Following government directives, the Ministry of Industry and Trade is urgently requesting relevant agencies to develop plans to address 12 loss-making projects under its purview. One of these is the Dinh Vu Polyester Fiber Production Plant project, owned by Petrochemical and Fiber Corporation (PVTex).
Start a project when supply has already exceeded demand.
The Dinh Vu Fiber Plant ceased operations on September 17, 2015, due to a lack of working capital. At this time, PVTex no longer has the funds to carry out regular maintenance of its machinery and equipment. As of September 30, 2016, PVTex had accumulated losses exceeding VND 3,209 billion, and the project continued to have negative equity due to the depreciation of fixed assets.
An official from the Ministry of Industry and Trade acknowledged that the failure of the Dinh Vu fiber project was due to both objective and subjective factors. The fiber industry is closely linked to the oil market, making it difficult to avoid premature collapse due to the extreme fluctuations in oil prices. “When the project was underway, oil prices were at their peak, then they plummeted to only $50 per barrel. The principle of the market is that the rate at which product prices fall is even faster than the rate at which raw material prices fall, so stockpiling materials at high prices inevitably leads to losses when prices fall,” this official analyzed.
According to this source, the Dinh Vu Fiber Plant's premature demise was also due to limitations in thinking and perception, and errors in market forecasting, as it was established when the global fiber market already had a supply exceeding demand.
According to investigations, PVTex has "consumed" 1,602 billion VND of capital contributed by the Vietnam Oil and Gas Group (PVN) and cannot recover it. Experts believe that if the project is declared bankrupt according to the law, PVN will also have to pay off the outstanding long-term loan of over 4,925 billion VND that was guaranteed for the construction of the factory. Alternatively, if the option of maintaining production and then divesting is chosen, calculations suggest that costs could be recouped and profits could be made by 2019. However, the conditions for PVTex to achieve this are not simple. Specifically, shareholders must work with PVTex to thoroughly address the financial issues, overcoming the current "patchwork" situation by adjusting the total investment of the project or increasing the charter capital. At the same time, the Government must allow the application of an import tax rate of 3%-5% on DTY yarn products in the initial phase; The Ministry of Finance has allowed PVTex to receive an early refund of value-added tax on imported goods within 60 days and has permitted PVTex to defer depreciation until the end of 2017 to preserve its equity capital...
Based on the above analysis, industry experts believe that the most suitable solution given the current situation is to cooperate with a foreign partner. With this option, PVTex can initially cooperate with a foreign partner to produce PSF fiber products with a calculated capacity of 400 tons/day. After this phase, the project will move towards maintaining safe operation and generating sufficient revenue to cover costs.
Through the working process, PVTex has reached a preliminary agreement with its Singaporean partner on a cooperation plan for production and business, and a projected production and business plan for the coming period.
"The useless handsome guy"
Another project that drained the state budget was the Phuong Nam Pulp Mill Project, with the investor being the Industrial Development and Transportation Company Limited (Tracodi).
The project commenced in early 2004 with a total investment of 2,286 billion VND. Calling the project a "useless handsome man," an official in the industry and trade sector attributed its failure to a lack of understanding. He explained that the idea for this factory originated from the closure of an Indian jute packaging processing plant in Ho Chi Minh City, leaving behind an entire 14,000-hectare jute raw material area in Long An province.
“Jute paper is excellent and can be used for many things, but no one has yet done it on an industrial scale, only small factories with a few thousand tons in China. So we commissioned a partner to develop the technology for producing jute pulp. However, the manufacturer provided us with technology to produce American jute stalks as thick as a wrist and as hard as wood. As a result, when the factory was installed, it looked very beautiful, arguably the most beautiful in Vietnam, but when we put jute into operation under load, it didn't work,” this person said bitterly.
That's not to mention that the factory's product is a bleached thermomechanical pulp with a whiteness of about 80%, mainly used for newsprint production, and partly for printing or packaging paper. The domestic market can only use this product in small quantities due to various technical requirements. More importantly, the average import price of this pulp in the second quarter of 2013 was approximately 11.9 million VND/ton, while the factory's planned production cost for 2013 was 16.4 million VND/ton. With uncompetitive production costs, losses are inevitable.
Therefore, halting investment in the project and undertaking a complete restructuring can be considered one of the feasible options currently available. According to sources from the Nguoi Lao Dong newspaper, the Vietnam Paper Corporation has been tasked with urgently organizing a tender to select a consulting firm to appraise and determine the starting price as a basis for auctioning off the project's assets; simultaneously, recovering all debts and handling outstanding liabilities. The Corporation is currently evaluating the bids from the consulting firms that will appraise and determine the starting price.
Finding ways to save ethanol projects.
Three ethanol projects, out of the 12 projects named by the Ministry of Industry and Trade, are stalled: the Dung Quat Bio-Ethanol Plant, the Binh Phuoc Ethanol Plant, and the Phu Tho Ethanol Plant. Mr. Cao Hoai Duong, General Director of Vietnam Oil Corporation (PVOil), stated that the Ministry of Industry and Trade has instructed PVN, and PVN has also instructed PVOil, to find ways to save these projects. According to Mr. Duong, these projects serve the development of biofuels. One of the current difficulties is the market for ethanol. Therefore, when all RON 92 gasoline is replaced with E5, the demand for ethanol will increase, allowing the plants to operate at 100% capacity. "This is a very good opportunity to revive these plants," Mr. Duong observed.
Source: https://nld.com.vn/kinh-te/co-hoi-nao-cho-du-an-dap-chieu-20170406221919951.htm
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