PetroVietnam willing to let Dung Quat Shipbuilding go bankrupt

PetroVietnam is willing to let Dung Quat Shipbuilding Co., Ltd. fall without recovering its $221 million investment

On July 25, PetroVietnam, the owner of Dung Quat Shipbuilding, submitted plans to deal with the ailing company to the government and the Ministry of Industry and Trade (MoIT).

Notably, first, PetroVietnam will put the company on sale. In case the company proves unmarketable, the company will be permitted to go bankrupt and then the company’s assets will be sold through competitive bidding.

PetroVietnam also asked MoIT to propose the prime minister to assign the State Audit of Vietnam to audit the dossiers of a 104,000 DWT tanker to determine its value in order to complete the handover between PetroVietnam and Vietnam Shipbuilding Industry Corporation (SBIC).

PetroVietnam has been waiting for the authorities’ answer.

Previously, Phan Tu Giang, director of Dung Quat Shipbuilding, said that the company has not stopped operating yet and the losses are accumulating.

However, Nguyen Vu Truong Son, general director of PetroVietnam, said that going bankrupt is the best solution for Dung Quat Shipbuilding, although PetroVietnam will continue to bear Dung Quat Shipbuilding’s debt afterwards.

However, if the company closes, the asset value that it acquires from bidding will still be lower than its debt, thus PetroVietnam will not recover its investment capital worth over VND5 trillion ($221.07 million).

Dung Quat Shipbuilding was established in 2006 as a member of SBIC, formerly Vinashin. In 2010, the company was transferred under the management of PetroVietnam. After taking over the management of the company, PetroVietnam pumped VND5.1 trillion ($225.49 million) into the company, including a charter capital of nearly VND2 trillion ($88.4 million) and VND3.1 trillion ($137.1 million) for paying its debts.

The company has been incurring cumulative losses in the billions of dollars. Figures showed that by the end of June last year, the shipbuilder’s total debts were VND6.89 trillion ($304.6 million), accumulated losses VND3.68 trillion ($162.7 million), and negative equity VND1.18 trillion ($52.2 million).

The shipbuilder’s equipment was described as inappropriate and out of date, and had failed quality requirements for manufacturing and production processes, resulting in large annual depreciation costs for the shipbuilder, according to the ministry’s assessment, as reported by newswire vneconomy.

The firm was one of additional loss-making projects reported recently by MoIT, raising the number of failing projects to 12.

The projects, five of which invested by PetroVietnam and four by national chemicals corporation Vinachem, include Dinh Vu Polyester Plant, Phuong Nam Pulp Factory, Thai Nguyen Iron and Steel Joint Stock Corporation, Dung Quat Bioethanol Plant, Ninh Binh Fertiliser Plant, Ha Bac Fertiliser Plant, DAP 1 Lao Cai Fertiliser Plant, DAP Fertiliser 2 Haiphong, Ethanol Binh Phuoc, Ethanol Phu Tho, Dung Quat Shipyard, and Lao Cai Steel Plant.

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