Vinapaco seeks extended discount incentives for Phuong Nam pulp mill

Vinapaco seeks for specific mechanisms for the Phuong Nam pulp mill

According to tienphong.vn, the Management Board of Phuong Nam Pulp Mill recently organised an extraordinary general meeting hosted by general director Nguyen Viet Duc to discuss plans to deal with difficulties encountered during the sales process.

At the meeting, Duc stated that further auctions may fail if the government does not approve specific mechanisms for the sale. Thus, Vinapaco will continue to publicise information about the auction according to the approved plan, with the starting price of VND1.885 trillion ($81.78 million).

In the case of there being no interested investors, Vinapaco proposed the Ministry of Industry and Trade (MoIT) to ask the government to approve specific incentives for the projects. Notably, if the first auction fails, the firm will be permitted to reduce the asking price by 10 per cent for the following auctions.

The discount will be applied as many times as necessary. Vinapaco’s proposal only differs from MoIT’s in the number of times this discount can be applied (MoIT proposed that this discount cannot be applied more than twice).

Vinapaco also stated that in case a buyer is not found even with the discounted price, the firm will appraise its financial capacity as well as its ability to repay debts and then report to MoIT to set the price discount for the next auction.

In addition, Vinapaco proposed that MoIT assign Vietnam Auditing and Evaluation Co., Ltd. to continue implementing the evaluation consultancy contract at the offered price of no less than VND500 million ($21,692).

The mill’s construction was kicked off in March 2006 with initial investment capital of VND1.487 trillion ($66.3 million) from Transport and Communication Development Investment Company (Tradico). The mill was expected to produce the highest quality pulp in Vietnam, reaching European standards.

In 2007 the mill entered its test run and in November Tradico decided to increase the total investment capital to VND2.286 trillion ($102.5 million). However, the test run was suspended due to machinery breakdowns.

In 2009, Tradico was licensed to transfer the pulp mill to Vinapaco. The expected cost of the project increased to VND3.4 trillion ($148.9 million).

However, after Vinapaco took over the mill, it was upgraded and began operating again, however the malfunctions remained.

According to Vinapaco’s report, as of December 31, 2015, the total disbursed capital of the project was VND2.636 trillion ($114.36 million), and as of the end of 2016, the mill had to bear a total debt of VND2.695 trillion ($116.9 million), including interest.