Pilot PPP project awaits green-light

February 26, 2013 | 11:29
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A fresh capital structure proposal could propel the implementation of Vietnam’s first public-private partnership infrastructure project, the Dau Giay-Phan Thiet expressway.

The proposed portion of the state capital contribution to the 101 kilometre Dau Giay-Phan Thiet expressway project, also backed by lead private investor Bitexco Group,  has been hiked to 40 from 29.4 per cent of the project’s total investment capital with a loan from the World Bank.

The state’s share on the $1 billion-plus project is roughly tantamount to $429 million, a figure subject to change related to land acquisition costs as described by the Ministry of Transport (MoT) in a bid to ensure the project’s financial feasibility.

The Dau Giay-Phan Thiet expressway project is one of three infrastructure projects under the World Bank’s pilot programme aiming to improve the public-private partnership (PPP) legal framework in Vietnam. The country is banking on the  PPP concept for dramatic, multi-billion-dollar infrastructure upgrades in highways, seaports and airports.  

Because WB rules restrict it from directly loaning to private firms such as Bitexco, the project’s capital structure has changed noticeably compared to the Vietnamese government’s initially approved scheme. Earlier, the Vietnamese government had envisioned a guarantee for Bitexco to secure a loan from the International Bank for Reconstruction and Development (IBRD), but it was rebuffed.

“Investors then must turn to other sources for their capital needs,” said MoT’s deputy minister  Nguyen Ngoc Dong.

The project’s total investment cost was estimated at $1.07 billion if Vietnam could not take loans from IBRD and based on unit rate VND1,000 or 5UScents/CPU/km which is viewed as reasonable by WB experts. The MoT initially proposed the Dau Giay-Phan Thiet expressway project source 49 per cent of the total investment costs from IBRD and 29.4 per cent from the Vietnamese government whereas equity capital of domestic and foreign investors must represent 10.6 per cent of the total investment costs and another 11 per cent capital to come from commercial loans of domestic and foreign banks and from bond issuance.

The Dau Giay-Phan Thiet expressway project is the only project that has basically fulfilled legal procedures as well as capital arrangements among nearly ten infrastructure projects determined for roll-out under PPP form.

The scheme on pilot implementation and management of Dau Giay-Phan Thiet expressway under PPP form was ratified by the Vietnamese government via Decision 1597/QD-TTg issued on October 26, 2012.

Properly setting state capital contribution ratio to ensure the project’s financial feasibility is considered vital before kicking-off the process of selecting the second investor.    

Relative to selecting the project’s second investor, according to the WB, draft dossiers on bidding invitations are readily available and if these papers were approved by the Vietnamese government the WB would help the MoT launch roadshows in the region for the project to get exposure to potential investors using Australia’s AusAID funding.

By Anh Minh

vir.com.vn

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