Foreign cash to drive highway

National Highway 20 photo source: baolamdong.com

BT 20 Joint Stock Company and the US’ Goldman Sachs are coming closer to an agreement on $250 million funding for implementation of a project on repair and overhaul of 110-kilometre-long National Highway 20 in the first phase under build-transfer (BT) form.

This came during a recent gathering of project donors in Hanoi early this week with leaders from the ministries of Transport (MoT) of Finance, project developer BT 20 and representatives from Goldman Sachs and loan guaranteeing organisation- Multilateral Investment Guarantee Association (MIGA) under the World Bank.

The capital donor has completed the capital funding plan, including proposed interest rate, guarantee fees and disbursement pace for around $250 million commercial loan out of the project’s total investment capital of $275 million, according to a Goldman Sachs source.

The capital donor said 95 per cent of the loan would be guaranteed by MIGA following the principle that MIGA will ensure time payments on behalf of the capital donor in case the Vietnamese government faces hardships in sourcing capital for the project.

If the funding package was inked, it would be the first time a Vietnamese transport infrastructure investor approached a foreign loan under MIGA guarantee.

Besides National Highway 20, MIGA is reportedly considering provision of around $600 million risk guarantee package for the Hanoi-Haiphong expressway project.

According to BT 20 general director Do Ngoc Dung, the project had a sufficient legal base, including an investment certificate and a signed BT contract with a competent government agency.

“The project developer is a group of local leading businesses in material production and road, bridge construction,” Dung noted.

By mid-May 2013, the developer had succeeded in raising around $25 million for the project’s execution until end of July 2013, according to a BT 20 executive.

National Highway 20 is an arterial route linking southern economic and political hub Ho Chi Minh City and Lam Dong province’s Dalat city, one of major transport axles of Dong Nai province and serving economic and tourism development in Dong Nai and Lam Dong provinces, according to deputy MoT minister Truong Tan Vien.

Since state investment sources are still finite in current context, the project’s capital should be raised under BT form for investment execution.

“The MoT hopes the capital donor Goldman Sachs and loan guarantor MIGA shortly finalise negotiating with the developer for submission to competent government agencies and the prime minister for approval, paving the way for the project fulfillment by 2014,” Vien said.