This is ADB's third guarantee operation in Viet Nam.

Viet Nam has made big strides in rolling out infrastructure to aid its economic expansion, but the electricity sector still suffers bottlenecks.

The loan will fund new transmission lines, and upgrade rural and urban power grids, helping to expand service coverage, reduce system losses, and address growing demand. Funding that extra capacity will require substantial levels of private investment, and while the government has had some success in attracting private investors, and forging public-private partnerships in the power sector, the process has been slow.

ADB's guarantee gives Viet Nam Electricity the ability to access long-term commercial bank loans on competitive terms and should help spur more private investment in the sector. Given the global economic crisis, foreign commercial banks require additional credit enhancements similar to the type of guarantee that is being provided by ADB.

“This ADB guarantee enables Viet Nam Electricity to reduce its borrowing costs and to increase the tenor of the loan, while it also allows commercial banks to reengage in lending in Viet Nam's infrastructure sector,” said Xavier Humbert, Senior Energy Specialist in ADB's Southeast Asia Department.

ADB will also provide technical assistance on a grant basis from its Technical Assistance Special Fund of $600,000 to ensure Viet Nam Electricity complies with procurement, and environmental and social safeguards, in carrying out infrastructure improvements.#