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Banks see attractive profits in funding electricity network development   2009-10-29 - Viet Nam Net

Commercial banks are getting set to provide loans to fund electricity grid development together.


According to the National Power Transmission Corporation (NPT), in 2008, the corporation had to spend 8,500 billion dong ($500 million) to invest in power network development.


The required investment will increase year after year. In 2010, NPT will need 11,700 billion dong ($688.23 million) to expand the network.


It is estimated that between 2006 and 2015, Vietnam will need 74,800 billion dong ($4,400 million) for power network development – that’s 7,480 billion dong a year.


According to the Electricity of Vietnam (EVN), the huge sum needs to be mobilised from different sources, including preferential international loans and domestic commercial loans.


The World Bank (WB) has committed to provide the loans worth $300-400 million to develop the power network, while the Asian Development Bank (ADB) will lend $2 million. The remaining capital will be gained from domestic sources.


Domestic commercial banks have said that they are capable of funding the projects.


Explaining why commercial banks are interested in providing long term loans with which they can only take back capital after a long period, analysts said that banks do not see any risk. They are confident since power network development can bring high socio-economic efficiency. Meanwhile, analysts say, banks can enjoy long term stable interest from the loans.


The biggest obstacle now for commercial banks is the current regulation that banks must not lend sums of money higher than 15 percent of their chartered capital. Most Vietnamese banks have small chartered capital, which means the sums of money they can lend may not be big enough.


EVN says that it still hopes to obtain permission from the State Bank of Vietnam to apply a “special mechanism”, under which banks can lend more than 15 percent of their chartered capital.


This special mechanism has been applied to petrol importers and other key business fields.


Tien Phong Bank, Indovina Bank and Bao Viet Bank have recently signed syndicated loans worth 530 billion dong ($31.17 million) to NPT to develop the power network. Indovina provides 280 billion dong worth of capital, while 150 billion dong comes from Tien Phong and the remaining sum from Bao Viet.


An Binh Bank has committed the credit limit of 800 billion dong in 2009 and the figure will increase further in the coming years.


Deputy general director of An Binh Bank Nguyen Thi Ngoc Mai said that besides providing loans to NPT and its power transmission member companies, the bank will also lend to contractors of the power grid projects.

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