Out-Law / Your Daily Need-To-Know
The Asian Infrastructure Investment Bank (AIIB) is in discussions to share in a US$95 million refinancing of a Vietnamese hydropower plant.
The proposal, details of which were disclosed by AIIB in September, consists of a US$47.5m ‘A loan’ from AIIB and US$47.5m ‘B loan’ participation from commercial banks.
The loan will be used to refinance the existing debt of the 125 megawatts (MW) Dakdrinh hydropower plant in central Vietnam, which is majority owned by the country’s state-owned PV Power.
A key element of the refinancing is the removal of the sovereign guarantee from the government of Vietnam and insurance cover in support of the existing debt financing.
Infrastructure expert John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “The announcement by AIIB of this proposed refinancing is noteworthy in that it reflects the change in the debt market over the past decade. With AIIB prepared to step in alongside commercial banks, taking out the government guarantee and insurance cover show the confidence in the repayment of the loan. Vietnam has for the past several years stood firm against full sovereign guarantees to cover repayment risks on the build–operate–transfer (BOT) power projects and if this loan is successfully refinanced, it may pave the way for further such refinancing. With construction risk no longer an issue, the issue then should be simply one of operational and payment risks.”
The plant has been in operational since 2014 and its total cost in 2011 was VND5,921 billion (US$280m). It was provided with a 13-year US$178m debt package by Credit Agricole CIB which was covered by Japan’s export credit agency Nippon Export & Investment Insurance (NEXI) in 2011.
The plant is part of Vietnam’s power development plan VI (PDPVI). Vietnam published its PDPVIII in April, which anticipates tripling renewable energy production between 2030 and 2045.
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