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Project Finance for Van Phong 1 Coal-Fired Power Generation Project in the Republic of Vietnam
Supporting Japanese Company's Participation in IPP Project in Vietnam

  • Region: Asia
  • Infrastructures
  • Project Finance
  • Overseas Investment Loans
April 19, 2019
  1. The Japan Bank for International Cooperation (JBIC; Governor: Tadashi Maeda) signed today a loan agreement for project finance*1 amounting up to approximately USD 1,199 million (JBIC portion) with Van Phong Power Company Limited (VAN PHONG), a Vietnamese company invested in by Sumitomo Corporation, for the Van Phong 1 Coal-Fired Power Generation Project in Vietnam. The loan is co-financed with Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, Oversea-Chinese Banking Corporation Limited and DBS Bank Ltd., and the Bank of China, with a total co-financing amount of approximately USD 1,998 million. The co-financed portion will be covered by insurance from Nippon Export and Investment Insurance (NEXI).
      
  2. In this project, VAN PHONG will build, own and operate a super critical coal-fired power plant with an installed capacity of 1,320 MW (two units of 660 MW each) in Van Phong district, Khánh Hòa Province in southern Vietnam. The electricity generated from this plant will be sold to Vietnam Electricity (EVN), the country's state-owned power utility, for 25 years.
      
  3. The purpose of the loan is to support an overseas infrastructure project where a Japanese company participates as an investor, as well as operates and maintains a power plant over a long period of time. This loan thereby contributes to maintaining and strengthening the international competitiveness of Japanese industries.
      
  4. This project is seen as one of the concrete initiatives to strengthen cooperation between Japan and Vietnam in the energy fields, as addressed in the Japan-Vietnam Joint Statements issued following the summit meetings held on June 6, 2017 and May 31, 2018. In its export strategy for infrastructure systems revised in June 2018, 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 overseas businesses. 
      
  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 demand, resulting in tight power supply in the country, and it is, therefore, imperative for the Vietnamese government to resolve power supply shortages. To overcome this power supply shortages, the Vietnamese government revised its Seventh Power Development Plan announced in 2016 in order to promote the construction of power plants and swiftly develop power sources. This project is in line with the Plan that incorporates the expansion of power supply capacity and 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 for a loan are made solely from the cash flows generated by the project.

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