Japan bank loans complete funding for Vietnam's $1.6bn plant

HANOI: Two Japanese banks signed a $95 million credit contract on Friday with state oil and gas group Petrovietnam, the final funding package to help build a $1.6-billion coal-fired power plant in central Vietnam.

The Japan Bank for International Cooperation (JBIC) will provide $57 million, or 60 percent of the loan, and the remaining $38 million will come from Sumitomo Mitsui , Petrovietnam said in a statement.

It said the credit provided an opportunity for the group to seek more funds from Japanese banks for its thermal power projects as well as its projects in other areas.

JBIC's funding is Petrovietnam's first with the Japanese lender.

Earlier on Friday, Petrovietnam Deputy Chief Executive Nguyen Tien Dung was quoted by the Dau Tu (Investment) newspaper as saying the $95 million loan was the last in the funding package of $1.2 billion for the plant.

The first generator of the $1.6 billion 1,200-megawatt plant in Ha Tinh province is expected to start operation in July 2012. Petrovietnam is the sole investor of the plant.

Petrovietnam has been using its own funds to finance 30 percent of the project while taking the remaining 70 percent from commercial loans, the statement said.

In April, it borrowed $904 million for the project from a consortium of foreign banks that included HSBC , China Development Bank, Bank of Tokyo-Mitsubishi UFJ, Credit Suisse and Italy's top retail lender Intesa SanPaolo.

Petrovietnam said the credit arranged by HSBC consisted of $758 million worth of commercial loans and $146 million in insurance covered by China's Sinosure and Germany's Hermes.

A power master plan projected that thermal plants in Vietnam will need 67.3 million tonnes of coal a year by 2020, when the fossil fuel may account for almost half its power mix.

Copyright Reuters, 2011