commercial financing
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MIGA, a member of the World Bank Group, has issued guarantees that will support the refinancing of existing power transmission infrastructure in Cambodia’s capital, Phnom Penh, and its surroundings.

The move paves the way for commercial funding to replace financing previously offered by the Export-Import Bank of Malaysia Berhad (Malaysia EXIM).

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Policy and financing
Financial institutions

The project, implemented and operated by Cambodian Transmission Limited (CTL), consists of a 230kV transmission network that connects the Phnom Penh region with power generators in the east and northeast of the country.

The network also provides an interconnection to the Cambodia-Vietnam and Cambodia-Thailand borders in the south and northwest of the country respectively.

Encouraged by an improving economy and accelerated growth, the project became operational in 2013 and is part of an overall strategy to bring power from additional sources to the greater Phnom Penh region to meet the critical energy needs of the capital and its surroundings.

Issued to Mizuho Bank of Japan and ING Bank of the Netherlands through its Singapore Branch, the guarantees amount to $76 million and cover up the lenders’ loans for up to 10 years. The guarantees will provide protection against Currency Inconvertibility & Transfer Restriction, Expropriation, Breach of Contract, and War & Civil Disturbance.

The development of Cambodia’s transmission sector is a national priority.

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Transmission and distribution

At this early stage in the nation’s infrastructure, refinancing is anticipated to draw needed private investments from local and international developers. This network expansion plan focuses on strengthening the interconnections between the nation’s Central-West and Central-South to accommodate transmission from new thermal and hydropower plants to the Phnom Penh region, where most electricity demand is currently concentrated.

This commercial financing project is MIGA’s first transaction in Cambodia.

Commitment to commercial financing

The transaction also reflects the ongoing commitment of the international commercial lenders to Cambodia against the backdrop of the COVID-19 pandemic.

MIGA’s Executive Vice President, Hiroshi Matano, said: “Against the backdrop of the global COVID-19 pandemic, this transaction reflects the ongoing commitment of the lenders to support Cambodia’s longer-term goals of diversifying its economy, consolidating its electrification program, and reducing the cost of electricity to consumers.” 

From an operating perspective, the refinancing will stabilise the project’s cash flow and reduce its exposure to interest rate risk.

By obtaining an interest rate benchmark-linked loan from international lenders, CTL will be able to enter into an interest rate swap for up to 80% of the exposure, helping to improve predictability, reduce the volatility of its debt service payments and enable enhanced long-term financial planning.

Lim Suy Meng, Executive Director of Global Project Finance, Asia Department of Mizuho Bank, said: “Mizuho is proud to partner with MIGA on another landmark transaction in ASEAN. This refinancing to a world-class operator for a transmission line that is critical to supporting Cambodia’s national electrification strategy is Mizuho’s first project financing in the country.

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The Multilateral Investment Guarantee Agency

“Mizuho would not have been able to provide this refinancing without the support of a MIGA guarantee for non-commercial risks. Through this experience, we see the potential to grow Mizuho’s franchise in Cambodia by providing project financing to suitable new investments, and to catalyze financing sophistication for local projects by bringing in experienced foreign commercial financiers.”

Erwin Maspolim, ING’s Managing Director and Network Head for South East Asia, added: “What makes this project so meaningful for ING is its significance to Cambodia’s economic and social development for years to come.”

“When you think about what the 110km double circuit span of CTL’s transmission system can do, you can point to the reach of electricity to many more households, lights available for students to study in the evenings, critical energy to the country’s industries and connectivity to existing and future green energy from hydro and solar sources across Cambodia. That is why ING is deeply honoured to partner CTL, MIGA and the Cambodian Government for this transaction,” concluded Maspolim .