Vietnam’s first 20-year project and green bond guaranteed by GuarantCo and issued by the Xuan Mai Water Supply System Project

GuarantCo, part of the Private Infrastructure Development Group (PIDG), has provided a VND 1,192 billion (c. USD 47 million equivalent) guarantee to Hoa Binh – Xuan Mai Clean Water Limited Liability Company (Hoa Binh – Xuan Mai) and Xuan Mai - Hanoi Clean Water Transmission Limited Company (Xuan Mai – Hanoi) (the Companies). Hoa Binh -Xuan Mai has issued 20-year VND 875.1 billion (c. USD 34.5 million equivalent) green bonds to fund the development of a greenfield water supply project in Hoa Binh province to supply clean water primarily to the Hanoi region.

The signing ceremony held at Song Duong Water Treatment Plant in Hanoi. Front row from left: Dang Huu Tuan, General Director, Xuan Mai – Hanoi Clean Water Transmission LLC; Nishant Kumar, Managing Director, Asia Investments at GuarantCo and Head of Coverage – Asia at PIDG; and Pham Manh Hung, General Director, Hoa Binh – Xuan Mai Clean Water LLC.

This will be Vietnam’s first-ever verified green project bond in the water sector, the longest-tenor project bond issuance in the country to date, and the first project bond in Vietnam to receive an external credit rating from a local ratings agency.

This transaction marks GuarantCo’s fifth transaction in Vietnam, demonstrating its continued commitment to the country in supporting the development of sustainable infrastructure and local capital markets. While it is the first time GuarantCo has provided guarantees to support the development of water treatment infrastructure globally.

In accordance with its green bond framework, Hoa Binh- Xuan Mai has committed to allocating capital raised from the green bonds to green water treatment capital expenditure projects. The project comprises water intake, treatment, pipeline and distribution components with a total capacity of 150,000 cubic metre per day. Notably, the project represents a key step in the Vietnamese government’s efforts to transition away from groundwater sources, which can be environmentally harmful. By using river water as feedstock, Hoa Binh – Xuan Mai project is not only embracing a more sustainable environmental approach but also ensuring a higher quality of water, which will positively impact public health and well-being. Its goal remains to promote sustainable and environmentally friendly clean water treatment from surface water sources, which aligns with and contributes to multiple sustainable development goals (SDGs), including SDG 6 (Clean Water and Sanitation).

Mirae Asset Securities worked as the issue manager. The green bonds received oversubscription from major institutional investors, and were invested by Chubb Life Vietnam, Hanwha Life, AIA, and Generali. Chubb Life Vietnam, as the anchor investor provided the largest subscription to the bonds, and Hanwha Life are first-time investors in GuarantCo guaranteed bonds. AIA and Generali further strengthened their longstanding relationship with GuarantCo through their continued participation in this initiative. To date, AIA is the only institutional investor to have participated in all five bonds guaranteed by GuarantCo in Vietnam. GuarantCo is proud to collaborate with new and existing investors through this landmark transaction and to further strengthen its strategic relationships with institutional investors in Vietnam and across the Southeast Asia region.

Fast Capital Solution, financial adviser to the Companies, arranged optimal financing solutions for the project companies through an innovative structure combining long-term fixed-rate bonds guaranteed by GuarantCo and floating-rate loans from a major local Vietnamese bank. Throughout the process, Fast Capital facilitated coordination amongst all stakeholders to ensure efficient execution.

The bond issue is rated AAA by FiinRatings under the national credit rating scale – a rating uplift of 11 notches – reflecting the strength of GuarantCo’s guarantee. The bond has also been structured in alignment with ICMA’s Green Bond Principles, with external review and a second party opinion provided by FiinRatings on the green bond framework. This is the second collaboration between GuarantCo and FiinRatings.

This is a continued collaboration between GuarantCo and the Global Green Growth Institute (GGGI) on green bond issuances in Vietnam, following the EVN Finance green bond in 2022 which was Vietnam’s inaugural local currency internationally verified thematic corporate bond. In this transaction, GGGI provided the Companies with essential technical support and strategic recommendations on developing the green bond framework.

The project has also been supported by PIDG with technical assistance funding under the Indo-Pacific Economic Framework’s Catalytic Capital Fund. The grants have supported the rating of Vietnam’s first 20-year green project bond, as well as a portion of legal adviser costs to develop documentation with international capital markets’ best practice.

Hoa Binh is one of two project components of the Hoa Binh Xuan Mai water treatment plant. The second – Xuan Mai Ha Noi – will issue VND 317.2 billion (c. USD 12.5 million) bonds in 2025 to fund the associated pipeline and distribution components.

Nishant Kumar, Managing Director, Asia Investments at GuarantCo and Head of Coverage – Asia at PIDG, said:

“We are excited to announce the financial close of this transaction with the Companies. The successful issuance of this green bond further demonstrates the market potential for green financing instruments to help address the significant investment and infrastructure financing gap in the country. This transaction will finance the necessary infrastructure to deliver a clean and dependable supply of water to millions of residents and creating lasting, positive impact in those communities. The transaction serves as an opportunity for GuarantCo to deliver on PIDG’s 2023-30 strategy in which water continues to be a priority sector whilst also addressing Vietnam’s National Strategy on Rural Water Supply and Sanitation by 2030.”

Mr. Hung Manh Pham, Chairman and CEO of Hoa Binh – Xuan Mai stated:

“Actualizing “Green Bonds” is a strategic choice for the Hoa Binh – Xuan Mai project, which was chosen for its strong and sustainable characteristic as a funding directive. Additionally, this option also provides opportunities for multiple infrastructure projects in Vietnam in general with the target of financing for sustainable development. On the other hand, the standout feature of this funding structure for Hoa Binh – Xuan Mai is the 20-year tenor bond, which secures the long-term financial standing of the project for its future development. Furthermore, this funding source enables us to achieve our key objectives of contributing to our community’s livelihood in the project areas, by improving the water infrastructure, ensuring a stable supply of clean and safe water, while promoting people’s quality of life for Hanoi city and Hoa Binh province. In addition, this financial solution will provide vital resources and technical financial leverage for the development of the water sector in Vietnam by and large, while benefitting us directly though this transformative process. With the guidance from the Government of Vietnam’s sustainable development initiative and through the alignment with the global sustainability standards of PIDG, here at Hoa Binh – Xuan Mai, we are proud to be building a robust framework for planning, managing, and improving sustainability performance. We can affirm that AquaOne’s Hoa Binh – Xuan Mai is steadfastly on the path to sustainable progress and commits to a better standard of living and a brighter, more prosperous future for generations to come.”

Mrs. Huyen Vuong Thi, Chairwoman of Fast Capital Solution, remarked:

“This bond transaction stands out as a testament to GuarantCo’s innovative approach and commitment to Vietnam’s infrastructure financing. It highlights the Companies’ strategy to adopt a global perspective by securing a 20-year fixed-rate financing facility instead of relying on only traditional local financing sources. The success of this transaction also reflects the spirit of cross-border collaboration, involving 15 different stakeholders. The Companies’ exceptional deal team demonstrated dedication and strategic thinking throughout the process. We are proud to contribute to supporting Vietnamese corporate clients with sustainable financing solutions.”

Kang Moon Kyung, General Director of Mirae Asset Securities, stated:

“We are thrilled to partner with GuarantCo on this pioneering 20-year green (ICMA standards) bond for the Hoa Binh Xuan Mai project. This initiative will harness advanced water treatment technology to provide clean, reliable water to communities across Hanoi, Luong Son, and Hoa Binh, bringing a lasting positive impact to millions of residents and addressing the acute water scarcity in these regions. This partnership not only strengthens our commitment to sustainable development but also aligns with our vision to foster economic growth through job creation and enterprise support.  Together with GuarantCo, we are advancing towards a more resilient, water-secure future for Vietnam. This project will be the essence for developing ESG in the future as well as our commitment to contribute continuously to Vietnam’s economy.”

Nguyen Quang Thuan, CEO of FiinRatings, stated:

“This pioneering transaction is not just a drop in the ocean – it’s making waves in Vietnam’s sustainable finance landscape. As Vietnam’s leading credit rating agency and green bond verifier, we’ve set a new high-water mark by providing both the credit ratings and green verification for this landmark 20-year water infrastructure bond. This dual role showcases our unique capabilities in delivering comprehensive assessments that meet international standards. The transaction’s success demonstrates how our rigorous evaluation framework helps build investor confidence and charts the course for Vietnam’s growing sustainable finance market.“

Helena McLeod, Acting Director-General of Global Green Growth Institute (GGGI), said:

“GGGI works to unlock the power of the finance sector globally to accelerate a green and sustainable future. GGGI is pleased to support Hoa Binh, on this first of its kind green bond issuance in Vietnam’s water sector. With this and other similar sustainable finance initiatives in the country, supported by the Grand Duchy of Luxemburg, GGGI aims to help grow the demand for green and sustainable bond issuance in Vietnam furthering the potential of a green economy for a net zero transition pathway. Collaboration between private-public sector actors is vital for sustainable finance market expansion and is in line with the Government’s national green growth strategy and action plans and ambitions for a sustainable and inclusive development for its people.”