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Ninh Binh Fertilizer Plant is the most complicated project of 12 projects. Picture: ST.

Hard to resolve disputed EPC contracts

Report submitted to the National Assembly members about the situation and results of treatment of projects, enterprises with slow progress or ineffective in the industry recently said: For the project, enterprises have problems, disputes over EPC contracts including three plant projects under Vietnam Chemical Group, Ninh Binh Fertilizer Plant Project, Ha Bac Fertilizer Plant Project, DAP fertilizer plant No. 2 - Lao Cai; 3 projects of PetroVietnam, including Quang Ngai biofuel production plant, biofuel production plant Phu Tho Polyester Fiber Factory and DQS Company; 1 Project under Vietnam Steel Corporation is the expansion project of the second phase of Thai Ngoc Steel Company, that so far has not been resolved according to the set schedule. Some cases cannot be settled and must be brought to international arbitration.

In particular, for three fertilizer plant projects, which are not settled by the parties, the dispute settlement procedures at the International Arbitration Center must be prepared. For the Dinh Vu polyester fiber factory, after a lengthy dispute with EPC contractor Huyndai Construction Company (HEC), the two sides have agreed to resume negotiations in the direction of reconciliation. The HEC contractor is considering proposals from PVN and PVTex. For the remaining projects, they are still working to resolve the disputes but have not reached agreement with the contractors for dispute resolution and final solutions.

Specific recognition from enterprises in the chemical industry, according to Nguyen Phu Cuong - Chairman of the Board of Chemicals Vietnam (Vinachem), one of the current problems is the interest payment for units’ loans are very large, accounting for more than 30% of product price. "For example, in Ha Bac Fertilizer Plant, the total cost of finance and interest of all kinds in 2018 is over 850 billion VND," Mr. Cuong said.

Challenge to secure resources

In addition to processing EPC contracts, the lost projects and enterprises in the trade and commerce industry still face the problem of mobilizing and ensuring resources to solve difficulties.

According to the Ministry of Industry and Trade, for some projects, corporations and investors are confused in directing state shareholders to raise capital and supplement resources to resolve project difficulties in accordance with the Law on Enterprises, the Law on Management and use of State capital invested in production and business in enterprises, and at the same time, it is ensured that the State does not allocate more capital to projects. In addition, some projects, especially fertilizer projects of Vietnam Chemical Group, are facing with difficulties in working capital loans for commercial production. Applying loans in the form of "collecting 10 and re-lending only 9 parts" after each production cycle, leading to difficulties and shortages of production capital for the project; Cost of inputs for fertilizer production increased.

In addition, some projects have delayed depreciation and debt restructuring, but some projects still remain unprocessed. Therefore, they still have difficulties in allocating resources for main activities for dealing with shortcomings, bottlenecks as well as working capital arrangement for production and business activities (Dinh Vu polyester fiber plant project, Fuel Factory project biology of Quang Ngai...). Notably, some projects have negative equity, so it is difficult to arrange funds to carry out the work to start and re-operate the plant and stabilize the production activities (the Binh Phuoc Biofuel Production Plant project, Ninh Binh Fertilizer Plant Project, DAP Fertilizer Plant Project No. 2 - Lao Cai, DQS).

Referring to the debt issue, recently, Vinachem has reported the status of debt repayment investment projects for Ninh Binh Fertilizer Plant. According to Vinachem, this unit has not paid enough of the debt due on the project investment loan to the Vietnam Development Bank (VDB). Specifically, in the period 2008 - 2010, Vinachem signed two loan contracts with the total amount of loan commitments of 3.340 billion VND and 76 million USD (4.7770 billion VND respectively). Outstanding loans of these two credit contracts as of 31st August, 2018 reached 2,658 billion VND and 1.69 million USD. In the first nine months of this year, the amount payable under the VDB announcement included principal, interest accrued in September and principal, unpaid overdue interest from January to August totaling 473.3 billion VND and 324,700 USD. However, Vinachem paid back 50 million VND and 324,700 USD. "Due to the current financial situation, the Group is unable to arrange funds to repay all outstanding loans to VDB in 2018. The Group is only able to arrange to pay VDB a part of due principal and interest", Vinachem’s report stated.

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Mr. Hung said: "The projects are large investment projects, carried out over many years and raised many problems in terms of exchange rate, depreciation, financial expenses..., along with that, it is necessary to consider and ensure the overall handling of issues related to employment for laborers, socio-political stability, national defense and security... so as to continue thoroughly handling the project is not simple in the future. This requires mobilizing more resources and directing more drastic measures, ensuring the close coordination among agencies and units in the political system in order to achieve the set objectives, solutions and plans."