A positive outcome is unlikely for the BOT project to expand National Highway 51 from Km0+900 to Km 73+600 due to significant differences in viewpoints between the competent state authorities and the project enterprise.
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| The BOT project for National Highway 51 has a more complex history than other BOT projects implemented from 2012 to the present. |
Waiting for instructions on how to proceed.
The process of resolving the obstacles at the Investment Project for the Expansion of National Highway 51, section from Km0+900 to Km 73+600, passing through Dong Nai and Ba Ria - Vung Tau provinces under the BOT contract form (National Highway 51 BOT Project), is unlikely to conclude in the near future, given the latest developments related to this project with a particularly complex fate.
Just before the Lunar New Year holiday of the Year of the Dragon 2024, the Government Office issued Official Letter No. 906/VPCP-CN conveying the directives of Deputy Prime Minister Tran Hong Ha regarding the handling of outstanding issues of the BOT National Highway 51 Project to the Ministry of Transport (the competent state agency) and Bien Hoa - Vung Tau Expressway Development Joint Stock Company (BVEC - the project enterprise).
Accordingly, considering the report of the Ministry of Transport (Document No. 15229/BGTVT-CĐCTVN dated December 29, 2023) on handling the investor's request for the BOT National Highway 51 Project, Deputy Prime Minister Tran Hong Ha assigned the Ministry of Transport to continue handling the investor's request according to its functions, duties, and the signed contract. The Ministry of Transport is to report the results of the handling within its authority.
This is the second time in less than two months that government leaders have had to provide guidance on outstanding issues and obstacles at the National Highway 51 BOT Project. Previously, in Official Letter No. 8793/VPCP-CN dated November 9, 2023, the Government Office stated that, in accordance with the Prime Minister's directive and the investor's request for the National Highway 51 BOT Project, Deputy Prime Minister Tran Hong Ha assigned the Ministry of Transport (as the competent state agency and the agency signing the BOT contract) to coordinate with the Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Justice to work with the investor of the National Highway 51 BOT Project to consider and resolve, within their authority, the investor's legitimate requests in accordance with the law on PPPs, based on the principle of risk sharing and harmonious benefits.
"If necessary, Deputy Prime Minister Tran Hong Ha will chair a meeting to consider and resolve the investor's request regarding matters under the authority of the Prime Minister, based on the report of the Ministry of Transport," Official Document No. 8793/VPCP-CN clearly states.
Approximately 1.5 months after the aforementioned directive, the Ministry of Transport sent Official Letter No. 15229/BGTVT-CĐCTVN to Deputy Prime Minister Tran Hong Ha to report on the handling of the investor's request for the BOT National Highway 51 Project. Notably, in this letter, the Ministry of Transport did not provide any specific solutions to address the differences in viewpoints between the competent state agency and the project enterprise.
According to the Ministry of Transport, out of the 64 BOT projects managed by the ministry as of the end of 2024, most have been completed and are in operation. Some projects have temporarily suspended toll collection due to the expiration of the payback period. The remaining issues and obstacles in the final settlement process mainly concern projects with contracts signed between 1997 and 2023.
During this period, BOT project contracts (including the National Highway 51 BOT project contract) included equity preservation fees, with the toll collection period generating profit in the financial plan. From 2009 to the present, BOT projects have not included equity preservation fees in their financial plans, only calculating the profit on equity during the operational phase, thus avoiding problems during final settlement.
Regarding the capital preservation fee, the Ministry of Transport stated that in Notice No. 336/TB-KTNN dated August 11, 2017 and Notice No. 337/TB-KTNN dated August 11, 2017, the State Audit Office recommended that the Ministry of Transport reduce the capital preservation fee for 9 BOT contracts for the operational phase in the financial plan (including the National Highway 51 BOT Project).
Following the State Audit Office's recommendations, the competent authority assigned by the Ministry of Transport to finalize the project accounts, the Vietnam Road Administration, negotiated with investors to settle the contracts. "However, the settlement process faced difficulties and obstacles because some investors did not agree with the State Audit Office's deduction regarding the equity preservation fee. To date, the Vietnam Road Administration reports that the equity preservation fee has not been included in the financial plan for 5 out of 9 contracts," stated Official Letter No. 15229/BGTVT-CĐCTVN.
Regarding the toll collection period for profit generation, the Ministry of Transport stated that 13 out of 64 BOT contracts include clauses calculating the toll collection period for profit generation in their financial plans. During project implementation, some contract conditions changed, leading to negotiations and adjustments by the parties to redefine the payback period, as well as the toll collection period for profit generation by the investor.
To date, the Vietnam Road Administration has negotiated and agreed with investors on a plan to adjust the toll collection period to generate profit for 7 out of 13 BOT contracts (basically, the return on equity is similar to the return on equity of BOT projects from 2012 to the present), while negotiations are still ongoing for the remaining 6 out of 13 BOT contracts.
The Ministry of Transport acknowledges that the aforementioned issues are all difficult problems, and the relevant legal regulations are incomplete or unclear, leading to difficulties between parties during the settlement process of some contracts.
Regarding the BOT National Highway 51 Project, following the Prime Minister's directive, on November 15, 2023, the Ministry of Transport chaired a meeting, coordinating with the Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Justice to work with the investor and lending banks.
"The Ministry of Transport has established an independent review team to examine and resolve the investors' requests in order to address the outstanding issues and obstacles of the aforementioned projects (including the National Highway 51 BOT Project) in accordance with the Government's directives and the conclusions of the State Audit Office for each project," a leader of the Ministry of Transport informed.
The investor wants to continue collecting fees.
The BOT project for National Highway 51 has a more complex history than other BOT projects implemented from 2012 to the present. Specifically, before the project was implemented, the Ministry of Transport had already undertaken a project to expand National Highway 51 using loan capital from the Vietnam Development Bank (VDB), with repayment through toll revenue at toll station T1 on National Highway 51.
However, due to the lack of investment efficiency, the Ministry of Transport proposed that BVEC acquire the right to collect tolls at toll station T1 with a contract value of 400 billion VND, a fixed interest rate (7.75%/year), and no profit for the investor. Subsequently, during the process of formulating the investment plan for the expansion of National Highway 51, the value of the transfer of toll collection rights at toll station T1 was included in the total investment of the project.
According to the contract signed between the Vietnam Road Administration and BVEC in 2009, the capital recovery period for the principal contract transferring the right to collect tolls at toll station T1 was July 10, 2013; the total toll collection period for the National Highway 51 expansion investment project is approximately 20.66 years, of which the capital recovery period is approximately 16.66 years (from August 3, 2012 to March 27, 2029); and the profit-generating period is 4 years (from March 28, 2029 to March 28, 2033).
By the end of February 2017, the toll collection period for the Project was adjusted to 20 years, 6 months, and 11 days, i.e., from July 1, 2009, to January 12, 2030. This includes 4 years and 24 days of collection under the toll collection rights sale contract at station T1 (from July 1, 2009, to July 24, 2013) and 4 years of toll collection for profit generation.
By the end of 2018, due to some changes related to input factors and recommendations from the State Audit Office, the Vietnam Road Administration recalculated the toll collection period for profit generation. The method chosen by the competent state agency to recalculate the toll collection period for profit generation was the expected profit method (which is the profit the investor earns over 4 years of toll collection according to the financial plan, excluding capital preservation interest for both the construction and operation phases). After recalculation, the Vietnam Road Administration reduced the profit generation period from 4 years to 9 months.
To prevent BVEC from collecting tolls beyond the permitted time, on January 9, 2023, the Vietnam Road Administration issued Document No. 137/CĐBVN temporarily suspending toll collection at toll stations under the BOT National Highway 51 Project from 7:00 AM on January 13, 2023.
It should be added that the toll collection period for profit generation is among the five groups of issues where there is a significant discrepancy between BVEC and the Vietnam Road Administration during the settlement process and the determination of when to stop toll collection for the BOT contract of the Project. The remaining four groups of issues include: equity capital preservation fees; interest on loans used to pay bank interest and the use of revenue to pay contractors; toll revenue for the period 2009-2015; and the method of calculating interest on deductions during the operation phase.
In Document No. 109/CT-TCKT dated October 2, 2023, sent to the Prime Minister to propose solutions to obstacles and administrative measures causing damage to investors of the BOT National Highway 51 Project, BVEC representatives affirmed that the Vietnam Road Administration's unilateral imposition of a reduction in the profit-making period and the forced suspension of toll collection has prevented the project enterprise from repaying the remaining investment loans worth VND 470 billion to the three financing banks; and from recovering VND 307 billion to shareholders who contributed capital…
“The Vietnam Road Administration’s unilateral suspension of toll collection and premature termination of the contract will lead to legal disputes between the parties. Because the waiting time for the final ruling is expected to be lengthy, it will lead to further significant costs, which ultimately VEC will bear,” worried Mr. Dinh Hong Ha, General Director of BVEC.
Reportedly, in Document No. 109/CT-TCKT, BVEC proposed to retain the capital preservation fee during the investment and operation phases; and to maintain the 4-year profit-generating period as stipulated in the signed contract and its appendix. The project enterprise also requested the Prime Minister to direct the Ministry of Transport and the Vietnam Road Administration to review and renegotiate with the investor the costs (mainly interest payments) that had been reduced by the Vietnam Road Administration.
"If the above proposal is approved, assuming BVEC is allowed to resume toll collection on January 1, 2024, then the project enterprise will continue to collect tolls to generate profit until August 27, 2027," VEC leaders calculated.
Over the past period, the Vietnam Road Administration has negotiated with the investor of the BOT National Highway 51 Project and related agencies 19 times to address several outstanding issues of the project, such as: the toll collection period for profit generation, the equity preservation fee during the construction and operation phases, the toll revenue from 2009-2015, and interest on loans for deductions as recommended by inspection and auditing agencies… However, the parties have not reached a consensus on these issues.
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