Capital Implemented for PPP Project by Investors and PPP Project Enterprises

Capital implementation of PPP projects of investors, PPP project enterprises (illustrative image)

According to Articles 76, 77, and 78 of the Law on Investment in the form of public-private partnership, the capital implementation of PPP projects by investors, PPP project enterprises is regulated as follows:

1. Financial arrangements for implementing PPP projects

- Investors and PPP project enterprises are responsible for contributing equity capital, mobilizing loans, and other legitimate sources of funds to implement the project as stipulated in the PPP project contract. The total amount of loans through various forms must not exceed the total loan amount stipulated in the PPP project contract.

- Within 12 months from the date of signing the contract, investors and PPP project enterprises must complete the financial arrangements; for projects under the investment decision authority of the National Assembly or the Prime Minister of the Government of Vietnam, this period may be extended but not exceeding 18 months.

- The form of handling in cases where investors and PPP project enterprises fail to arrange finances within the stipulated time limit in Clause 2 of this Article must be specified in the bidding documents.

2. Equity capital contribution

- Investors must contribute a minimum equity capital of 15% of the total investment amount of the project, excluding state capital stipulated in Articles 70 and 72 of this Law.

- Investors must contribute equity capital according to the schedule agreed upon in the PPP project contract.

3. Issuance of bonds by PPP project enterprises

According to Article 78 of the Law on Investment in the form of public-private partnership 2020, PPP project enterprises are permitted to issue and repurchase privately placed bonds they have issued according to this Law, enterprise law, and securities law to mobilize funds for implementing PPP projects; they are not allowed to issue convertible bonds or bonds with warrants privately.

Issuance of bonds according to Clause 1 of this Article must meet the following conditions:

- The capital mobilized through bond issuance must not exceed the value of the loan determined in the PPP project contract;- Capital mobilized through bond issuance must not be used for any purposes other than the project implementation according to the PPP project contract or for restructuring the enterprise’s debts;- PPP project enterprises must open an escrow account to receive bond purchase money. Fund disbursement from bond issuance shall be performed according to regulations.

Note: If the PPP project enterprise has been in operation for less than 01 year, it is exempt from the condition to have the audited financial statement of the year preceding the issuance year as per enterprise law regulations when issuing bonds according to Clause 1 of this Article.

More details can be found in Law on Investment in the form of public-private partnership 2020, effective from January 1, 2021.

Thanh Thao

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