Cambodia’s power project secures first guarantees from MIGA
Project aims to connect capital of Phnom Penh with outlying regions
20 Apr 2020 | Chito Santiago

The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, has issued guarantees supporting the refinancing of existing power transmission infrastructure in Cambodia’s capital of Phnom Penh and its surroundings. The move paves the way for commercial funding to replace the facility previously offered by the Export-Import Bank of Malaysia.

The guarantees are expected to lower the cost of borrowing and help retain interest in investment in Cambodia’s infrastructure sector. Issued to Mizuho Bank and ING Bank Singapore, the guarantees amount to US$76 million and cover the lenders’ loans for up to 10 years. The guarantees will provide protection against currency inconvertibility and transfer restriction, expropriation, breach of contract, and war and civil disturbance.

This is the first-ever project finance transaction by Mizuho Bank in Cambodia, and it is also the first Japanese bank to arrange a loan in Cambodia. Likewise, these are MIGA’s first transaction guarantees in Cambodia, and they are in addition to the guarantee granted by the Cambodian government over the life of the project. 

The project, implemented and operated by foreign firm Cambodian Transmission Limited (CTL), consists of a 230-kilovolt 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.

From an operating perspective, the refinancing will stabilize 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 volatility of its debt service payments and enable enhanced long-term financial planning

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.

CTL commenced commercial operation of a power transmission line based on a 25-year power transmission agreement with Electricite du Cambodge, a state-owned utility company serving as the electricity off-taker.

“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 programme, and reducing the cost of electricity to consumers,” says MIGA executive vice-president Hiroshi Matano.

The development of Cambodia’s transmission sector is a national priority, MIGA points out. At this early stage in the country’s infrastructure development, it is anticipated that the refinancing will draw the needed private investments from local and international developers.

This network expansion plan focuses on strengthening the interconnections between Cambodia’s central-west and central-south to accommodate transmission from new thermal and hydro power plants to the Phnom Penh region, where most of the electricity demand is currently concentrated.

CTL is a wholly-owned subsidiary of HNG Capital, which in turn, is the investment holding and management company of HNG Capital Group, a Malaysian conglomerate incorporated in 2011 with diversified business interests in investments, power generation and transmission, metals, and hospitality.