Amending the contract and adding approximately 4,600 billion VND in state funding is perhaps the best solution to save the Bac Giang - Lang Son BOT expressway project from the risk of financial failure.
Benefits are balanced, risks are shared.
Exactly one month after receiving the request to complete the plan on solutions to address difficulties and obstacles in some BOT transport projects, the People's Committee of Lang Son province sent Report No. 402/BC-UBND to the Ministry of Transport on the implementation status and difficulties of the Bac Giang - Lang Son expressway BOT project. This is one of the BOT projects with the most "troubled" fate, considering both the implementation process (three changes of investor) and the toll collection process for capital recovery.
In Report No. 402/BC-UBND, Mr. Luong Ngoc Quynh, Vice Chairman of the People's Committee of Lang Son province, stated that the contents of the detailed 24-page report are the result of a meeting between competent state agencies, investors, project enterprises, and credit financing units ( VietinBank ) held in early August 2024.
The most notable point in the report is the proposal by the People's Committee of Lang Son province to amend the contract and supplement central government budget funds to resolve difficulties and obstacles for the Project.
Specifically, the People's Committee of Lang Son province requested the Ministry of Transport to consider reporting to the competent authority to provide central government budget support for the Project with an amount of approximately 4,600 billion VND as requested by the project enterprise, in order to compensate for the cash flow deficit during the toll collection period to ensure the financial plan (at that time, the Project's payback period would be approximately 28 years and 7 months).
The People's Committee of Lang Son province also requested the Ministry of Transport to report to the Government, the Prime Minister, and central ministries and agencies to issue mechanisms and policies to implement debt restructuring and maintain the same debt classification for the Project.
Previously, at the end of March 2024, in an effort to "rescue" the Project, the People's Committee of Lang Son province submitted Proposal No. 23/TTr-UBND requesting the head of the Government to consider and approve the policy of providing support from the central budget of approximately 5,600 billion VND (not exceeding 50% of the audited and finalized value of the Project) to compensate for the cash flow deficit during the toll collection period to ensure the financial plan and stable operation and exploitation of the project.
Reportedly, in order to reduce the state's support by 1 trillion VND, at a meeting attended by the "three parties" – the Lang Son Provincial Investment and Construction Project Management Board (representing the competent state agency); the investor, the project enterprise; and VietinBank (the sponsor) – the parties agreed to adhere to the Prime Minister's guiding principle when addressing difficulties and obstacles in the Project: "harmonizing interests and sharing risks".
Find the optimal solution.
Besides amending the contract and supplementing central government budget funds to support the Bac Giang - Lang Son BOT expressway project, the People's Committee of Lang Son province and the investor/financial sponsor are also considering two other options to resolve difficulties and obstacles: continuing to implement the contract and terminating the contract.
Regarding the contract-based implementation option, the People's Committee of Lang Son province stated that this is the option it has been applying for nearly five years. Continuing with this option would eliminate the need for additional state budget support for the project, but it presents a number of limitations that are difficult to address.
According to the People's Committee of Lang Son province, based on the actual traffic volume on the route and the projected growth rate for the following years, the financial plan calculations of the investor and project enterprise show that the payback period of the project is approximately 44 years and 11 months, while the initial payback period was 18 years and 3 months.
This creates difficulties not only for investors and project companies, but also for banks providing credit in the process of handling loans and restructuring the project's debt.
Furthermore, because the Project does not involve state budget funding and lacks a revenue-sharing mechanism, simply extending the toll collection period as stipulated in the contract, without any support or revenue sharing from the State, will not effectively resolve the Project's difficulties and obstacles.
Regarding the solution to terminate the contract, the People's Committee of Lang Son province stated that the competent state agency for the Project needs to allocate approximately 11,267 billion VND to pay for the costs incurred by the investor and project enterprise, which would immediately resolve the difficulties and obstacles of the Project. This will put considerable pressure on the state budget, investors will also suffer losses due to unprofitable investments, and the banks providing credit will not be able to collect the unpaid interest from the project's operational phase until now, leading to capital loss for state-owned enterprises.
Therefore, among the three proposed options, only amending the contract and supplementing it with central government budget support can resolve the difficulties and obstacles of the Project; while ensuring the Project continues to be implemented.
Source: https://baodautu.vn/truan-chuyen-du-an-bot-cao-toc-bac-giang---lang-son-d222855.html
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