Global power firm AES Corporation has tapped the syndication market for a US$1.5bn long-term non-recourse construction financing for its 1,200 MW Mong Duong II power plant in Quang Ninh, Vietnam.

AES is the first independent power producer to reach financial close in Vietnam since 2003, the firm says.
In a broadly syndicated financing, 12 commercial banks and two Korean government export credit agencies participated in the transaction.

The Mong Duong II plant will sell electricity to Vietnam Electricity – the state-owned power company under the terms of a 25-year power purchase agreement (PPA).

The PPA is US dollar denominated and allows for a fuel cost pass-through, protecting the project from fluctuations in coal prices.

AES also entered into a parallel 25-year coal supply agreement with the Vietnam National Coal-Mineral Industries Group (Vinacomin), the state-owned coal and mineral company, to supply locally sourced fuel to the facility.

Doosan Heavy Industries and Construction and its affiliates will serve as the engineering, procurement, and construction contractor responsible for designing, building, and commissioning the project.

Paul Hanrahan, president and CEO of AES says: “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.”

AES has a 51% equity ownership interest in the US$1.95bn project, while PSC Energy Global, a wholly-owned subsidiary of Posco Power Corp, and Stable Investment Corporation, a wholly-owned subsidiary of China Investment Corporation, own 30% and 19% respectively.

The project is being implemented under Vietnam’s Build-Operate-Transfer regulatory regime and which will begin operations in 2015, the firm says.