Pinsent Masons advises on funding of Vietnam’s first large-scale LNG-fueled power plants

Pinsent Masons was the international legal adviser to PetroVietnam Power, supporting the work of Vietnam-based law firm YKVN Law. 

Nhon Trach 3 and Nhon Trach 4 will add a combined capacity of 1.5GW to the existing Nhon Trach combined-cycle power plant, owned and operated by PetroVietnam Power, and play a major role in the country’s goal of zero carbon emissions by 2050. 

The plants will be the first large-scale LNG projects in Vietnam to be financed without a government guarantee, establishing a crucial precedent for future projects. Instead, the project is using a hybrid corporate finance model, combining local and international loans. This model means that although the structure is similar to corporate finance, lenders still impose strict requirements such as those appliable to project finance such as strict ESG requirements. 

The engineering, procurement and construction (EPC) contract for the project was awarded to a consortium of Samsung C&T and Lilama and the two new units are expected to be operational by 2025. 

Citi and ING Germany, alongside Export Credit Agency’s Korea Trade Insurance Corporation, K-SURE, and Swiss Export Risk Insurance, SERV, financed the project via a US$521.5 million, 12-year supported financing loan for Petrovietnam Power Corporation for the project. 

The capital required for the development of the two power plants has been sourced through 25% equity and 75% debt. The loan component of the project financing includes a tied export credit of US$521.5 million, an untied export credit of US$200 million, US$300 million in foreign short-term loans and approximately US$170 million in domestic loans. 

The Pinsent Masons team on the matter was led by Singapore-based finance partner James Harris, with partner Kanyi Lui, senior associate Winnie Nie, associates Yonghui Qiu and Qiyu Lu, and legal executive Darrell Pang. 

Commenting on the matter, James Harris said: ‘We are very pleased to have supported PetroVietnam Power and YKVN Law on the international law aspects of this momentous project.’* 

‘The Nhon Trach 3 and 4 LNG-to-power project is the most advanced LNG-to-power projects in Vietnam so far and is a landmark deal that sets the precedent for future LNG-to-power projects. The success of financing this project would be significant given these large-scale projects would be the first of its kind to be financed without a Government guarantee.’