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Credit guarantee backs hydropower plant

Released at: 14:31, 18/01/2016

Credit guarantee backs hydropower plant

Guarantee provided from Multilateral Investment Guarantee Agency for Hoi Xuan Hydro Power Project in ...

by Doanh Doanh

The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance and credit enhancement arm of the World Bank Group, announced its support for the Hoi Xuan Hydro Power Project in Quan Hoa district, northern Thanh Hoa province.

“Vietnam is diversifying its energy mix to increase energy supply and security, just as it is diversifying its financing sources to create a more secure base for infrastructure development in the future,” said MIGA’s Executive Vice President and CEO Keiko Honda. “MIGA is glad to play a role.”

MIGA issued a $239.7 million guarantee to a consortium of lenders led by Goldman Sachs and Bank of Tokyo Mitsubishi (BTMU). The guarantee supports the financing of the design, construction, operation, and maintenance of the 102 MW hydropower plant, located approximately 15 kilometers northwest of Hoi Xuan commune.

“We are delighted to continue our cooperation with MIGA and the Government of Vietnam in helping to meet the country’s growing energy needs,” said Mr. Tim Leissner, Vice Chairman of Investment Banking in Asia Ex-Japan at Goldman Sachs. “Clean, renewable and sustainable projects of this nature are vital as the country continues its rapid GDP growth trajectory.”

The power plant will use an indigenous, renewable, low-cost resource and mitigate Vietnam’s reliance on imported thermal alternatives.

The plant will produce and sell electricity to Electricity of Vietnam under a power purchase agreement. MIGA’s guarantee covers the risk of sovereign financial obligations not being honored in respect of the government’s repayment guarantee to lenders and carries a 15-year tenor.

Demand for electricity in Vietnam is expected to double very quickly to 2020 due in large part to the country’s sustained economic growth, which has transformed it from one of the poorest in the world to lower middle-income status within a quarter of a century.

Support for local independent power producers like Hoi Xuan is critical in meeting Vietnam’s electrification goals. More than 70 per cent of investment in the country’s new generation capacity is expected to come from the private sector.

MIGA’s support to the power plant is expected to have broad demonstrative effects in Vietnam’s hydropower sector, both with respect to future private sector investments and international environmental and social best practice for such projects.

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