(EnergyAsia, September 2 2011, Friday) — AES Corporation said it has closed on a US$1.5 billion long-term non-recourse financing for the construction of its 51%-held 1,200 MW Mong Duong II coal-fired power plant in Vietnam’s Quang Ninh province.
The NYSE-listed company said 12 commercial banks and two South Korean government export credit agencies participated in the broadly syndicated financing. AES’s partners in the US$1.95 billion project are PSC Energy Global Co Ltd, a wholly-owned subsidiary of POSCO Power Corp, with a 30% stake, and Stable Investment Corporation, a wholly-owned subsidiary of China Investment Corporation, which owns the remaining 19%.
The plant is expected to begin commercial operations in the second half of 2015.
AES said the consortium has appointed Doosan Heavy Industries and Construction Co Ltd and its affiliates as the engineering, procurement, and construction (EPC) contractor responsible for designing, building, and commissioning the project.
Mong Duong II will sell electricity to state-owned Vietnam Electricity (EVN) under the terms of a 25-year power purchase agreement (PPA). The agreement is US dollar denominated and allows for a fuel cost pass through, protecting the project from fluctuations in coal prices.
AES said it has also signed a 25-year agreement to be supplied with coal from the Vietnam National Coal-Mineral Industries Group (Vinacomin), the state-owned coal and mineral company.
The project is being implemented under Vietnam’s Build-Operate-Transfer (BOT) regulatory regime. It is the country’s largest private sector power project and AES is the first independent power producer (IPP) to reach financial close in Vietnam since 2003.
Mong Duong II will comply with the Vietnam and World Bank environmental standards and will also allow lenders to meet the requirements of the Equator Principles.
Paul Hanrahan, AES Corp’s President and CEO, said:
“The knowledgeable and experienced AES team, supported by a valuable group of strategic partners, made this transaction a success. With financing in place, we will proceed with our construction efforts and look forward to bringing this project online. As we build on our track record of successful operations in the Philippines, the Southeast Asian market is one in which we are competitively positioned to pursue significant long-term growth.”
Victoria D. Harker, the company’s executive vice president and chief financial officer, said:
“This is a notable achievement that demonstrates the strength of our project finance model and is a testament to our ability to raise capital in the face of challenging global economic conditions. Once completed, this project will contribute meaningful returns to the company, while also providing Vietnam with a safe and reliable source of electricity to help support its growing economy.”
Citing “published reports” and EVN, AES said Vietnam’s power demand is expected to rise by 15% annually over the next five years, with GDP projected to grow by 7% in the same period. AES has been developing projects in Asia since 1992 and today has nearly 4,000 MW in operation in some of the region’s fastest growing markets.