Investigation into PetroVietnam losses in Dinh Vu polyester

Dinh Vu polyester plant in Haiphong

Information related to PetroVietnam's acquisition of over 34.2 million shares of Vietnam National Textile and Garment Group (Vinatex) and Phong Phu Corporation in PVTex, such as procedures for the transfer of shares, related regulations, who decided the transfer, as well as the related groups and individuals will all be investigated by the functional authorities, according to thanhnien.vn.

The Government Inspectorate has issued the conclusion of the inspection at Dinh Vu polyester plant where they noted signs of irregularities in the capital contribution and capital transfer to PVTex.

Specifically, in 2007, PetroVietnam signed a co-operation agreement with Vinatex to implement the Dinh Vu polyester project in Hai Phong with the total initial investment of $324.8 million.

The legal entity established by PetroVietnam and Vinatex to manage the project as well as the project’s investor is PVTex, with, PetroVietnam holding 39 per cent, Vinatex 19 per cent, Phong Phu Corporation 5 per cent, while the rest belonged to other shareholders.

In 2009, with shareholders approving PVTex’s proposal to increase PetroVietnam’s capital contribution ratio to 56 per cent, and agreed that six shareholders would divest their 17 per cent holding in PVTex.

After this, PVTex only had five shareholders, including PetroVietnam, Vinatex, Phong Phu Corporation, PetroVietnam Finance Corporation (PVFC), and PetroVietnam Fertilizer and Chemicals Corporation.

Notably, since the establishment of PVTex, according to regulations, within 90 days from the date of issuance of the Business Registration Certificate, Vinatex was supposed to make its capital contribution, but it failed to do so.

In addition, PetroVietnam also lent VND229.6 billion ($9.98 million) to Vinatex and VND82 billion ($3.57 million) to Phong Phu to contribute charter capital to PVTex. These were among the transactions the Haiphong Police Department requested PetroVietnam to clearly explain.

In 2016, the Government Inspectorate discovered that PVTex had not completed the appraisal or made careful calculations about the project, which resulted in the project costing more than $363 million, far higher than the total initial investment of $324.8 million.

According to initial calculations, the Dinh Vu polyester project would recoup investment after eight years and eight months. However, the results from the trial run to commercial operations were continuously losses. The total loss during the three years (2012-2014) was VND1.47 trillion ($64 million), and by the end of 2015, the plant stopped operating completely, according to Tienphong.vn.

After that, the long-delayed Dinh Vu polyester plant officially resumed the operation of its draw texturised yarn (DTY) manufacturing workshop on April 18 last year.

Although PVTex suffered heavy losses, in December 2014, PetroVietnam received all the shares of Vinatex and Phong Phu Corporation in the polyester project.

According to the Government Inspectorate, in 2013, the prime minister approved the PetroVietnam Restructuring Scheme for 2012-2015, which required PetroVietnam to reduce its ownership ratio in PVTex from 56 to at least 36 per cent.

Therefore, PetroVietnam’s acquisition of the shares of Vinatex and Phong Phu Corporation at the unit price of VND10,000 ($0.43) while PVTex was in heavy losses has caused heavy debts and losses to PetroVietnam and were contrary to the PM’s directions.

Meanwhile, PetroVietnam has just appointed Le Manh Hung, deputy general director as its new general director, replacing Nguyen Vu Truong Son who has just resigned. This appointment may have caused concerns about a subsequent human resources crisis because PetroVietnam assigned Le Manh Hung to be in charge of PVTex, and so far his responsibility in the loss of thousands of billions of VND in Dinh Vu polyester project have yet to be clarified by the authorities.