Waiting for capital appraisal
According to the news of Investment Newspaper, last week the Ministry of Transport issued the Official Letter No. 27/BGTVT-KHDT to the Ministry of Finance related to the appraisal process of residual capital utilization of the 2nd ADB Loan Agreement (3391-VIE), Ben Luc – Long Thanh Expressway Construction Project.
Thereof, the Ministry of Transport proposed the Ministry of Finance to preside over and soon complete the procedures for appraising the residual capital utilization of the Asian Development Bank loan agreement – 2nd time ADB (3391-VIE) for underfunded items of Ben Luc – Long Thanh Expressway Construction Project as a basis for the submission to the Prime Minister for their decision.
This is one of the decisive factors impacting the completion and putting Ben Luc – Long Thanh Expressway Construction Project into operation on December 31, 2023, said Mr. Le Anh Tuan, Vice Minister of Transport.
The residual capital utilization after bidding in the Agreement l3391- VIE worth about USD 74 million to complete Ben Luc – Long Thanh Expressway Construction Project has been proposed by the Ministry of Transport to the appropriate authorities for approval from August 2020. Particularly, the Ministry of Transport requested the Government Office to summarize and submit the plan to the Prime Minister for early approval of capital utilization from the 2nd ADB loan agreement (3391-VIE) to complete the uncompleted works of the 1st ADB Loan Agreement (2730-VIE).
The Ministry of Transport also wants the Government to allow the residual capital utilization from ADB loan agreement to implement the items of toll booths, monitoring center buildings, toll station operating offices because it is not allowed to use the loan funds from the Japan International Cooperation Agency (JICA).
It is known that the total estimated value of the above items is about USD 74 million, of which the capital is expected to be spent on construction and installation bidding packages, unfinished consultancy during the loan validity period of the 1st ADB Loan Agreement (2730-VIE) about USD 67.42 million and construction items of toll booths, monitoring center buildings, toll station operating offices… serving toll collection for the project’s payback with the value of about USD 6.6 million.
Ben Luc – Long Thanh Expressway Construction Project, invested by Vietnam Expressway Development Investment Corporation (VEC), was started in July 2014, the works must be completed in 2018 as schedule. The project is divided into 3 sections, in which the middle section (mainly large river bridges) and the western and eastern sections.
According to VEC, the first section (west) is 21.1 km long, including 5 bidding packages of A1, A2-1, A2-2, A3 and A4 of which ADB’s loan was utilized through the 1st Loan Agreement No. 2730-VIE worth about USD 350 million. Because this loan agreement expired after June 30, 2019, the bidding packages were stopped from July 2019 when the construction volume reached 87.2%, 50.62% of loan agreements was disbursed.
The 02nd section (middle) is 10.7 km long, mainly the big river crossing bridges, with very high technical complexity, including 3 packages of J1, J2 and J3, of which JICA’s ODA loan was utilized. Bidding packages have been stopped since 2019 due to lack of capital, construction volume reached 84.6%.
The 3rd section (East) is 25.3 km long, including 3 packages of A5, A6 and A7, of which ADB loans was utilized through the 2nd Loan Agreement No. 3391-VIE worth about USD 297 million, which has been extended until December 31, 2023. These are the only 3 bidding packages that have been financed for contractors to carry out construction, but the implementation progress was delayed, the construction volume was about 50% and was being severely affected by Covid-19 epidemic.
In the terms of nature, the residual capital utilization after the bidding of the 2nd ADB Loan Agreement (3391-VIE) to complete the construction and installation bidding packages of the 1st Loan Agreement No. 2730-VIE and construction items of toll booths, monitoring center buildings, toll station operating offices, do not change the total investment of the project.
“in addition, this was also the only capital source that the investor could rely on at this time to offset for the expiration of the 1st ADB Loan Agreement No. (2730-VIE) while the project was still under construction”, reported the representative VEC.
Gradually revealing the escape way
In order to obtain enough legal basis for the Ministry of Finance to conduct the appraisal of the residual capital utilization of the 2nd ADB Loan Agreement (3391-VIE), on December 31, 2021, the Minister of Transport signed the Decision No. 2323/QD – BGTVT approved the financial plan to combine cash flow for 5 expressway projects invested by VEC, serving the appraisal of capital utilization of the 2nd ADB Loan Agreement (3391-VIE) for Ben Luc – Long Thanh Expressway Construction Project.
Thereby, 5 expressway projects were managed by the Ministry of Transport, and invested by VEC, including Cau Gie – Ninh Binh expressway which was put into operation in 2011, Noi Bai – Lao Cai expressway in 2014, Ho Chi Minh City – Long Thanh – Dau Giay Expressway in 2014, Da Nang – Quang Ngai Expressway in 2017, Ben Luc – Long Thanh Expressway is being implemented and is expected to be put into operation in 2024.
It is known that there are 11 input figures temporarily determined by the Ministry of Transport to calculate the financial plan of VEC’s 5 projects at the present time, including: total cost of implementation; investment capital structure; time of putting the works into operation; vehicle traffic; toll rates; charge rate increase; loan repayment Libor interest rates from ADB and WB; exchange rate; inflation rate; construction price slippage; maintenance, operation and exploitation costs.
Out of the above input costs, the total cost of implementing 5 projects invested by VEC is temporarily determined the Ministry of Transport, it is fully updated according to the contract value/implementation value/the final settlement value of packages of construction, consultancy, and other costs as of December 31, 2021 is VND 104,998 billion, including Cau Gie – Ninh Binh expressway: VND 8,579 billion; Noi Bai – Lao Cai expressway: VND 26,737 billion; HCMC – Long Thanh – Dau Giay expressway: VND 18,058 billion; Da Nang – Quang Ngai expressway: VND 25,099 billion; Ben Luc – Long Thanh project (under construction): VND 26,525 billion.
For the investment capital structure, the Ministry of Transport temporarily determines the percentage of state capital and capital mobilized by VEC accounting for 23.3% and 76.7% for Cau Gie – Ninh Binh expressway project; 19.9% and 80.1% for Noi Bai – Lao Cai expressway project; 33.9% and 64.1% for Ho Chi Minh City – Long Thanh – Dau Giay expressway project; 73.4% and 26.6% for Da Nang – Quang Ngai Expressway Project; 61.3% and 38.7% for Ben Luc – Long Thanh expressway project
Another important input figures is the rate for 5 projects to calculate the payback basis applied by the Ministry of Transport under the Decision No. 3789/QD-BGTVT dated November 23, 2016 of the Ministry of Transport, in which VND 1,500/PCU/km for Cau Gie – Ninh Binh expressway, VND 1,250/PCU/km for Noi Bai – Lao Cai expressway, VND 2,000/PCU/km for HCMC – Long Thanh – Dau Giay expressway, VND 1,500/PCU/km for Da Nang – Quang Ngai Expressway, VND 2,000/PCU/km for Ben Luc – Long Thanh Expressway. The increase rate is once every 3 years, 12% each time of increase.
With the above determined and forecasted input figures, the Ministry of Transport determines that after-tax cash flows for 5 expressway projects invested by VEC will be lack of VND 518 billion in 2022, VND 167 billion in 2023. However, the accumulated after-tax cash flow every year is always positive, specifically: by 2022, it will be VND 9,631 billion; by 2023, it will be VND 9,464 billion; by 2025, VND 12,534 billion.
“With the above after tax cash flow results, VEC ensures the loan repayment of the 2nd ADB Loan Agreement (3391-VIE) for Ben Luc – Long Thanh Expressway Construction Project”, affirmed Mr. Le Anh Tuan, Vice Minister of Transport.
It should be further said that, the pressure on the repayment of contractor debts, especially Japanese contractors for the construction of Ben Luc – Long Thanh Expressway Construction Project was relieved after the investor was allowed to temporarily use the toll collection sources, the sums have not been due.
In an offficial letter issued at the end of November 2021, the Committee for the Management of State Capital at Enterprises (the governing body) agreed to let VEC temporarily utilize the fee collection source, undue sum to repay the contractor of Ben Luc – Long Thanh Expressway Construction Project.
Such proposal is to effectively utilize the capital, ensure the project objectives, avoid complaints, incur costs that increase the total project investment, cause damages to VEC and the state budget capital for VEC, affecting the reputation of the Government of Vietnam on donors.
As the mechanism problems, VEC did not have funds to pay for the completed volumes at the Ben Luc – Long Thanh Expressway Construction Project. From mid-2020 until now, Japanese contractors have asked VEC to pay for the completed volume and incurred costs as of April 2021, about USD 33 million.
“This is the minimum sum required to finance to immediately pay the completed volume of Japanese contractors and restart the project construction. VEC will continue to work with contractors J1 and J3, JICA to discuss and negotiate in requesting contractor J3 to continue performing the work according to the signed contract, “reported VEC leader.
According to the financial plan, VEC is submitting to the appropriate authority, accumulated VEC’s toll cash flow in 2021 is about VND 7,504 billion (after all due debts have been paid off) and accumulated cash flow of VEC in 2022 is VND 6,546 billion.
In case VEC temporarily utilizes the idle money that has not yet been due to repay debt with a sum of about VND 429 billion to remove the difficulties and obstacles in funding for Ben Luc – Long Thanh Expressway Construction Project, will not affect VEC’s current liability repayment.
Source : Baodautu
