BOT project to expand Hanoi Highway is expected to borrow nearly 2,400 billion VND

Investor CII will guarantee a maximum loan of nearly 2,400 billion VND for the Hanoi Highway expansion BOT project in 7 years.

The Board of Directors of Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII) approved the company to guarantee the medium- and long-term loan for the BOT project to expand Hanoi Highway and National Highway 1, from the old Station 2 intersection to Tan Van intersection. The maximum loan amount is about VND2,398 billion for a period of 7 years. The company did not disclose any further information about the above loan.

BOT Hanoi Highway expansion is one of the key infrastructure projects of Ho Chi Minh City, invested by CII. This project is divided into 3 phases, currently completing the entire main axis from Saigon Bridge to the intersection of Ho Chi Minh City National University, upgrading and paving the entire Di An section ( Binh Duong ).

The project is still unfinished on two parallel roads of Hanoi Highway due to land acquisition problems and infrastructure overlap of several projects such as Ben Thanh - Suoi Tien metro and environmental sanitation.

Traffic jam in Hanoi Highway area when BOT toll collection resumed on April 1, 2021. Photo: Quynh Tran — Traffic jam in Hanoi Highway area when BOT toll collection resumed on April 1, 2021. Photo: *Quynh Tran*

For CII in particular, this project is of great importance in the business circuit of the enterprise. The BOT expansion of Hanoi Highway accounts for 25% of the company's asset contribution, second only to the Trung Luong - My Thuan Expressway. With the payback date in 2035, according to the management's calculations, the project can account for 30% of annual revenue in the period 2023-2032. Meanwhile, CII estimates that revenue in this period will increase from nearly 2,400 billion to 5,000 billion VND.

The expansion of Hanoi Highway as well as other BOT projects that CII is investing in, although bringing large and stable revenue in the future, still leaves this enterprise with risks from financial leverage. The company's debt at the end of 2016 was nearly 3,600 billion VND, by 2021 it had increased to more than 17,000 billion VND. Last year alone, this enterprise had to spend more than 3 billion VND per day to pay interest on loans.

However, CII leaders declared that with two large sources of revenue from BOT and real estate, the company is capable of fulfilling all financial obligations. After a long period of "being tied to debt", the company has also begun to focus on the roadmap of increasing capital and reducing debt.

At the annual meeting on May 24, General Director Le Quoc Binh said that a large financial institution in the top 3 in Vietnam has approved the decision to finance 2,400 billion VND for CII. This amount is part of a long-term loan package (12 years) worth nearly 9,400 billion VND.

Also at this meeting, the company approved a plan to issue 4,500 billion VND in convertible bonds to existing shareholders. Part of the proceeds will be used to pay off bank debt for the BOT project to expand Hanoi Highway, up to 2,400 billion VND.

The plan to increase capital and reduce debt was also proposed by this enterprise to prepare for participating in new large-scale projects in the period after 2024. According to the plan, CII will spend 60,000 billion VND to research new transport infrastructure projects such as the elevated road combined with real estate in Ho Chi Minh City, Trung Luong - My Thuan Expressway phase 2, intersections in Ho Chi Minh City and Thu Thiem 4 bridge.

Siddhartha

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