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French firm says will raise $2.5-3bn for Vietnam’s controversial $15.8bn airport project

French firm says will raise $2.5-3bn for Vietnam’s controversial $15.8bn airport project

Tuesday, March 24, 2015, 13:29 GMT+7

A Paris-based company has pledged to help mobilize up to US$3 billion to fund the construction of a multibillion-dollar airport in southern Vietnam, as the country’s transport minister is seeking governmental permission for his own funding solution.

Aéroports de Paris (ADP) chairman and CEO Augustin de Romanet proposed the funding plan to Minister Dinh La Thang as they met in Hanoi on Monday.

ADP and Switzerland-based financial service company Credit Suisse will work with the transport ministry and the Airports Corporation of Vietnam (ACV) to mobilize $2.5-3 billion for Long Thanh International Airport, Romanet told the minister.

The airport, to be built in the eponymous district of Dong Nai Province, would consume $15.8 billion worth of investment over three construction phases ending by 2030, by which time the airport is expected to be able to handle 100 million passengers a year.

The ADP wants to become the strategic partner of the ACV, which is set for privatization this year, by holding 25 to 30 percent of its stake, according to the executive.

The French company is also interested in joining hands with the ACV to construct and operate the Long Thanh airport, he added.

Minister Thang said the transport ministry is expected to complete the privatization of the ACV by the end of the second quarter of this year.

He thus suggested that the ADP keep in touch with the ACV to receive the most updated information about the plan and to be able to become its strategic shareholder once the privatization plan is approved.

As for the French firms pledge to join the Long Thanh airport development, Thang said the ministry is awaiting in-principle approval for the project from the lawmaking National Assembly.

The central government will submit a report on the project to the National Assembly in May, and the ministry will only take the next steps if lawmakers give it the go-ahead, Thang said.

Ministry’s funding plan

The Long Thanh airport project was first estimated to cost $18.7 billion when Minister Thang reported to the National Assembly in late October last year.

But as he addressed the National Assembly Standing Committee last month, Thang said the new estimate for the project is $2.9 billion lower than previously estimated.

“The new estimate for the project is $15.8 billion, with $5.2 billion allocated for the first phase,” Thang told lawmakers.

Vietnamese lawmakers are still concerned over the project’s huge investment and necessity, forcing Thang and his ministry to constantly try to sell the plan over the last six months.

In addressing the money issue, Thang has suggested selling – or transferring the rights to operate – several airports across the country to fund the controversial Long Thanh project.

In a petition recently submitted to the Prime Minister, Thang seeks permission to transfer the right to operate Phu Quoc International Airport to domestic investors under a pilot program before doing so with other terminals.

Money generated from the transfer will be earmarked for the construction of the Long Thanh airport, according to the document.

At least one investor has shown interest in the ministry’s plan.

Hanoi T&T, which operates in industry, finance, and real estate, announced earlier this month it wants to either purchase all of the assets of the airport on Phu Quoc Island, which is administered by the southern province of Kien Giang, or acquire the right to operate its services.

The company has also said it is committed to upgrading the airport, which opened to passengers in December 2012, and will not transfer the operation right to other parties within five years.

The Phu Quoc airport was developed by the ACV at a total investment of VND3 trillion ($139.81 million).

The stake selling at Phu Quoc airport will be done on a pilot program before the Ministry of Transport moves on to sell the government’s investment in Noi Bai International Airport in Hanoi.

Two local carriers, including flag carrier Vietnam Airlines and no-frills VietJet Air, have shown interest in buying the Hanoi terminal.

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