Monday,  Aug 20, 2018,23:22 (GMT+7) 0 0
Lack of credit affects Dung Quat expansion project
By Ngoc Lan
Saturday,  Jul 21, 2018,17:01 (GMT+7)

Lack of credit affects Dung Quat expansion project

By Ngoc Lan

A view of Dung Quat oil refinery in the central province of Quang Ngai – PHOTO: TTXVN

HANOI - The expansion of the Dung Quat oil refinery in the central province of Quang Ngai is scheduled to start this quarter, but difficulties in financial arrangement may cause delays for the project.

According to the planned progress of the project, to raise the production capacity of the refinery from 6.5 million tons per year to 8.5 million tons, Binh Son Refining and Petrochemical Co., Ltd, (BSR) will open the first phase of the engineering, procurement and construction contract next month. If it goes smoothly, the expansion project will start commercial operations in 2022.

The capital arrangement plan was prepared two years ago and was published in a prospectus when BSR launched its initial public offering.

BSR recently confirmed that 30% of the capital amount of US$1,269 million was from equity and 70% was from loans, including loans from a foreign lender (another US$650 million). The firm’s own capital includes money flows remaining at the time of the equitization (some VND6 trillion) and profits generated from this year onward.

BSR is now selecting a domestic provider of commercial loans and a firm to arrange credit for the project.

Its plan to seek government guarantees to obtain foreign loans almost two years ago did not pan out as the government had tightened guarantees for medium-term foreign loans.

The plan to obtain preferential loans from domestic credit institutions and foreign loans via an arranger has also hit trouble as the arranger is a bank associated with the Vietnam National Oil and Gas Group and is incapable and inexperienced in credit arrangement.

Moreover, the loan amount of US$1,269 million, noted in the borrowing plan of last year, could rise due to the increasing exchange rate. Therefore, the borrowing plan, even if it goes well, will require hundreds of billions of dong per year due to the changing exchange rate.

In addition, domestic fuel products are ready to meet the Euro 4 emission standards in 2021. If products from the BSR plant are to meet these standards, the plant’s second phase must be put into operation as planned.

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