Multimillion-dollar steel and iron plant on the verge of death, waiting for contractor

photo source Vnexpress

The plant’s construction was kicked off in 2007 under the engineering, procurement and construction (EPC) contract with the initial investment capital of VND3.8 trillion ($170.4 million). The facility has a designed capacity of 500,000 metric tonnes of iron and steel products per year.

In 2009, the expected cost of the project increased from VND3.8 trillion ($170.4 million) to VND8 trillion ($361.4 million).

In 2012, the Chinese contractor namely China Metallurgical Group Corporation (MCC) decided to stop implementing the project and returned to China because the increase is too high while the investor had difficulty arranging capital after disbursing more than VND4.5 trillion ($216.35 million) for the project. Thus, the project’s construction has been delayed for four years.

On March 29, TISCO announced that it can currently arrange the financial issue to continue implementing the construction. Notably, Vietnam Development Bank (VDB) and Vietnam Bank for Industry and Trade (VietinBank) will supply an added loan of VND1.3 trillion ($58.7 million) and VND1.1 trillion ($49.6 million), respectively. Besides, State Capital Investment Corporation (SCIC) will contribute a total capital sum of VND1 trillion ($45.1 million).

However, TISCO has yet to negotiate with MCC to continue to implement the construction.

Besides the negotiation, TISCO has plans to maintain and repair the rusted machinery with an expenditure of VND90 billion ($4.1 million). TISCO has to pay the contractor VND100 billion because the machinery is downgraded during the past years due to the delay. The total maintaining and repairing fee and compensation, in collaboration with other arisen fees during the project’s delay period make the project suffer a huge cost overrun of VND9 trillion ($406.5 million).

In early March, in order to decrease the construction cost, TISCO asked for an exemption from import tariffs worth VND530 billion ($23.9 million) on the contractor’s equipment. Besides, the company proposed VDB exempt it from paying an interest worth VND386 billion ($17.4 million) from its initial loan and asked VietinBank exempt it from paying half of the interest for its loan.

TISCO is 42.11 per cent owned by Vietnam Steel Corporation and 35.21 per cent by SCIC. By the end of 2015, TISCO had total assets of VND10.9 trillion ($492.4 million) with a debt of VND8.4 trillion ($379.4 million), including short-term debts of VND2.8 trillion ($126.4 million) and long-term debts of VND4.01 trillion ($181.1 million), according the company’s latest report.

Further information on this issue can be read on VIR print to be published on April 11, 2016