Shearman & Sterling Advises on US$1.95 Billion Mong Duong 2 IPP in Northern Vietnam

Shearman & Sterling represented the borrower and lead sponsor The AES Corporation (AES) in relation to the project financing for the US$1.95 billion 1240 MW coal-fired Mong Duong 2 IPP in northern Vietnam. This will be the first independent power producer (IPP) in Vietnam to reach financial close since Phu My 3 in 2003.

The financing documents for the US$1.46 billion non-recourse debt facilities signed on July 8, 2011, with financial close occurring on 24 August 2011. AES is providing 51% of the equity in the project, with Posco Power Corporation of South Korea providing 30% and China Investment Corporation providing the remaining 19%.
The 12 lenders are foreign banks BNP Paribas, Credit Agricole, HSBC, ING, Natixis, Societe Generale, Sumitomo Mitsui Banking Corp., Mizuho Corporate Bank, Standard Chartered, UniCredit, Credit Industriel et Commercial and DZ Bank. Korea Eximbank, the biggest single provider of direct debt, and Korea Trade Insurance Corporation (K-sure) will provide extended political risk cover. The project offers the first opportunity for South Korean ECAs to participate in Vietnam.
Mong Duong 2 will be developed as a build-operate-transfer (BOT) project and is the largest private sector power project and the first coal-fired BOT project to close in Vietnam. Construction will start in August and continue for four years. Commercial operation of the whole plant (2 x 620MW) is targeted for June 2015.
Singapore-based Project Development & Finance partner Bill McCormack led the Shearman & Sterling team, working with senior associate Scott Baggett and associate Warren Kim, also from the Singapore Project Development & Finance team. Partner Paul Strecker and associate Joseph Tong, both based in Hong Kong, and partner Patrick Clancy and associate Leona McManus from the London office were also on the Shearman & Sterling team.
Commenting on the transaction, McCormack said, “We are thrilled to have advised on the largest private sector power plant in Vietnam. This transaction is likely to set a precedent for power projects in Vietnam as additional projects come to the table in future years to meet the rising demand for power in the region.”