AIIB approves loan for Vietnam hydropower plant refinancing

Renewables expert John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “This refinancing will no doubt give a boost to the confidence of project developers in Vietnam on the ability to finance renewable energy projects without the need for sovereign guarantee and insurance cover. This project is an operational project several post construction, and it is majority owned by a strong state-owned entity. Both these characteristics significantly reduce the risks for lenders.”

“If Vietnam is to meet its ambitions of a significant pivot towards renewable energy, it will need to be able to replicate financings similar to this one and the success of this refinancing is a positive signal on the appetite of the debt market for Vietnam risk,” he said.

The refinancing is for the Dakdrinh hydropower plant which has 125 megawatts (MW) generating capacity including two units in Quang Ngai province and Kon Tum province. The plant began construction in 2007 and commenced operations in June 2014.

According to an AIIB project summary, the refinancing is in the form of a non-sovereign senior secured loan. This involves removal of the sovereign guarantee from the government and insurance cover in support of the existing debt financing. The idea is to mobilize private capital to restructure the plant’s existing debt.

In September, AIIB was in discussions to share in a US$95m refinancing of the plant with private commercial lenders. The plan was split into a US$47.5m ‘A loan’ from AIIB and US$47.5m ‘B loan’ participation from the banks. AIIB is now seeking the participation of commercial banks in the debt package.