The long running saga of the Phu My 2.2 power project in Vietnam took a step closer to completion yesterday with the signing in Hong Kong of the financing documents for a $480 million project finance facility. In local terms the deal is worth some 7.2 trillion dong and can be seen as something of a triumph for the sponsors, arrangers and Vietnamese government.
The project sees the construction of a 715MW gas fired power station at the Phu My power complex, 85 kilometres south of Ho Chi Minh. The project is being developed by a consortium of French and Japanese power companies called Mekong Energy Company (Meco). Meco comprises EDF International (56.25%), Sumitomo Corporation (28.125%) and Tokyo Electric Power Company International (15.625%).
The story goes back to 1997 when the Vietnamese government requested bids for the greenfield project. The EDF consortium was chosen and began what became four years of negotiations with the Vietnamese authorities. In November 2001 the consortium appointed SG as financial adviser to the project and financial signing occurred 11 months later.
The project has a debt: equity ratio of 75% debt: 25% equity giving the project a total value of $480 million. The debt comprises: a $75 million World Bank (IDA) political risk guaranteed facility; a $25 million ADB political risk guaranteed facility; a $50 million ADB direct loan; a $150 million direct loan from JBIC; and $40 million direct loan from Proparco - a French government financing agency. The political risk guarantee (PRG) comes from Sovereign of Bermuda.
The three co-ordinating lead arrangers are SG, ANZ and Sumitomo Mitsui. The commercial bank portions of the debt have a 100% political risk guarantee and come to around $100 million. Commercial banks will participate in the World Bank and ADB PRG facilities, which have been hard underwritten. A limited syndication to perhaps two more banks may occur on these tranches. All the debt is lent offshore under a common terms agreement before being on lent to the project company in Vietnam. The various tranches of the debt have tenors ranging between 11and 16 years. Officials have not released the margins of the debt, but bankers assure FinanceAsia.com that "it is very attractively priced money for Vietnam."
The project is now under construction and commercial operations are due to start in September 2004. It will be powered by advanced 9FA+ turbine technology, produced by GE.
"Being the largest project financing in Vietnam to date, Phu My 2.2 is a challenging but landmark project financing in Asia," says Ashley Wilkins, head of project finance and advisory at SG in Hong Kong. "It is also an interesting structure involving a combination of international commercial banks and supranational and bilateral institutions." According to Wilkins, standout features of the project are that it is the first build-operate-transfer (BOT) project in Vietnam, while also being the first power contract that has ever been awarded through a competitive bidding process in Vietnam.
The power station will be supplied with gas from the Nam Con Son offshore gas project, which is led by BP. BP, has its own downstream power interests in the Phu My 3 power project, which it jointly owns with Sembcorp of Singapore and a host of Japanese developers.