The State Bank of Viet Nam and the World Bank on Wednesday signed a US$500 million loan for a project in support of Viet Nam's energy sector.

The funds will cover construction of over 1,000 kilometres of transmission lines and implement Smart Grid technologies to improve reliability and quality of electricity supply.

"Improving energy efficiency is critical for Viet Nam's ability to meet energy demand to power growth and maintain improvements in welfare," said Victoria Kwakwa, Country Director for the World Bank in Viet Nam.

"Energy efficiency improvements are also important for reducing Viet Nam's rapidly growing greenhouse gas emissions and contributing to climate change mitigation," she said.

The loan supports the $731.25 million Transmission Efficiency Project, which is expected to improve the capacity, efficiency and reliability of electricity transmission in areas that are key to economic development, including the greater Ha Noi Area, the greater HCM City Area, the Mekong Delta, and the central region.

The loan will finance transmission lines and substations, or about 15 per cent of the expected need for transmission network expansion by 2020.

The project targets key investment needs in major economic development areas where transmission overloads are already present or are expected in the very near term.

In addition, the project will support Smart Grid technologies for monitoring, control, and protection equipment to improve reliability and reduce electricity outages.

It will also help build capacity of the National Power Transmission Company by supporting its operational and financial independence, as part of a plan to pilot a competitive energy wholesale market by 2015.

The total financing requirement of the project is estimated at $731.25 million, of which $500 million will be funded by the International Bank for Reconstruction and Development, the World Bank Group's lending arm for middle-income countries.

The remaining $231.25 million will be financed by the National Power Transmission Company, Electricity of Viet Nam, according to a press release from World Bank Viet Nam.