BOT highway developer faces toll collection cessation sanction

This is one of the ‘ultimatums’ of Deputy Minister of Transport Nguyen Hong Truong to Bien Hoa-Vung Tau Expressway JSC (BVEC), the developer of the southern region’s 72km national highway 51, which stretches from Dong Nai’s Bien Hoa city to Ba Ria-Vung Tau province.

The developer was also urged to make the full contribution of their equity capital as regulated in the build-operate-transfer (BOT) contract before the May 31, 2016 deadline.

“After fulfilling their equity contribution, the developer needs to submit records to the Ministry of Planning and Investment in order to revise the project’s investment certificate as regulated by law,” Truong said.

The project oversight body, the Ministry of Transport’s (MoT) Project Management Unit 7, was also asked to guide the developer in drawing up the project’s financial scheme based on updated figures as well as a revised contract draft appendix.

These requirements were set by the MoT after they received a review report from the MoT’s PPP Project Steering Committee on law obedience pertaining to the National Highway 51 project.

According to the MoT, although the project contract was signed in 2009 following regulations set out in the 2007 governmental Decree 78/2007/ND-CP, some contract clauses as well as related sanction measures had not yet been made clear.

The largest unsolved issue at the project was the contribution of equity capital. The MoT’s appraisal results show that by the end of March 2016 the developer had only contributed VND115 billion out of the total VND307 billion, equal to just 37.5 per cent of the total equity capital needed.

The project was underway from the first quarter of 2009 to the fourth quarter of 2011.

In light of Clause 51 under governmental Decree 15/2015/ND-CP regulating the PPP investment model, six months after the project’s completion, the developer must complete finalisation procedures, before engaging in toll collection.

However, the project was put into use in 2012 and from that year the developer began collecting tolls, even though the finalisation procedures had not yet been completed. Significantly, the developer was reported to owe contractors about VND300 billion ($13.7 million).

However, in its latest statement to the MoT, the developer’s general director Pham Minh Hiep said that they only owed about VND71 billion ($3.2 million) to contractors, and placed the blame for the late payment squarely on the contractor’s shoulders.

“We did not get the needed co-operation from the contractors to tackle this late payment, despite our goodwill to resolve the issue,” Hiep said.

Developer BVEC said that the project’s current disposable capital of nearly VND300 billion was enough to make the payment to contractors. “If this is still insufficient, the shareholders have committed to making further contributions,” Hiep stressed.

Regarding BVEC’s duties, Truong from the MoT concluded that “If the investor failed to make the full equity contribution, or had yet to complete finalisation procedures after the above said deadlines, the Vietnam Road Administration shall co-operate with related authorised agencies to stop the investor’s toll collection. Postponement will last until the obligations are met.”