The situation of 12 major shelved projects: Is DAP No. 2 – Lao Cai overcoming its rough patch?

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Three ofVinamchem’s projects of fertilizer production (including NinhBinh Nitrogenous Fertilizer Plant Project, Ha Bac Fertilizer Plant Renovation and Expansion Project and DAP No. 2 – Lao Cai fertilizer plant project) have had their debtrestructured and interest rates adjusted by commercial banks. Photo: Internet

Financial difficulties

DAP No. 2 – Lao Cai fertilizer plant project has been temporarily handed over and put into commercial operation since July 2015. From then, due to difficulties in the consumer market, the plant reached acapacity of only 50% - 65% (below the designed capacity). By the end of the third quarter of 2016, the plant had to stop production for about four months due to a large inventory. By the end of the fourth quarter of 2016, the plant was operating again and only reached about 35% capacity due to unstable operation of the plant equipment after the production pause. The operation fluctuated in 2017 and 2018, by the end of the first quarter of 2019, the total output of the plant reached 49,160 tons; the total consumption volume reached 29,276 tons; the revenue reached 286,934 billion VND; the losses were66,306 billion VND. This figure decreased by 5.47 billion VND compared to the same period in 2018.

The Ministry of Industry and Trade said the problem of this project mainly focused on financial difficulties for production and business. In addition, the dispute of the EPC Contract had not been resolved, so the project could not be finalized and completed.

For the loss-making projects of Vietnam National Chemical Group (Vinachem) in general (including DAP No. 2 – Lao Cai fertilizer plant project), the Ministry of Finance has had many direct works to deal with issues of handling and restructuring loans, extending the depreciation rates of projects and enterprises.

Talking about the implementation of the scheme on dealing with shortcomings and weaknesses of a number of delayed, ineffective projects and enterprises at the beginning of July, Mr. Duong Duy Hung - Director of Planning Department (Ministry of Industry and Trade) saidup to now, four fertilizer projects of Vinachem haddepreciated from 2017 to 2019. According to estimates, depending on the implementation capacity, the companies could reduce their financial pressure from 180 to 310 billion VND/year. At the same time, the Ministry of Finance had studied and reported to the Government the proposed contents to the National Assembly on the drafting of the Law amending and supplementing a number of articles of the Special Consumption Tax Law and the Value Added Tax Law, Personal income Tax Law, Natural Resources Tax Law, Import and Export Tax Law to ensure its compatibility with the actual operation and increase the fair competition in a number of domestic manufacturing industries.

Equitization, divestment in enterprises

Mr. Hung addedfrom the perspective of the State Bank of Vietnam, the bank has also directed and instructed commercial banks and credit institutions to consider measures to restructure debts and reduce the loan interest rates for projects and businesses.

At the same time, consider continue lending in accordance with the provisions of law and market principles to ensure capital for production and business on the basis of feasible production and business plans of projects and enterprises.Accordingly, three ofVinamchem’s projects of fertilizer production (including NinhBinh Nitrogenous Fertilizer Plant Project, Ha Bac Fertilizer Plant Renovation and Expansion Project and DAP No. 2 – Lao Cai fertilizer plant project) have had debtrestructured and interest rates adjusted by commercial banksin the direction of reducing interest rates to reduce financial costs in difficult periods, continuously maintaining the limit of working capital to ensure sufficient capital for their production and business activities.

The Ministry of Industry and Trade statedthe handling of DAP No. 2 – Lao Cai fertilizer plant project in the future would follow the direction of clarifying responsibilities and damages caused by the parties.On that basis, re-evaluating the project and carry out the plan of divestment and equitization of the enterprise. In addition, for this project, it is necessary to continuously research and have plans to improve the quality of products as well as to thoroughly dispose of waste in the production process, ensuring not to recur the breakdown of the dike of PG gypsum dump, which affects the environment, ensuring environmental safety for people living around and the factory workers.

Regarding this issue, according to Vinachem, this group also directed its units to build the 3-year production and business plan (2018-2020) with the goal of escaping losses and conducting divestments in the units, at the same time, to inspect and supervise the units according to each subject; to actively work with related ministries and agencies to handle the problem of using PG gypsum as an additive in cement production,thereby handling gypsum waste in fertilizer production plants, minimizing the risk of environmental pollution, making the most of waste in fertilizer production.

In early 2017, DAP No. 2 – Lao Cai fertilizer plant continued to operate unstable production with low capacity (only about 35%). By August 2017, after actively reviewing the project's problems and drastically implementing technical measures, human resources and plant management, the plant's operating capacity was raised to about 85%, the product quality has met customers’ requirements, and the plant has gradually achieved more stable and effective production.