The itinerary to find a solution for financing arrangement

Ms. Françoise Chalier - Deputy Director of Asia Division; Ms. Rima Le Coguic - Deputy Director, Division of Sustainable Energy and Communications and Ms. Malorie MANI - Projects Coordinator (projects in Vietnam), Asia Division warmly welcomed the delegation at the headquarters of AFD.

​Ms. Françoise Chalier said, Vietnam is the second largest partner of AFD globally (after Tunisia). Up to now, the total commitment fund of AFD to Vietnam reachs EUR 1.6 billion for more than 80 projects, in which, there are several projects combined loan and grant. In the energy sector, AFD has financed projects and technical assistances (TA) for a total amount equivalent to EUR 235.2 million. In 2015 and following years, AFD's objective is to maintain the minimum grant with amount of EUR 100 million per annum for Vietnam, which includes power projects.

The EVNNPT’s Chairman Dang Phan Tuong highly appreciated the support of AFD in recent years and stated that this support has brought certain positive effects for the development of Vietnam's power sector, including the power transmission area.  As for EVNNPT, the co-financing of ADB and AFD for two projects: the Northern Power Transmission project and  Power Transmission Investment Project No.2 (Tranche 2) with total amount of EUR 140 million clearly expresses the effectiveness of this assistance. These two projects are implemented successfully. Especially, the subproject Pleiku - My Phuoc - Cau Bong 500kV power transmission line under the Power Transmission Investment No.2 project (Tranche 2) was a typical case of fast construction and has set a record in disbursement (within one year) in comparison with normal projects (within 5-6 years). The project was successfully energized in May 2014 and its commissioning helped reducing the burden and relieving the anxiety of electricity shortage in the southern region. The Chairman also mentioned that the use of savings from this loan (EUR 31 million) will be more effective if AFD considers to finance for equipment as well as civil works. With the current regulation of AFD, only equipment was financed, which will cause many difficulties for EVNNPT in choosing appropriate projects. Since the value of equipment is normally about 20 percent of the total investment value of a project while the ODA procedures have been made according to regulations of Vietnam are more complicated and tighter, it significantly affects the rate of progress of the project. The Chairman commited that EVNNPT will provide AFD with the detailed schedule for implementation of proposed subprojects using the savings and will mobilize resources to implement them as soon as possible.

The Chairman Dang Phan Tuong thanked AFD for providing a grant for Technical Assistance Project "Capacity building for EVNNPT in organization, financial management and planning activities" with the amount of EUR 500,000. He also informed that EVNNPT is currently proceeding with next steps to have consultants on board and will send AFD the update on processing schedule for joint implementing with AFD to achieve the highest efficiency. The Chairman also stressed that beside this grant, EVNNPT needs the support of AFD to continue providing new TAs in the fields of increasing the labor productivity; improving production efficiency; training of human resources; science and technology applications in production; researching and developing the smart grid...

With the viewpoint of a donor and is in charge of the energy sector, Ms. Rima - Deputy Director of Communications sustainability Energy was very interested in transmission rates. She would like to know how the current power transmission charges meet the EVNNPT’s requirement of operation.

To response the concern of Ms. Rima, The Chairman said the power transmission charge is very important to EVNNPT. Currently, EVNNPT is working with Vietnam Electricity (EVN), Electricity Regulator Agency of Vietnam (ERAV) and Ministry of Industry and Trade (MOIT) and suggest to increase the transmission rates. With the current result, there are many possibilities that the power transmission charge will be increased in year 2015 at high rate. Once the transmission charge increases, the financial situation of EVNNPT will be significantly improved. So that EVNNPT will meet requirements on financial condittions set by donners.

Additionally, The Chairman highly appreciated the new modality of lending applied by AFD to recent loans of Vietnam Electricity (EVN). This is loans without guarantee of the Government. This modality is really efficient and favorable for both sides: shorten procedures, minimize cost of projects owners, supported by the Government because project owners takes full responsibility of payment and this will not effect to the public debt of the Government. Therefore, the Chairman proposed AFD may consider applying this modality of lending for EVNNPT’s projects in the next time since the financial situation of EVNNPT in the last three years is very positive. Furthermore, in year 2015 the transmission charges of EVNNPT is going increase at high levels. This is the convenience factor ensuring a stable financial situation for EVNNPT, so that EVNNPT is able to repay its debts in due time.

The Chairman added, in the next five years, the annual investment need of EVNNPT is from USD 800 million to USD 900 million. In order to arrange such a large amount of investment need, EVNNPT has to mobilize from several sources, local commercial and ODA loans in which ODA is still the main source. Also, EVNNPT borrows from other foreign financial institutions, such as NEXI, BNP Paribas. As for ADB, in the up coming time, two sides will discuss in details for implementing commercial loans. Therefore, the Chairman also proposed AFD to continue supporting EVNNPT in the future and consider adding new modalities of lending in order to expand the cooperation between AFD and EVNNPT.

Ms. Rima gave a warm support to proposals of the EVNNPT’s Chairman. However, she also said, to be able to raise an expected figure of financing to EVNNPT and set up a specific financing plan, AFD should review the financial situation and study contents of TAs. Regarding the proposal of EVNNPT on direct loan, Ms. Rima also shared, in the short-term, AFD is implemeting a pilot application of this form of lending to EVN. AFD needs more time to verify the result of this pilot as well as to evaluate the outcome of Technical Assistant provided to EVNNPT. It is expected that this new form of financing will be applied to EVNNPT in the next two years.  

End of the meeting, AFD and the delegation noted the results achieved, difficulties and outstanding issues in procedures facing as well as proposals on new modalities of lending. They committed themselves to making effort to improve and enhance cooperation in the future. /.