The highest principle when dealing with objective difficulties in some BOT traffic projects is to ensure "harmonious benefits, shared risks"; openness, transparency and absolutely no exploitation or profiteering of policies.
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| BOT project to build Thai Nguyen - Cho Moi route. |
Not support more than 75% of investment costs
Speaking to reporters of Investment Newspaper on the afternoon of March 20, Mr. Nguyen Viet Huy, Deputy Director of the Vietnam Expressway Administration, confirmed that the Ministry of Transport (MOT) has just sent Document No. 2451/TTr - BGTVT to the Government on solutions to handle difficulties and problems in a number of BOT transport infrastructure investment projects.
It is known that with nearly 150 A4 pages, including a report and 7 appendices, this is the most elaborate report ever researched and prepared by the Ministry of Transport, based on the guidance of the Government leaders and related ministries and branches including: Ministry of Planning and Investment, Ministry of Finance, Ministry of Justice, Ministry of Public Security, State Bank of Vietnam (SBV) and Government Inspectorate. The Ministry of Transport hopes that the competent authority will approve it to promptly resolve the problems in a number of BOT transport projects, including 8 BOT projects managed by the Ministry of Transport.
“In the recent past, the Ministry of Transport has directly discussed with relevant parties (investors, businesses, banks...) to find solutions to jointly overcome shortcomings and inadequacies, minimize damage and follow the principle of harmonious benefits, shared risks; fully calculate, evaluate and clarify the benefits and level of sharing of the parties”, said Mr. Nguyen Viet Huy.
Previously, implementing the conclusions of the National Assembly Standing Committee and the direction of the Prime Minister, the Ministry of Transport coordinated with localities to comprehensively evaluate BOT transport projects nationwide. On that basis, it developed principles and solutions to handle difficulties and obstacles in BOT transport projects and proposed solutions to handle obstacles in a number of BOT projects managed by the Ministry of Transport.
At the same time, the Ministry worked with the Standing Committee of the National Assembly's Economic Committee, investors, project enterprises, credit providing banks, completed and submitted to the Government in Document No. 4405/TTr-BGTVT dated April 27, 2023.
In Submission No. 2451, the Ministry of Transport has proposed a number of principles for handling difficulties and obstacles in BOT transport projects, emphasizing that the handling must ensure proper authority; priority must be given to applying solutions according to the provisions of the signed project contract. In case of using the state budget, priority must be given to supplementing state capital participation and support to continue implementing the contract.
In addition, the Ministry of Transport determined that state budget capital can only be used to handle difficulties and obstacles for BOT projects due to objective reasons, state agencies violating the contract implementation, and the parties have applied solutions according to the contract's provisions but they are still not feasible. In particular, in all cases, state budget cannot be used to handle difficulties and obstacles due to subjective errors of investors/project enterprises.
To ensure the principle of "harmonized benefits and shared risks", in case of contract amendments or additional state support capital, investors need to consider reducing the profit margin by 50% compared to the profit margin in the project contract.
The credit provider bank shall consider reducing the loan interest rate during the exploitation phase for project investment loans in a manner not exceeding the maximum interest rate for deposits in Vietnamese Dong of organizations and individuals according to the decision of the State Bank at the time of negotiation; at the same time, maintain the debt group, restructure the project investment loan in accordance with the revenue and debt repayment capacity of the project enterprise.
In case of additional state capital, based on the calculation of the financial plan, the parties shall determine the amount of state capital required to ensure the principle of minimum additional state capital, ensuring that the project's revenue is sufficient to cover the costs of management, operation and maintenance of the project according to the project contract, and to pay interest according to the credit contract so that the parties can continue to perform the contract.
The maximum additional state capital level ensures that the total state capital participating in project implementation does not exceed 70% of the total investment capital of the BOT project, determined according to the settled or audited value up to the calculation time.
In case of contract termination, using state capital for payment, investors and credit providing banks need to have a solution to share and minimize the amount of state capital proposed for payment. In particular, priority should be given to arranging state capital to carry out contract termination procedures for BOT projects when investors and credit providing banks agree on a maximum sharing solution excluding equity profits and loan interest during the exploitation phase within the amount of state capital proposed for payment.
Early termination of contracts is only applicable to projects that have been completed and put into operation but have not collected capital recovery fees; projects with reduced toll revenue due to objective reasons; solutions to amend contracts and supplement state capital have been applied but are still not feasible to continue implementing the contract; projects that pose a potential risk of causing insecurity and disorder.
Clear roles and authority
Based on the above principles for handling difficulties and obstacles in BOT projects, the Ministry of Transport proposes solutions to handle difficulties and obstacles in 8 BOT projects managed by the Ministry. These are projects that do not ensure financial plans due to objective difficulties and obstacles that are not the responsibility of the investor.
“The number of BOT projects that need to be handled is very small compared to the 140 BOT projects implemented before the PPP Law took effect. If there is no definitive solution, it will greatly affect project enterprises, especially credit institutions and their creditworthiness, investment attraction environment, especially the Party's policy and the State's policy on attracting social resources under the PPP method,” the leader of the Ministry of Transport assessed.
Also in Submission No. 2451, the Ministry of Transport proposed that the Government unify solutions to handle difficulties and obstacles for 8 BOT projects managed by the Ministry and submit to the National Assembly Standing Committee for approval a plan to use about 10,650 billion VND from the source of increased revenue and savings from the central budget in 2023 for implementation.
In case it is not possible to balance enough from the source of increased revenue and savings from the central budget in 2023, report to the National Assembly for permission to use the medium-term public investment reserve fund to handle the situation.
In addition, the Ministry of Transport proposed that the Government direct the State Bank to review regulations, allowing banks to implement solutions to maintain the debt group for credit loans investing in BOT transport projects, in order to promptly remove difficulties for businesses and credit providing banks.
Regarding mechanisms under the authority of the National Assembly, the Ministry of Transport reports to the Government for consideration and submission to the National Assembly for permission to supplement state capital to support BOT projects that have been put into operation and have experienced a decrease in revenue due to objective reasons (not due to the investor's fault), and have applied solutions according to contract regulations but are still not feasible; the maximum level of state capital to support is 70% of the total investment capital determined according to audit and settlement results.
Allowing the arrangement of state capital to pay reasonable and legal costs according to audit and settlement results and early termination of contracts for BOT projects signed before the PPP Law took effect, but not collecting fees to recover capital, projects with reduced revenue due to objective reasons, additional state capital to continue implementing unfeasible contracts, projects with high potential risks of causing insecurity and disorder.
In case it is not possible to balance enough capital from increased revenue and savings from the central budget in 2023, the Government proposes that the National Assembly allow the use of medium-term public investment reserve capital to promptly resolve difficulties and problems for 8 BOT projects managed by the Ministry.
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