The Bac Giang - Lang Son expressway BOT project is in a desperate situation as toll revenue only reaches about 30% of the approved financial plan, insufficient to cover interest expenses from the financing banks.
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| After four years of operation, the Bac Giang - Lang Son BOT expressway project is facing a series of obstacles and shortcomings. |
Requesting a lifeline from the budget.
“We have received information that the People's Committee of Lang Son province has just proposed to the Government to provide 5,600 billion VND in support for the BOT project to invest in the construction of the Bac Giang - Lang Son expressway section from Km45+100 to Km108+500, combined with upgrading the surface of National Highway 1 section from Km1+800 to Km106+500 (Bac Giang - Lang Son Expressway BOT Project). If this proposal is approved, the financial obstacles at the Project will be basically resolved,” said Mr. Nguyen Quang Vinh, General Director of Bac Giang - Lang Son BOT Company (the project enterprise).
Earlier last weekend, Mr. Ho Tien Thieu, Chairman of the People's Committee of Lang Son province, signed Submission No. 23/TTr-UBND to the Prime Minister regarding the removal of difficulties and obstacles at the Bac Giang - Lang Son BOT expressway project.
Specifically, the People's Committee of Lang Son province requested the Prime Minister to consider and approve the policy of providing support from the central budget of approximately 5,600 billion VND (not exceeding 50% of the total investment based on the audited and finalized value) to compensate for the cash flow deficit during the toll collection period to ensure the financial plan, and at the same time help ensure the smooth and stable operation and exploitation of the Bac Giang - Lang Son BOT expressway project.
The Bac Giang - Lang Son BOT expressway project received investment approval from the Prime Minister in Decision No. 2167/TTg-KTN dated October 30, 2014, and includes two components: the construction of the 64 km long, 4-lane Bac Giang - Lang Son expressway main route and the upgrading of 110 km of National Highway 1, from Km1+800 to Km106+500.
By May 2018, the People's Committee of Lang Son province received the transfer of rights and obligations from the Ministry of Transport. This was a particularly difficult period for the Bac Giang - Lang Son BOT expressway project, as the consortium of investors led by UDIC Investment Joint Stock Company could not implement the project on schedule, forcing the competent state agency to replace them with Deo Ca Group.
At this time, the project, with a total investment of VND 12,188 billion, has no state capital contribution. Implementation costs only include the investor's equity and credit mobilized from Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). During the implementation process, the new investor and the project enterprise focused resources, mobilized machinery, equipment, personnel, supplies, and materials, completing the project 3 months ahead of schedule.
Since its commissioning in January 2020, this expressway has reduced 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 in the localities through which the road passes.
However, after four years of operation, the Bac Giang - Lang Son BOT expressway project is facing a series of obstacles and shortcomings, putting the project enterprise at risk of bankruptcy and unable to repay interest and principal to the credit financing unit.
In Report No. 23/TTr-UBND, the People's Committee of Lang Son province stated that during the implementation and operation of the Project, several changes (reduction of one toll station, exemption and reduction of tolls for some subjects, lower-than-expected traffic volume growth, additions to the project scale, etc.) have affected the Project's financial plan. These difficulties and obstacles were pointed out by the State Audit Office in Notice No. 09/TB-KTNN dated January 16, 2020.
Specifically, according to the initial financial plan, the Project was to collect tolls for capital recovery at two toll stations on National Highway 1 (at Km 24+800 and Km 93+160) and other stations on the expressway, with projected revenue of 93 billion VND/month. However, due to unforeseen circumstances, current toll revenue is only about 30 billion VND/month, reaching approximately 32% of the initial financial plan. This has resulted in a shortfall in the Project's cash flow for capital recovery, insufficient to cover principal and interest payments to the lending banks.
Furthermore, the failure to complete the Huu Nghi - Chi Lang Border Gate Expressway Project under the BOT (Build-Operate-Transfer) model, which would have provided a seamless connection to Lang Son City and the Huu Nghi border gate as planned, along with the impact of the Covid-19 pandemic and China's border trade policies regarding border gates, has resulted in traffic volume growth and distribution on the expressway not meeting the forecasts in the approved financial plan.
The People's Committee of Lang Son province stated that the aforementioned obstacles have altered the input parameters of the Project and directly affected its ability to repay debt and operate the Project, similar to the difficulties and shortcomings at 8 BOT projects under the authority of the Ministry of Transport. "Therefore, considering options to support the investor to ensure the feasibility of the financial plan, including using state budget funds to support the Bac Giang - Lang Son expressway BOT project, is necessary," the leader of the Lang Son Provincial People's Committee assessed.
Difficulties piled up.
Reportedly, the biggest challenge for the People's Committee of Lang Son province is balancing the budget to support the Bac Giang - Lang Son BOT expressway project. The state budget support for the project, approximately 5,600 billion VND, equivalent to about 49% of the total investment capital based on the estimated final settlement value (approximately 11,356 billion VND), exceeds the local budget capacity. Meanwhile, the province is also allocating approximately 2,500 billion VND from its own budget to support the Huu Nghi Border Gate - Chi Lang expressway PPP project.
"Therefore, the People's Committee of Lang Son province needs support from the central budget to definitively resolve the difficulties and obstacles at the Bac Giang - Lang Son expressway BOT project," a leader of the Lang Son Provincial People's Committee stated.
According to Mr. Nguyen Quang Vinh, the proposal from the Lang Son provincial leadership 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% capital mobilized by the investor). Furthermore, the obstacles and shortcomings in the project are force majeure situations, not originating from the investor or the project company.
Speaking with a reporter from the Investment Newspaper, a representative of the Bac Giang - Lang Son BOT Company stated that the contents of Submission No. 23/TTr-UBND do not fully reflect the difficulties the project enterprise is facing. Specifically, the project's revenue is currently insufficient to cover the accrued interest expenses to VietinBank, with overdue interest payments to the bank reaching over 3,000 billion VND. If this continues, the project enterprise may not even have the funds to maintain its operations and cover maintenance and upkeep costs.
Previously, in Notice No. 09/TB-KTNN, the State Audit Office affirmed that if the payback period is ensured according to the approved financial plan (18 years from 2020 to 2037) and the ability to repay the debt according to the credit agreement signed with the bank is guaranteed, then the interest-free capital needed to compensate for the Project is approximately VND 4,850 billion (assuming a one-time supplement in the first year of operation of the expressway), or approximately VND 5,745 billion (assuming a supplement over 3 years from the time the expressway comes into operation).
"Therefore, if the project does not receive approximately 5,700 billion VND in support from the state budget, the Bac Giang - Lang Son BOT expressway project will certainly face financial collapse. Not only will investors lose their capital, but bank loans will also turn into bad debts with no solution," the project's business representative affirmed.
At a meeting to address difficulties for the Bac Giang - Lang Son BOT expressway project, organized by the Lang Son Provincial People's Committee at the end of December 2023, the Bac Giang - Lang Son BOT Company stated that although the project was completed many years ago, only the investor's equity capital has been fully paid and disbursed. The credit capital from VietinBank has only been disbursed at 9,229/10,169 billion VND, leaving 940 billion VND undisbursed, resulting in an outstanding debt of 492 billion VND for the project.
According to a report by the Bac Giang - Lang Son BOT Company, the project enterprise owes more than 400 billion VND for completed construction work and approximately 21 billion VND for land clearance costs due to the suspension of credit disbursement since October 2020. This has led to prolonged disputes from the project's contractors, potentially affecting the normal operation of the Bac Giang - Lang Son expressway.
“The contractors implementing the project have filed a petition with the court requesting the dissolution of the Bac Giang - Lang Son BOT Company due to its inability to pay its debts. If the project company goes bankrupt, this expressway risks ceasing operation. Investors may lose their equity capital invested in the project, and banks that provided credit will not be able to recover their debts,” the General Director of Bac Giang - Lang Son BOT Company worried.
For the 5 projects recommended for contract termination, the estimated payment amount is approximately VND 6,812 billion. According to preliminary negotiation results, 1 investor agreed not to include profit in the payment value; 4 investors agreed to reduce profit by 20-50% in the payment value; and 3 projects are expected to receive additional state capital support of approximately VND 3,530 billion, corresponding to about 49% of the total investment capital (according to the results of investment capital audit and settlement).
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