China Development Bank contributes $673 million to $844 million syndicated buyer's credit loan for 1200MW Vung Ang 1 Coal-Fired Power Plant Construction Project

Project narrative

On April 22, 2011, a bank syndicate, including China Development Bank (CDB), and Vietnam National Oil and Gas Group (PetroVietnam), a state-owned company, signed an $844 million buyer's credit loan (BCL) agreement for the 1200MW Vung Ang 1 Coal-Fired Power Plant Construction Project. CDB contributed $673 million to the syndicated loan facility. The estimated borrowing terms of the loan were as follows: 13- to 15-year maturity and 3-year grace period. The interest rate is unknown. By the end of 2013, CDB had disbursed $571 million. Besides CDB, the other loan syndicate members included: Hong Kong and Shanghai Banking Corporation Limited (HSBC), Bank of Tokyo-Misubishi UFJ (part of MUFG Bank, a Japanese group), Credit Suisse AG (Credit Swiss), and Intesa Sanpaolo S.p.A Singapore Branch (an Italian group). Furthermore, Japan Bank for International Cooperation (JBIC) and Sumitomo Mitsui Banking Corporation separately issued a $95 million loan for this project. The Vietnam Ministry of Finance issued a sovereign guarantee in support of the syndicated loan involving CDB. Euler Hermes Kreditversicherungs-AG (Hermes) and Sinosure provided buyer’s credit insurance. The borrower was to use the proceeds of the loan to partially finance a $1.17 billion EPC contract signed on April 9, 2009 with Vietnam Machine Installation Corporation (or Tổng Công Ty Lắp Máy Việt Nam or Lilama). The 1200MW Vung Ang 1 Coal-Fired Power Plant Construction Project was implemented as an Independent Power Project (IPP) and financed according to a debt-to-equity ratio of 70:30. The purpose of the project was to construct a 1200MW coal-fired power plant — with two, 600MW power generation units (Unit 1 and Unit 1) — in Kỳ Lợi Commune, Kỳ Anh District, and Hà Tĩnh Province (exact locational coordinates: 18.09792, 106.38123). Lilama — a Vietnamese state-owned enterprise — was the general EPC contractor responsible for implementation. Construction began in August 2009. Unit 1 was completed in December 2014 and Unit 2 was completed in May 2015. The power plant was officially put into operation on September 17, 2015. Unit 1 subsequently had problems with its turbine. A new rotor was installed in 2016. Then, in February 2017, local residents blocked the road leading to Vũng Áng-1, saying that coal trucks moving along the road were causing pollution. The local government said it would write to Vinacomin and call for the suspension of coal trucks.