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Project Finance and Political Risk Guarantee for Nghi Son 2 Coal-Fired Power Generation Project in the Republic of Vietnam
Supporting Japanese Company's Participation in IPP Project in Vietnam

  • Region: Asia
  • Infrastructures
  • Overseas Investment Loans
  • Project Finance
April 13, 2018
  1. The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed today a loan agreement for project finance*1 amounting up to approximately USD 560 million (JBIC portion) with Nghi Son 2 Power Limited Liability Company (NS2PC), a Vietnamese company invested in by Marubeni Corporation and other. The loan will finance the Nghi Son 2 coal-fired power generation project in Vietnam. The loan is co-financed with the Export-Import Bank of Korea (KEXIM), Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., Shinsei Bank, Ltd., Oversea-Chinese Banking Corporation, Ltd., DBS Bank, Ltd., and Malayan Banking Berhad, with a total co-financing amount of approximately USD 1,869 million. JBIC and KEXIM provide political risk guarantee for the portion of the loan financed by private financial institutions.
      
  2. In this Project, NS2PC will build, own and operate a coal-fired power plant with an installed capacity of 1,200 MW (two units of 600 MW each) in Nghi Son district, Thanh Hóa Province. The electricity generated from this plant will be sold to Vietnam Electricity (EVN), a state-owned power utility in Vietnam, for 25 years.
      
  3. The purpose of the loan is to support an overseas infrastructure project  that Japanese company participate as an investor, as well as operate and maintain a power plant over a long period of time, using advanced Japanese technologies. This loan thereby contributes to maintaining and strengthening the international competitiveness of Japanese industries.
      
  4. In its export strategy for infrastructure systems, revised in May 2017, the Japanese government expressed its intention to expand the export of infrastructure systems, including the design, construction, operation, and management of infrastructure, as well as increasing investments in to overseas businesses. The government also announced its overseas deployment strategy for the power sector in October 2017, emphasizing overseas power generation business implemented by Japanese companies as a priority policy area in its policy and expressing the government's intent to support Japanese companies through the effective use of financing support by JBIC. This loan is also in line with these strategies of Japanese government. This is the first IPP*2 project in Vietnam in which Japanese company participates as an investor in approximately 15 years since the Phu My 3 gas fired power generation project for which JBIC signed a loan agreement in 2003. This project was mentioned in the Japan-Vietnam joint statement*3 issued in June 2017 as part of efforts to strengthen cooperation in the energy field.
      
  5. In Vietnam, demand for electricity has been increasing sharply against the backdrop of robust economic growth. However, the construction of power plants has been lagging behind the growing demand, which has resulted in tight power supply in the country, and it is, therefore, imperative for the Vietnamese government to resolve power supply shortages. To overcome this situation, the Vietnamese government revised its Seventh Power Development Plan announced in 2016 in order to accelerate the construction of power plants and swiftly develop power sources. This project is in line with the revised Seventh Power Development Plan that incorporates the expansion of power supply capacity. This project is expected to contribute to economic development in Vietnam through a stable supply of electricity as a base load power source in the 2020s and beyond. 
      
  6. As Japan's policy-based financial institution, JBIC will continue to provide financial support to assist Japanese companies in expanding overseas infrastructure businesses by drawing on its various financial instruments for structuring projects, and by performing its risk-taking function.
Note
  1. *1 
    Project finance is a financing scheme in which repayments are made solely from cash flows generated by the project.
  2. *2 
    An IPP (Independent Power Producer) is an independent producer of electric power who builds and operates power facilities, and generates electric power available for sale.
  3. *3 
    Refers to the Joint Statement on Deepening the Japan-Vietnam Extensive Strategic Partnership issued on June 6, 2017

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