“Lifebuoy” for Bac Giang Expressway BOT Project

The Bac Giang - Lang Son expressway BOT project is at a dead end as the project's toll revenue only reaches about 30% of the approved financial plan, not enough to pay interest costs to the bank that finances the capital.

After 4 years of operation, the Bac Giang - Lang Son Expressway BOT Project is facing a series of difficulties and problems.

Ask for bailout from the budget

“We have received information that the People's Committee of Lang Son province has just proposed that the Government support 5,600 billion VND for the BOT project to invest in the construction of the Bac Giang - Lang Son expressway, section Km45+100 - Km108+500, combined with strengthening the National Highway 1 road surface, section Km1+800 - Km106+500 (Bac Giang - Lang Son expressway BOT project). If this proposal is approved, the financial problems of the project will be basically resolved", Mr. Nguyen Quang Vinh, General Director of the Bac Giang - Lang Son BOT Company (project enterprise) assessed.

Previously, last weekend, Mr. Ho Tien Thieu, Chairman of Lang Son Provincial People's Committee signed Document No. 23/TTr-UBND to the Prime Minister on removing difficulties and obstacles at the Bac Giang - Lang Son Expressway BOT Project.

Specifically, the People's Committee of Lang Son province proposed that the Prime Minister consider and agree to the policy of supporting about VND 5,600 billion from the central budget (not exceeding 50% of the total investment according to the audited and settled value), to offset the cash flow deficit during the toll collection period to ensure the financial plan, and at the same time help the operation and exploitation of the Bac Giang - Lang Son Expressway BOT Project to be smooth and stable.

The BOT Bac Giang - Lang Son Expressway project was approved by the Prime Minister in Decision No. 2167/TTg-KTN dated October 30, 2014, including 2 items: construction of the main Bac Giang - Lang Son Expressway route, 64 km long, 4 lanes, and upgrading 110 km of National Highway 1, from Km1+800 - Km106+500.

By May 2018, the People's Committee of Lang Son province received the handover of rights and obligations of the competent state agency from the Ministry of Transport (MOT). This was a particularly difficult period for the Bac Giang - Lang Son Expressway BOT Project when the investor consortium led by UDIC Investment Joint Stock Company could not implement on schedule, forcing the competent state agency to replace it with Deo Ca Group.

At this time, the Project with a total investment of 12,188 billion VND mentioned above does not have any State capital contribution, the implementation cost only includes the investor's equity capital and credit capital mobilized from the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). During the implementation process, the new investor and the project enterprise have focused resources, mobilized machinery, equipment, human resources, supplies, and materials, completing the Project 3 months ahead of schedule.

Since being put into operation in January 2020, this expressway has helped save travel time between Hanoi and Lang Son from 3.5 hours to 2.5 hours compared to traveling on National Highway 1, contributing to reducing traffic congestion on National Highway 1 and promoting services and production development of localities through which the route passes.

However, after 4 years of operation, the Bac Giang - Lang Son Expressway BOT Project is facing a series of difficulties and problems, causing the project enterprise to face the risk of bankruptcy, unable to pay interest and principal to the credit funding unit.

In Document No. 23/TTr-UBND, the People's Committee of Lang Son province stated that during the implementation and operation of the Project, there were some changes (reducing 1 toll station, exempting some toll collectors, traffic growth lower than initially forecasted, adding project scale...) which affected the financial plan of the Project. These difficulties and problems were pointed out by the State Audit in Notice No. 09/TB-KTNN dated January 16, 2020.

Specifically, according to the initial financial plan, the Project was allowed to collect tolls to recover capital at 2 stations on National Highway 1 (at Km 24+800 and Km 93+160) and stations on the expressway, with an expected revenue of 93 billion VND/month. During the implementation process, due to objective factors, the current toll revenue of the Project is only about 30 billion VND/month, reaching about 32% of the initial financial plan, leading to a deficit in the Project's cash flow to recover capital, not enough to pay the principal and interest incurred by the lending bank.

In addition, the failure to complete the Huu Nghi - Chi Lang Border Gate Expressway Project under the BOT form to synchronously connect the route to Lang Son City and Huu Nghi Border Gate as planned and the impact of the Covid-19 pandemic, China's border trade policy towards border gates led to the traffic growth rate and traffic distribution on the expressway not being as forecasted in the approved financial plan.

The People's Committee of Lang Son province said that the above-mentioned problems have changed the input parameters of the Project and directly affected the ability to repay debts and operate the Project, similar to the difficulties and shortcomings in 8 BOT projects for which the Ministry of Transport is the competent state agency. "Therefore, it is necessary to consider options to support investors to ensure the feasibility of the financial plan, including using state budget capital to support the Bac Giang - Lang Expressway BOT Project", the leader of the People's Committee of Lang Son province assessed.

Difficulties piled up

It is known that the biggest difficulty for the People's Committee of Lang Son province is balancing the budget to support the Bac Giang - Lang Son Expressway BOT Project. The state budget support for the Project is about 5,600 billion VND, equivalent to about 49% of the total investment capital according to the estimated settlement value (about 11,356 billion VND), which exceeds the local budget capacity, while the locality is also having to arrange about 2,500 billion VND of local budget capital to support the PPP Project of the Huu Nghi - Chi Lang border gate expressway.

“Therefore, the People's Committee of Lang Son province needs support from the central budget to completely resolve the difficulties and problems at the Bac Giang - Lang Son Expressway BOT Project,” said the leader of the People's Committee of Lang Son province.

According to Mr. Nguyen Quang Vinh, the proposal of the Lang Son provincial leaders is currently the only way out for the Bac Giang - Lang Son Expressway BOT Project (the only road BOT project without budget support, using 100% of the capital mobilized by the investor to implement). In addition, the difficulties and inadequacies in the Project are force majeure situations, not originating from the investor and the project enterprise.

Speaking to reporters of Dau Tu Newspaper, a representative of the Bac Giang - Lang Son BOT Company said that the contents of the Submission No. 23/TTr-UBND did not fully reflect the difficulties that the project enterprise is facing. Specifically, the project's revenue is currently not enough to pay the interest costs incurred by VietinBank, the amount of interest that the project has delayed to the Bank has reached more than 3,000 billion VND. If this continues, the project enterprise will not even have money to maintain the apparatus and costs for maintenance and operation of the project.

Previously, in Notice No. 09/TB-KTNN, the State Audit affirmed that if the capital recovery period is guaranteed according to the approved financial plan (18 years from 2020 to 2037) and the ability to repay the debt according to the credit contract signed with the bank is ensured, the interest-free capital source needs to be offset to the Project by about VND 4,850 billion (assuming a one-time supplement in the first year of operating the expressway), or offset by about VND 5,745 billion (assuming a supplement within 3 years from the time the expressway comes into operation).

“Therefore, if it does not receive about VND5,700 billion in support from the state budget, the Bac Giang - Lang Son Expressway BOT Project will certainly fail its financial plan. Not only will investors lose capital, but bank loans will also turn into bad debts, with no solution,” the project enterprise representative affirmed.

At the meeting to resolve difficulties for the Bac Giang - Lang Son Expressway BOT Project organized by the People's Committee of Lang Son province at the end of December 2023, the Bac Giang - Lang Son BOT Company said that although the project has been completed for many years, so far only the investor's equity capital has been fully paid and disbursed. The credit capital of VietinBank has only disbursed 9,229/10,169 billion VND, while 940 billion VND has not been disbursed, leading to a backlog of 492 billion VND of project debt.

According to the report of the Bac Giang - Lang Son BOT Company, the project enterprise owes more than 400 billion VND for the construction volume that has been accepted and about 21 billion VND for site clearance costs because the credit capital has stopped disbursing since October 2020. This has led to prolonged complaints from project contractors, potentially affecting the normal operation of the Bac Giang - Lang Son expressway.

“The contractors implementing the project have submitted a petition to the court requesting the opening of dissolution proceedings against the Bac Giang - Lang Son BOT Company due to its inability to pay its debts. If the project enterprise goes bankrupt, this expressway is at risk of ceasing operation. Investors may lose their equity invested in the project, and the credit bank may not be able to recover its debts,” the General Director of the Bac Giang - Lang Son BOT Company worried.

In Document No. 4405/TTr-BGTVT sent to the Government in September 2023, the Ministry of Transport proposed to allocate about VND 10,342 billion in state capital to handle difficulties and inadequacies for 8 BOT projects managed by the Ministry of Transport (terminating contracts for 5 projects, supporting state capital to continue implementing contracts for 3 projects).

For the 5 projects proposed to terminate the contract, the expected payment capital is about 6,812 billion VND. According to the preliminary negotiation results, 1 investor agreed not to include profit in the payment value; 4 investors agreed to reduce 20-50% of profit in the payment value; 3 projects with additional state capital support are expected to be about 3,530 billion VND, equivalent to about 49% of the total investment capital (according to the results of audit and settlement of investment capital).

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