PM orders sale of multimillion dollar steel and iron plant

The sale and its conditions came as part of the prime minister (PM)’s directions during the monthly governmental meeting, when discussing solutions for the problems of Thai Nguyen iron and steel plant-phase 2.

The PM requested the Ministry of Industry and Trade (MoIT) to establish a working group to study potential solutions to save the project. Accordingly, the working group will build plans to sell the project or TISCO’s stake. In addition, the working group must assess the feasibility of negotiations between TISCO and contractor China Metallurgical Group Corporation (MCC) to continue the implementation of the project, as well as comply plans to call for investors in case the two parties fail to reach a compromise.

The MoIT has to submit its proposals to the PM before July 1.

Hoang Ngoc Diep, general director of TISCO, told Tienphong that if the expanded iron and steel plant will experience further delay in construction, TISCO will have to split the expansion from its existing plant, otherwise the company will certainly go bankrupt. The financial crisis came about as the company had taken up the entire debt volume of VND3 trillion ($134.8 million) for the project, while simultaneously shouldering interest payments of VND30 billion ($1.35 million) per month.

The plant’s construction was kicked off in 2007 under an 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 project’s expected cost increased from VND3.8 trillion ($170.4 million) to VND8 trillion ($361.4 million).

In 2012, the Chinese contractor, MCC, decided to stop implementing the project and returned to China, claiming the capital increase was too high and the investor had difficulty whipping up 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 finances necessary to continue implementing the construction. Notably, Vietnam Development Bank (VDB) and Vietnam Bank for Industry and Trade (VietinBank) will supply an additional 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 the construction.