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Vietnam to borrow over $3bn for power projects in 2012, according to reports


Vietnam's state-run main energy company is set to borrow over $3 billion to fund up to 60 infrastructure projects over the next year, according to press reports.

Vietnam Electricity (EVN) is due to borrow over $2bn from international development agencies as well as additional $1bn in commercial debt, according to a report by the country's English language news agency, Vietnam News.

The majority of the finance will be sourced from multilateral development organisations and international commercial banks including the World Bank, the German Reconstruction Bank, the Asian Development Bank, the French Development Agency and the Japan International Cooperation Agency.

Construction law expert John Yeap of Pinsent Masons, the law firm behind Out-Law.com, said that Vietnam currently has an "ambitious" building programme. Current work includes government-backed projects by EVN as well as projects involving private sponsors. Foreign investors can use various structures including Build-Operate-Transfer (BOT) infrastructure contracts to fund projects in the country.

Last year global power company AES Corporation began construction on the Mong Duong 2 coal-fired plant in the country's Quang Ninh Province. AES owns a 51% stake in the BOT contract, which the company said in a statement was the first independent power project established in Vietnam since 2003. The project is expected to be completed by 2015, and will be transferred to the Vietnamese government after 25 years.

"Following the successful close of the Mong Duong 2 BOT project last year, the investment community has been anxiously waiting to see progress on other BOT projects as this would reinsure stakeholders of Vietnam's power programme," Yeap said.

He added that the funding by multilateral and development organisations would "no doubt be essential" to further the development of EVN's planned projects.

EVN will spend an estimated 75.5 trillion Vietnamese dong ($3.5bn) on capital projects this year, according to Vietnam News – an increase of 18.7% on 2011's spending.

The money will be used to finance the O Mon 3 and 4 gas-fuelled power plants, improve the national distribution grid and assist the electricity sector in reforming policy the report said. EVN also intends to bring turbines in four different hydropower projects with a combined capacity of 1,370 megawatts (MW) online, as well as begin construction on four further thermoelectric projects with a 2,390MW capacity.

EVN raised electricity rates by 5% at the end of last year after reporting operational losses in 2011, Vietnam News said.

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