While transport and infrastructure projects are often granted to investors in other countries, this is not the case in Vietnam wherein the government shoulders all the expenses for such programs. But for the first time ever, it is considering applying such practice for the construction of its Cau Gie – Ninh Binh Highway.
The Cau Gie – Ninh Binh Highway is a 50-kilometre project which was built in January 2006 and began operation in June 2012. It had a total investment capital of VND8.974 trillion. The investor has a 30-year concession contract under the plan.
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Two companies have expressed interest in investing in the said endeavor, the Vietnam Express Corporation (VEC) and a French corporation called VINCI Concessions. VEC has already submitted a proposal to the Ministry of Transport (MOT) to offer concession to investors for the operation and maintenance of the highway.
In retrospect, VEC has six highway projects under its belt totalling to 583 kilometres. Of these, three projects of 350 kilometres in all have been finished and in operation. The remaining projects are due to be completed in 2019. VEC has several other operation and maintenance projects already in store for the future, including the HCMC – Long Thanh – Dau Giay project and the Bien Hoa – Vung Tau Highway project, if the former will push through. A Japanese investor has shown interest in the latter.
But in order to construct the 1,000-kilometre Cau Gie – Ninh Binh Highway project, the corporation needs a tremendous amount of capital. This is why it proposed to offer concessions to investors, for a specific period of time. Interested investors must also meet the following requirements in order to be approved: 1. Experience in operations and maintenance road projects; 2. Financial capability; 3. Capability to operate and exploit highway projects.
The selected investor will then have joint businesses with the owner of the road called SPV (Special Purpose Entity) to operate and exploit the Cau Gie – Ninh Binh Highway project. VEC has expressed intent to furnish capital for SPV as well as share in the management responsibilities.
Mai Tuan Anh, general director of VEC, stated that the concession value is based on “the expected annual net income of the highway in the future which is estimated based on revenue, operation cost, regular maintenance cost, capital structure and expected interest rate.” It has a fee which will be paid in three phases.
When it comes to the investment capital structure, VEC proposed that “stockholder equity will be equal to 30% of the concession value” of which VEC will share 29% of capital, and strategic investors contribute 71%. This is equivalent to VND9.171 trillion revenue for VEC.