Out-Law News 1 min. read

JBIC lends $636m to Vietnam coal power project

The Japan Bank for International Cooperation has agreed to lend $636 million to Vung Ang 2 Thermal Power Limited Liability Company (VAPCO) for financing the construction of a coal fired power plant in Vietnam.

The loan will be co-financed with the Export-Import Bank of Korea (KEXIM) and private lenders, with the total co-financing amount estimated $1.8 billion. JBIC will provide the money through JBIC’s Growth Investment Facility, which aims to provide support for Japanese firms in oversea merger and acquisitions and infrastructure investment.

VAPCO will build, own and operate a coal-fired power plant with 1,200 megawatts (MW) capacity installed in the Vung Ang district, Ha Tih province in Vietnam. Electricity generated by the plant will be sold to Vietnam's state-owned company Vietnam Electricity (EVN) for 25 years, a statement said.

Infrastructure expert John Yeap of Pinsent Masons, the firm behind Out-Law, said: “As Vietnam prioritises gas fired power plants and renewables, legacy coal fired power projects have had a challenging time achieving financial close. This announcement by JBIC is therefore a significant milestone achievement for the Vung Ang 2 project.” 

“Whilst the policy priority on gas and renewables is very much in keeping with energy policies internationally, these legacy coal-fired deals will nevertheless help Vietnam achieve energy and fuel diversification,” he said.    

Japan became the second largest foreign investor in Vietnam in 2019 with 4,385 project worth over $59.33bn in registered capital. In October 2020, the two countries signed 12 cooperation agreements for improving Vietnam’s infrastructure during Japanese prime minister Yoshihide Suga’s visit to Vietnam. In December, Japanese ambassador to Vietnam Yamada Takio said more Japanese investment capital would flow to Vietnam once the Regional Comprehensive Economic Partnership (RCEP) comes into effect.

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