ADB guarantees loan for power sector upgrade

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The Asian Development Bank will stand guarantee for a US$342 million loan used to fund urgently needed power transmission and distribution improvements needed in Vietnam.

The $325 million guarantee will give state-owned Electricity of Vietnam, or EVN, the ability to access long term commercial bank loans on competitive terms and should help spur more private investment in the sector, the Manila-based lender said in a statement on Friday.

Amidst the global economic crisis, foreign commercial banks require additional credit enhancements similar to the type of guarantee that is being provided by ADB, the bank said.

“This ADB guarantee enables EVN to reduce its borrowing costs and to increase the tenure of the loan, while it also allows commercial banks to reengage in lending in Vietnam’s infrastructure sector,” said Xavier Humbert, Senior Energy Specialist in ADB’s Southeast Asia Department.

ADB said the 13-year syndicated loan of $342 million will fund new transmission lines and upgrade rural and urban power grids in Vietnam. According to the bank Vietnam has made “big strides” in improving its infrastructure but the electricity sector still suffers from several “bottlenecks”.

Experts have forecast Vietnam’s power shortage will be severe from 2015 onwards as demand outpaces capacity. Next year the local demand for electricity is expected to grow 14 percent on the back of an economic recovery.

Source: Thanh Nien

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