The World Bank’s investment arm IFC has proposed a $39 million investment in BaF, a Vietnamese pork producer and feed mill operator.
This proposed financing is part of IFC Agribusiness’ African Swine Fever (ASF) Regional Recovery Program, an IFC disclosure on Tuesday showed. The proposal is for a VND600 billion ($25.85 million) convertible bond issuance and a VND300 billion senior bond, which has a higher priority.
The goal is to support BaF in growing its genetic breeding stock and breeding farms, IFC said. Specifically, the sites for this project include two feed mills, one in the planning stage while the other is under construction; one slaughterhouse and meat processing facility in the planning stage; and expansion of pig farm production capacity with 13 sow farms and 18 hog farms, planned in the 2022-2023 period.
Of these 31 farms, one is in operation, four are under construction, four are bidding for contractors, and five are in the planning stage. The remaining 17 farms were not yet identified at the time of the appraisal, IFC said.
According to the global investment firm, BaF’s farm expansion model is to identify suitable locations for pig farms, through either acquiring the land use right directly via self-build, own-and-operate, or engage partners to conduct construction under a lease back and/or rental arrangement.
Under the rental model, the landowner constructs the facility to the agreed design and technical specification then rents the finished unit back to BaF. For acquisition, BaF acquires the site from the landholder and develops the facility itself.
Meanwhile, the third farm expansion approach is to rent existing farms constructed by other owners with capital expenditures (CAPEX) to upgrade facilities via long-term lease agreements with the landowner.
CAPEX are funds used by a company to acquire, upgrade, and maintain physical assets like property, plants, buildings, technology, or equipment.
In all the farm expansion and development models, BaF would have management control over the facility and take direct responsibility for facilities, employing staff, and applying standardized BaF operating standards.
The economic life expectancy of the farm operation is 20 years. For all construction and refurbishments, BaF would engage construction contractors and its own team oversee the construction process, according to IFC.
BaF currently operates two feed mills with a combined production capacity of 254,000 tons per year, with a third mill set for completion this year at an annual capacity of 200,000 tons.
Its farming division owns a total of 13 pig farms, three commercial sow units and eight finishing farms across 13 provinces in Vietnam.