The possibility of choosing an investor for the Sapa Airport Project remains unknown.

The possibility of choosing an investor for the Sapa Airport Project remains unknown.

The possibility of a successful bidding to select an investor for the Sapa Airport Construction Investment Project under the public-private partnership (PPP) method remains unknown, although the competent state agency has proposed to adjust the financial plan.

Perspective of Sapa Airport

Long payback period

After 6 months of urgent implementation, the Interdisciplinary Appraisal Council has just issued Report No. 9832/BC to the People's Committee of Lao Cai province on the appraisal results of the Pre-Feasibility Study Report adjusting the Sapa Airport Construction Investment Project under the PPP method.

The Ministry of Planning and Investment - the standing agency of the Inter-sectoral Appraisal Council, said that 10/10 Council members agreed to approve the Appraisal Report (accounting for 100%), of which 5/10 members agreed to approve, with no other opinions (accounting for 50%); 5/10 members agreed to approve with comments to complete the Draft (accounting for 50%).

Pursuant to Decree No. 35/2021/ND-CP dated March 29, 2021 detailing and guiding the implementation of the Law on Investment under the PPP method, the number of members voting in writing is 10/10, accounting for more than 2/3 of the number of members to be eligible to approve the Report on appraisal results of the Project Adjustment Pre-Feasibility Study Report.

On the basis of the appraisal dossier, the Interdisciplinary Appraisal Council requests the People's Committee of Lao Cai province to base on the Appraisal Report and opinions of relevant agencies, appraisal opinions of Council members to study, fully absorb, complete the Pre-Feasibility Study Report to adjust the Project and take full responsibility for the accuracy of the dossier, legal basis, data, documents of the Project and the explanation contents according to the provisions of law.

“After fully absorbing and completing the above contents, the Project Adjustment Pre-Feasibility Study Report is eligible to be submitted to the Prime Minister for consideration and decision on adjusting the investment policy,” stated Appraisal Report No. 9832 signed by Mr. Nguyen Chi Dung, Minister of Planning and Investment, Chairman of the Interdisciplinary Appraisal Council.

It should be added that, although the proposed adjustments to the Pre-Feasibility Study Report to adjust the Project have been approved, in Appraisal Report No. 9832, the Interdisciplinary Appraisal Council still has many concerns about the selection of investors for Component Project 2 - Construction of an airport under a BOT contract with a total investment of up to VND 6,948,845 billion.

According to the Inter-sectoral Appraisal Council, in Explanation Document No. 5813/UBND-XD dated October 15, 2024, Lao Cai Provincial People's Committee said that many more favorable conditions have appeared to attract investment, such as the advantage of state capital participating in the Project increasing from 39.29% to 49.16% of the total investment, favorable site clearance; the shortest payback period compared to previously implemented PPP airports.

Specifically, the Sapa Airport Project is expected to recover capital within 43 years and 11 months; the Van Don Airport Project will recover capital within 46 years; and the Quang Tri Airport Project will recover capital within 47 years.

However, the Inter-sectoral Appraisal Council believes that the capital recovery period of the Project is still very long, about twice as long as the capital recovery period of road projects under the PPP method.

To ensure feasibility in deciding to adjust the investment policy, the Interdisciplinary Appraisal Council requested the People's Committee of Lao Cai province to clarify and take responsibility for the proposal to increase state capital in the total investment of the Project, which will ensure attracting investors to participate through working sessions and seminars to listen to investors' wishes, avoiding the situation where the Prime Minister approves the adjustment of the investment policy, but still has no interested investors.

In addition, Lao Cai Provincial People's Committee needs to continue researching solutions to increase the attractiveness of the Project, such as price framework, fees, investment guarantee mechanism to ensure the feasibility of mobilizing investors and credit capital for the Project.

“On that basis, Lao Cai Provincial People's Committee is responsible for the proposals to the Prime Minister and deploys the survey of interest, bidding to select investors to implement the Project in accordance with current regulations,” the Appraisal Council recommended.

Fragile financial plan

Previously, Lao Cai Provincial People's Committee posted a notice to survey investors' interest in Component Project 2 - Airport construction within 1 month (from November 3, 2021 to December 3, 2021).

As a result, there were 2 interested investors, including Fansipan Sapa Cable Car Tourism Service Company Limited under Sun Group Corporation and T&T Group Joint Stock Company. However, after 2 invitations to bid for investors (August 2022 and December 2022), no investors submitted bid documents.

Lao Cai Provincial People's Committee said that investing in airport infrastructure requires a huge amount of capital, while the long payback period, along with the impact of the Covid-19 pandemic, as well as difficulties in the real estate sector, have made investors no longer interested in the project.

It should be added that the lack of investors submitting bidding documents is one of the reasons why Lao Cai Provincial People's Committee proposed to adjust the Pre-Feasibility Study Report of the Sapa Airport Construction Investment Project under the PPP method.

Specifically, the total State budget capital participating in the Project according to the adjustment proposal of Lao Cai Provincial People's Committee is 3,456 billion VND, an increase of about 726 billion VND compared to the previous approval of the Prime Minister. It is expected that the additional State budget capital for the Project will be self-balanced by Lao Cai Provincial budget in the period of 2024-2027.

The increased State capital contribution has made the Project have a financial Net Present Value (NPV) of VND 4,959 billion; Financial Internal Rate of Return (IRR) of 9.356%; Benefit-Cost Ratio (B/C) of 1.01; Return on Equity (ROE) of 10.6%; Weighted Average Cost of Capital (WACC) of 9.346%; Payback Period of 43 years and 11 months.

The Inter-sectoral Appraisal Council believes that the financial indicators of the Project have not improved significantly, only reducing the capital recovery period by 3 years. If the exploitation flow decreases by 5%, the Project will not be financially feasible (net present value is negative 206,424 billion VND).

“Because the Inter-sectoral Appraisal Council did not hire a consultant to review, the Lao Cai Provincial People's Committee needs to direct functional units to continue reviewing and ensuring the completeness and accuracy of revenue and cost factors... to update the financial indicators of the Project, ensure a feasible financial plan, submit to competent authorities for consideration, decision and take responsibility for the honesty and accuracy of the reported data", Appraisal Report No. 9832 clearly stated.

Source: https://baodautu.vn/kha-nang-chon-nha-dau-tu-cho-du-an-san-bay-sapa-van-la-an-so-d231573.html