Projects get cement shoes

Five major cement projects critically short of capital sources for debt repayment all belong to state groups and corporations. They are Dong Banh, Cam Pha, Thai Nguyen, Tam Diep and Halong cement plants.

The Halong cement project, developed by Song Da Group’s Ha Long Cement JSC, reported initial investment capital of VND4 trillion ($190.4 million).

Total investment capital was then scaled up by VND2.776 trillion ($132 million) due to extending construction, 45 months delayed. The cement plant came into operation from early 2010 and by the end of March 2012 it incurred VND1.215 trillion losses ($57.8 million) on the back of tremendous borrowing cost VND5.196 trillion ($247 million).

After 2012’s first quarter developer Halong Cement JSC sought loans to pay back over VND2 trillion ($95 million). The company current faces paying due debts amounting to VND1.2 trillion ($57 million) during 2012-2015.

In the present context of financial constraints the company would further source loans to pay back this huge sum, according to a company source.

The Ministry of Finance (MoF) when checking cement projects using loans with the government acting as underwriter detected that during investment Halong Cement’s Management Board had ratified the cement project’s investment cost of VND1.8 trillion ($86.7 million) channeling into conveyer belt facilities, infrastructure and associated port earmarked to serve two cement production lines. However, in fact just one line was installed.

The project’s investment ratio of VND3.296 million ($157) per tonne was also higher than that at other cement projects such as it was VND2.480 million ($118) per tonne at Cam Pha Cement and VND2.561 million ($121) per tonne at Thang Long Cement.

The Halong cement case is not unique as it was one out of 10 cement projects surfaced in the list of government guaranteed cement projects bogging down in losses.

MoF checks showed that as of March 31, 2012 accrued losses of these 10 cement projects approximated VND4.4 trillion ($209 million) and their outstanding loans amounted to VND22.495 trillion ($1.07 billion).

Of these cement projects loss amount at Cam Pha Cement topped the list VND1.259 trillion ($60 million) while that at Halong Cement was VND1.215 trillion ($57.8 million), at Yen Binh Cement VND932 billion ($44 million), at new Haiphong Cement VND361 billion ($17.2 million), at Dong Banh Cement around VND197 billion ($9.3 million), at Song Thao Cement VND173 billion ($8.2 million) and at Thang Long Cement VND127 billion ($6 million). 

Of them, Dong Banh Cement had to stop operation from 2012’s first quarter.

High borrowing costs, ineffective investment and delayed construction pace were believed core reasons behind cement projects’ poor performance. Borrowing costs at many cement projects surpassed 80 per cent of total investment capital.

For instance, Hoang Mai Cement loan exceeded total investment cost, Thai Nguyen Cement loan reached 93 and Tam Diep Cement 98 per cent projects’ total investment.

Effectively running cement projects also face high borrowing costs.

For instance, Tay Ninh Cement reported VND2.09 trillion ($100 million) outstanding loan. Despite its good sales figures the company faces repaying from VND300-370 billion ($14-17.6 million) principle and interest total amount per year during 2012-2015.