

More than one-third of its power currently comes from hydroelectricity and the government aims to open its first nuclear energy facility in 2020, with seven more to follow.

Late last month hundreds of farmers in the drought-stricken north of the country staged protests against prolonged power disruptions, news reports said.

Vietnam had a shortage of two billion kilowatt-hours in the first five months of the year, according to a state electricity body.

Foreign businesses have expressed concern about a lack of energy and other infrastructure.

"Consumption of electricity keeps on growing by 15 percent annually, thereby substantially surpassing the economic growth rates," the European Chamber of Commerce in Vietnam has said.

BDST: 13:36 HRS, July 5, 2010