Sole bookrunner and mandated lead arranger Calyon closed a US$40mn pre-export facility for Vietnam National Coal and Mineral (Vinacomin) in March 2007, the first ever pre-export financing raised to support coal in Vietnam.
The deal demonstrates Vietnam’s growing strength as a major coal supplier within the Asia-Pacific region, opening up a whole new sector and region for future financing opportunities.
The funds are being used by Vinacomin to partly finance the construction of Cam Pha power project, a 310MW coal-fired power plant to be developed in Quang Ninh province in Vietnam.
Vietnam needs to rapidly increase its power generation capacity in order to ensure its economic growth is sustainable. This facility will play a part in supporting the country meet its target of a total generation capacity of 22,500MW by 2010, of which 4,000MW will be produced by coal-fired plants.
When looking at its financing options, Vinacomin originally invited a number of foreign banks to finance the power plant development. Most banks offered typical structured commodity finance (SCF) structures involving the ‘offshorisation” of the loan and tenors of between three to five years.
The borrower ultimately opted for Calyon’s proposed package as it included a far longer tenor, and included some onshore aspects due to Calyon having a branch presence in Hanoi.
The facility was then syndicated out locally to banks based in Vietnam. Additional participating lenders include Bangkok Bank and First Commercial Bank.
The transaction carries a tenor of eight years, and pays a margin of 140 basis points per year over Libor. A relatively low margin and a long tenor is unusual for a first time SCF facility, but it reflects both the high level of liquidity in the domestic market at time of signing, as well as the growing level of confidence in the strength of the Vietnamese economy.
Johnson Stokes & Master provided legal advice on the deal.
The security package includes a US dollar onshore account held by Calyon Hanoi into which payments of export contracts are paid. There is also a US or Vietnamese dollar onshore account acting as a debt service account and also held with Calyon Hanoi. Offtake contracts have been set up with Japanese and Chinese firms.
Vinacomin has 20 coal-producing companies and 32 companies involved in mining activities. In 2005 Vietnam’s total coal production hit 34mn tonnes, and generally around 50% of the coal is exported with its key buyers based in Japan and China. Domestic buyers are usually thermal power plants, cement and fertiliser factories.
As well as the Cam Pha plant, Vinacomin has a number of further important investment requirements in the coming years, and is planning to support the construction of a series of thermal power plants before 2010.
Vietnam National Coal and Mineral (Vinacomin)
Mandated lead arrangers: Calyon
Tenor: 8 years
Margin: 140bp over Libor
Law firms: Johnson Stokes & Master
Date signed: March 2007