Viet Nam: Power Transmission Investment Program - Tranche 2

Energy - Electricity transmission and distribution - Energy sector development and institutional reform

The investment program will contribute to meeting electricity demand growth of industrial, commercial, and residential consumers in an economically and environmentally sustainable manner. The outcome of the investment program is enhanced capacity of the transmission network to balance power load. The investment program also supports partial implementation of National Power Sector Development Master Plan VII (PDMP VII) to meet growing electricity demand of industrial, commercial and residential consumers throughout Viet Nam, and improve the operational effectiveness and efficiency of the National Power Transmission Corporation (NPT) the entity responsible for financing, managing, and operating the transmission network to ensure reliable electricity supply.

Tranche 2 will finance part of each of the three output components:

Component 1: Expanded Transmission Network (Physical investment)

Component 2: Improved Operational Effectiveness and Efficiency (Non-physical investment)

Component 3: Project Implementation Support (Non-physical investment)

Recognizing the need to overcome current constraints in the power sector to ensure that rapidly growing electricity demand can be met in an economically and environmentally sustainable manner to sustain economic growth, the government of Viet Nam approved in 2011 the PDMP VII . With PDMP VII, the government approved multiple power generation and transmission projects to be implemented during 2011 -2020 and laid out a detailed road map and reform framework for (i) strengthening financial capacity, (ii) improving the operational performance of power sector entities, (iii) enhancing human resource capacity and development, (iv) improving the technological optimization and modernization of power sector infrastructure, and (v) enhancing energy efficiency in generation and consumption to sustainably develop and modernize Viet Nam's power sector.

To improve the financial sustainability of power sector entities, the Prime Minister approved in July 2012 EVN's 2011- 2015 Operation and Business Plan. The plan includes a provision for revaluation of NPT's assets of D15,000 billion to raise NPT's equity to D22,000 billion by the end of 2012. The asset revaluation will contribute to progressively improve NPT's financial performance in line with the objectives under the power transmission investment program of achieving a (i) debt-service coverage ratio of 1.5, (ii) self-financing ratio of 25%, and (iii) debt-to-equity ratio of 75:25 by 2015. Financial and implementation details of the asset revaluation are currently under approval by the Ministry of Finance. The asset revaluation is scheduled to take place end of 2012.

Component 1: Expanded Transmission Network

Energized transmission lines

Component 2:

Improved Operational Effectiveness and Efficiency of NPT

Strengthened investment planning and management capacity of NPT

Component 3:

Project Implementation Support

Enhanced streamlined project implementation

Strengthened safeguard compliance management

Effective support in design and construction