15-05-2025
Vingroup-backed VinSpeed wins initial backing for US$61.3 billion express rail project
[HANOI] Vingroup-backed VinSpeed has secured preliminary support from the Vietnamese government for its intention to invest in the North-South high-speed railway project, with a total investment of US$61.3 billion.
Government agencies have been asked to collaborate with VinSpeed to assess and finalise the investment proposal, which is a shift from the current public investment model to a private direct investment one, according to a notice dated May 15 issued by the government office and reviewed by The Business Times.
The parliament last November approved public investment for the US$67 billion national express railway connecting Vietnam's two metropolises, Hanoi and Ho Chi Minh City.
According to a plan issued on Apr 23, Vietnam aims to begin construction of the railway in 2026 and put it into operation from 2035. The bullet train will travel about 1,500 km across 20 cities and provinces at 350 kmh.
Meanwhile, under the latest proposal, VinSpeed seeks to receive approval to start implementing the project in December this year. It pledges to bring the railway into operation after five years upon receiving the cleared sites handed over by the state.
The proposed total investment of US$61.3 billion excludes expenses related to site clearance and resettlement, which will be handled by the state.
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Family firm of Vietnam's richest man
VinSpeed was founded by Vingroup chairman Pham Nhat Vuong and his family members in May, with a charter capital of six trillion dong (S$300.6 million). Vietnam's largest private conglomerate Vingroup is also a shareholder that owns a 10 per cent stake in the railway development firm.
According to the proposal dated May 6 and seen by BT, VinSpeed has committed to contributing 20 per cent of the total investment into the rail project, equivalent to US$12.3 billion, using its own resources and capital mobilised from other sources.
The firm seeks to finance the remaining amount through zero-interest loans provided by the state Budget, with a 35-year term and repayment deferred until the due date.
VinSpeed has also proposed being designated as the investor for several urban and real estate projects on land surrounding the railway stations to generate additional income, along with tax exemptions on the import of equipment, materials and machinery for the rail construction, operation, and maintenance.
Other suggested incentives include setting train fares at 60 to 75 percent of the ceiling airfare and allowing a 99-year investment term for the project.
Those special mechanisms and policies outlined in VinSpeed's proposal will be reviewed by competent authorities and reported to the Standing Board of the Government's Party Committee by May 22.
It will subsequently be submitted for parliament's assessment during the ongoing ninth meeting session, which will run until the end of June.
Stronger participation of private sector
The government views this move as aligned with the Communist Party of Vietnam's landmark resolution on May 4 about private sector development.
Locally referred to as the 'Resolution 68', the ruling Communist Party has explicitly encouraged private firms to participate in national-scale initiatives and projects, including the development of high-speed rails, metro lines, power and digital infrastructure, green transportation and defence sectors.
This is part of the South-east Asian nation's ambition to foster the rapid growth of home-grown, mid-to-large private enterprises into internationally recognised corporations.
'This opens new doors that were previously reserved for state-owned enterprises, potentially creating the next generation of national champions,' Dang The Duc and Pham Hoang Vu at Vietnam-based law firm Indochine Counsel wrote in a recent note.
Ensure capital safety
Prior to the establishment of VinSpeed, Vingroup also proposed to invest in a US$4 billion metro line connecting Ho Chi Minh City's District 7 and Can Gio coastal urban area.
In March, the Vietnamese conglomerate submitted a proposal to develop major power projects including liquefied natural gas, solar and wind plants. The projects are worth between US$25 billion and US$30 billion by 2030, with a generation capacity of 25.5 gigawatts (GW) for a start, and an additional 27 GW in the following five years.
At the annual general meeting of Vingroup shareholders in Hanoi last month, chairman Vuong affirmed that the conglomerate would ensure capital safety in its venture into the electricity sector.
The group plans to finance those power plants with 15 per cent from its own capital, 35 per cent from bank loans and 50 per cent through engineering, procurement and construction (EPC) contracts.
In these EPC agreements, the contractor typically handles upfront costs and risks, while the investor pays as milestones are met to ensure efficient cash flow management.
By the end of the first quarter of 2025, Vingroup's equity was 157.4 trillion dong. Meanwhile, its debt stood at 251.5 trillion dong, making up 61.5 per cent of the total debt and equity.
'This means that (Vingroup) is leveraging debt more than equity, but still at a safe level,' said Steven Woo, research manager at Ho Chi Minh City-based brokerage firm VNDirect Securities.
Woo also believed that those newly announced ventures would not affect the group's financial health.
In a May 15 interview with local newspaper Thanh Nien, Dao Thuy Van, deputy chief executive of VinSpeed, emphasised that the company operates independently of Vingroup and would not place financial burdens on the conglomerate's shareholders.
'Instead, companies within Vingroup's ecosystem are expected to benefit from the transit-oriented developments along the high-speed rail route,' she added.
