Asian commercial and development banks have signed a massive project financing agreement in Vietnam.
In total, US$5bn of the US$9bn total project cost for the Nghi Son Refinery and Petrochemical (NSRP)’s complex has been raised in the form of debt. It is the largest project financing in Vietnamese history.
The Japan Bank for International Co-operation (JBIC) has provided a direct loan of US$1.65bn, with the Export Import Bank of Korea (Kexim) lending around US$650mn.
The remaining US$2.7mn is co-financed by JBIC and commercial lenders, namely Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Mizuho Corporate Bank, Yamaguchi Bank, Chiba Bank and Shizuoka Bank.
It’s understood that the commercial portion of the co-financing is worth around US$1.3bn, is covered by Nippon Export and Investment Insurance (Nexi) and has a tenor of 16 years. Other export credit agencies are involved in the transaction, but their names have not been disclosed.
The borrower, NRSP, is a special vehicle established by Idemitsu Kosan, Mitsui Chemicals, Kuwait Petroleum Europe and Vietnam Oil and Gas group. The residual capital requirement will be provided by the partners in the form of equity.
It will use crude oil imported from Kuwait to produce several products including petroleum products such as diesel and jet fuel, and high-value added petrochemicals such as polypropylene and benzene. The petroleum products from the refinery plant will be sold in Vietnam and the petrochemicals will be exported from Vietnam to other countries in Asia.
The operation of the refinery plant will be led by Idemitsu Kosan, and Mitsui Chemicals will be responsible for the production of the polypropylene. NRSP will construct the refinery and petrochemical complex in Nghi Son Economic Zone in the Thanh Hoa province of Vietnam, 200km south of Hanoi. Construction is expected to be complete in 2016. Commercial operations are to begin in 2017.
The EPC contract is with a consortium of contractors comprising JGC Corporation, Chiyoda Corporation, Technip, and South Korean contractors GS Engineering and Construction and SK Engineering and Construction, which explains the involvement of Japanese and Korean ECAs and commercial lenders.
Law firm Allen & Overy advised on the project, led by Hanoi-based partner Bill Magennis, who says: “This will be the largest project financing in Vietnam in the 20 years I have been here. In addition to its significance to Vietnam, this project holds importance regionally, with long-term agreements with Kuwait and Japanese companies for the supply and purchase of products.”