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Nghi Son oil refinery bankrupt if not completed capital contribution procedures

Friday - 13/07/2018 22:12
If PVN does not complete the procedures for capital contribution, the lenders will not disburse and the Nghi Son Oil Refinery risk of default.
In a letter to the Ministry of Industry and Trade, PVN said that there are many problems in the process of completing the approval of the adjustment of total investment and state capital contribution in Nghi Son Refinery project.

"The capital contributors are urging PVN to complete in July to serve as the basis for contributing the remaining capital contribution proportionally, then the new lenders will disburse the portion of the loan as committed. Otherwise, the project may fall into a 'default' situation, PVN said.

The Nghi Son Oil Refinery project was approved on April 5, 2008 with the designed capacity of 8.4 million tons of crude oil per year with a total investment of $ 6.15 billion.

The Nghi Son Oil Refinery project was approved on April 5, 2008 with the designed capacity of 8.4 million tons of crude oil per year with a total investment of $ 6.15 billion.

In 2013, the project was approved by the management board of Nghi Son EZ for the fourth time, changing the total investment of the project to US $ 9 billion and chartered capital of US $ 2.4 billion. Total cost is $ 9.2 billion. The content of the loan application is $ 4.2 billion, and the loan is not more than $ 5 billion. This loan application was approved by the PVN Board of Members in February 2014 resolution.

However, according to the final investment decision of the project, the loan costs are more accurately determined, EPC contract prices are also updated at the new exchange rate, down from 5.25 billion dollars to 5,1 billion dollars. As the Nghi Son Refinery joint venture has pledged loans and capital contribution to banks, the reduction from the EPC contract is included in the project's reserve costs. The total cost of the project remains $ 9.2 billion.

PVN said that the current problems related to the adjustment of total investment, state capital contribution in the project. Firstly, because it is a 100% state owned enterprise, PVN needs to apply current regulations on management of construction investment costs. Meanwhile, the Nghi Son Refinery Joint Venture Company does not need to set up an adjusted investment project because of foreign capital contribution of less than 30%, just a report explaining the increase of total investment capital. PVN has requested this joint venture to set up a total investment adjustment, verification, appraisal ... in accordance with the regulations. However, the internal appraisal process has caused problems due to "there is a difference in many terms between old and current law ".

PVN's second difficulty is the disbursement of the remaining capital contribution in the refinery project over $ 9 billion. According to the commitments signed with the banks lending and government guarantee for the project, PVN will have to contribute investment capital to 9.2 billion USD, contributed capital from shareholders is 4.2 billion. However, the adjustment of total investment has not been implemented due to legal obstacles, so the group has not paid off the remaining capital contribution in the project.

Therefore, PVN urgently requested the Ministry of Industry and Trade to guide the solution soon.

Regarding this problem, Deputy Minister of Industry and Trade Dang Hoang An said at the online briefing meeting in the first half of 2018 that this is a big and complex issue. So, Ministries, branches and report to competent authorities for consideration and decision. He also requested the Department of Electricity and Renewable Energy to complete these reports as soon as possible, to the Ministry's leaders.

The project of Nghi Son Petrochemical Refinery (Thanh Hoa) located in Nghi Son open economic zone, Tinh Gia district, Thanh Hoa province has a capacity of 200,000 barrels of crude oil a day, equivalent to 10 million tons of crude oil per year. . This capacity is almost double Dung Quat oil refinery (Quang Ngai).

This project was jointly invested by four national and international investors, including PetroVietnam, Kuwait Petroleum International (Kuwait), Idemitsu and Mitsui Chemicals. (Japan).

This project is entitled to a number of incentives, including 10% corporate income tax for 70 years; Compensation (from PVN) for the period 2017-2027 if the tax rate applicable in the market is lower than the preferential tax rate; Exemption of corporate income tax for 4 years (average tax rate of 10% for 70 years only).

PVN is the product consumption unit of Nghi Son for 15 years, with the same time import prices plus import tax incentives 3-7% ...

In early May, the US $ 9 billion refinery was born the first commercial gasoline, delivered more than 5,000 cubic meters of RON92 gasoline, and is expected to operate commercially in August or September. Concerned that Nghi Son's products would be "not sold", at a six-monthly online meeting between the Government and local authorities, Thanh Hoa province's leaders suggested ministries and industries should have policies to restrict imports Petroleum to prioritize the use of this plant

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