New capital mobilization plan for Tan Phu expressway

New capital mobilization plan for Tan Phu - Bao Loc expressway worth 18,120 billion VND

State investment credit capital is proposed to play a larger role in the PPP project to invest in the construction of the Tan Phu (Dong Nai province) - Bao Loc (Lam Dong province) expressway worth VND 18,120 billion.

Tan Phu – Bao Loc Expressway is one of three component projects of the Dau Giay – Lien Khuong Expressway Project.

Improve financial viability

The Government Office has just issued Official Dispatch No. 4160/VPCP-KTTH to the Ministers of Finance, Planning and Investment, Justice, Transport; Governor of the State Bank of Vietnam; Chairman of Lam Dong Provincial People's Committee; General Director of Vietnam Development Bank (VDB) to convey Prime Minister Pham Minh Chinh's direction on supporting mechanisms for the PPP project to invest in the construction of Tan Phu - Bao Loc expressway.

In Official Dispatch No. 4160/VPCP-KTTH, the Prime Minister emphasized that the appraisal and decision on lending, debt collection of principal and interest of projects borrowing State investment credit capital are under the authority of VDB for consideration and decision and must be implemented in accordance with the order, procedures and regulations of Decree No. 32/2017/ND-CP dated March 31, 2017 on State investment credit and current legal regulations, ensuring strictness, efficiency, feasibility, and preventing negativity, corruption, profiteering and violations of the law.

The Prime Minister assigned the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Transport, the State Bank of Vietnam, and the VDB to study the recommendations of the Lam Dong Provincial People's Committee for consideration and handling in accordance with their authority and legal regulations. The above ministries and branches must proactively coordinate closely and respond in writing to the Lam Dong Provincial People's Committee according to regulations; promptly propose and report to competent authorities on matters beyond their authority.

Previously, in May 2024, Lam Dong Provincial People's Committee issued Official Dispatch No. 3814/UBND-GT proposing to support the mechanism for the PPP Project to invest in the construction of Tan Phu - Bao Loc Expressway. Specifically, Lam Dong Provincial People's Committee proposed that the Prime Minister assign VDB to finance State investment credit loans for the PPP Project to invest in the construction of Tan Phu - Bao Loc Expressway according to regulations; agree and direct VDB to approve State investment credit loans for the Project with the condition that the owner's equity capital participating in the project implementation process is at least 20% of the total investment of the Project (excluding the State budget capital).

In addition, the competent state agency proposed that the Prime Minister approve VDB to lend State investment credit for the project, with a maximum loan amount of 80% of the total investment (excluding the state budget capital). "These are conditions to improve financial feasibility, creating investor attractiveness for the PPP project to invest in the construction of the Tan Phu - Bao Loc expressway", Mr. Vo Ngoc Hiep, Vice Chairman of Lam Dong Provincial People's Committee emphasized.

The PPP project to invest in the construction of the Tan Phu - Bao Loc expressway, with a length of 66 km, is one of the three component projects of the Dau Giay - Lien Khuong Expressway Project, assigned by the Prime Minister to the People's Committee of Lam Dong province as the competent state agency in Decision No. 1386/QD-TTg dated November 10, 2022. This project must be completed by the end of 2026 to be able to operate synchronously with the remaining two segments of the Dau Giay - Lien Khuong expressway, namely Dau Giay - Tan Phu and Bao Loc - Lien Khuong.

Priority for state investment credit capital

In the feasibility study report submitted by Lam Dong Provincial People's Committee to the Inter-sectoral Appraisal Council, the total investment of the PPP project to invest in the construction of Tan Phu - Bao Loc expressway increased by 5.35% compared to the total investment approved in Decision No. 1386/QD-TTg, up to VND 18,120 billion. Of which, the state budget capital participating is VND 6,500 billion (accounting for about 36% of the total investment), the capital mobilized by investors is about VND 11,620 billion (accounting for 64% of the total investment).

Lam Dong Provincial People's Committee is speeding up the completion of the feasibility study report, submitting it to the Interdisciplinary Appraisal Council for appraisal and Lam Dong Provincial People's Committee to approve the PPP Project to invest in the construction of Tan Phu - Bao Loc Expressway in the second quarter of 2024; organizing bidding to select investors, preparing conditions to be able to start the Project in the fourth quarter of 2024.

Lam Dong Provincial People's Committee calculated that the project's payback period is up to 28 years and 7 months. This is a payback period, according to the representative of the State Bank, which is too long, causing many difficulties in arranging credit from commercial banks. Mr. Vo Ngoc Hiep said that this opinion is well-founded because in the past, PPP projects that successfully bid to select investors all had better financial indicators, due to the state budget support rate of up to 50% (or more).

To resolve the problem, the leader of Lam Dong Provincial People's Committee said that during the process of building the Feasibility Study Report, VDB Lam Dong Branch and Deo Ca Group Joint Stock Company (the investor proposing the project) signed an agreement on funding State investment credit capital.

Accordingly, the total capital that VDB provides according to the needs of Deo Ca Group is about 20,000 billion VND, the lending objects are transport infrastructure investment projects in the list of eligible loans and meeting the prescribed loan conditions, the expected loan period is in the period of 2024-2027. This is a source of capital with a more preferential time and interest rate than normal commercial loans.

By the end of April 2024, VDB Lam Dong Branch confirmed that this unit can lend State investment credit capital for the PPP Project to invest in the construction of Tan Phu - Bao Loc Expressway, with the maximum State investment credit loan capital equal to 70% of the total investment capital of the Project (excluding working capital) within the credit limit as prescribed.

However, the project's borrowing needs to ensure financial feasibility must be equivalent to 80% of the total investment (excluding state budget capital). The difficulty for the project is that Decree No. 78/2023/ND-CP of the Government stipulates that the equity capital of investors participating in the project implementation process is at least 20% of the total investment capital of the project (excluding working capital), while the PPP Law stipulates that the minimum equity capital in a transport infrastructure PPP project is 15% of the total project investment, excluding state capital.

“In the Tan Phu – Bao Loc Expressway Construction Investment PPP Project, the equity capital is determined to be 20% of the total investment, excluding the state capital, which will not ensure the conditions for state credit loans from VDB according to the provisions of Decree No. 78/2023/ND-CP,” Mr. Vo Ngoc Hiep explained.

Source: https://baodautu.vn/phuong-an-huy-dong-von-moi-cho-cao-toc-tan-phu—bao-loc-tri-gia-18120-ty-dong-d217967.html