Finding a way for the National Highway 51 BOT Project

It is difficult to have a happy ending for the BOT Project to invest in the construction and expansion of National Highway 51 from Km0+900 to Km 73+600 due to the existence of many major differences in viewpoints between the competent state agencies and the project enterprise.

The National Highway 51 BOT project has a more complicated history than other BOT projects implemented from 2012 to present.

Waiting for processing instructions

The journey to resolve the problems at the National Highway 51 Expansion Investment Project from Km0+900 to Km 73+600 passing through Dong Nai and Ba Ria - Vung Tau provinces under the BOT contract form (National Highway 51 BOT Project) is unlikely to end in the near future if following the latest developments related to this project with a special fate.

Right before the 2024 Lunar New Year holiday, the Government Office issued Official Dispatch No. 906/VPCP-CN conveying the direction of Deputy Prime Minister Tran Hong Ha on handling the existing problems of the National Highway 51 BOT Project to the Ministry of Transport (GTVT - competent state agency) and Bien Hoa - Vung Tau Expressway Development Joint Stock Company (BVEC - project enterprise).

Accordingly, considering the report of the Ministry of Transport (Document No. 15229/BGTVT-CĐCTVN dated December 29, 2023) on handling the petition of the investor of the BOT National Highway 51 Project, Deputy Prime Minister Tran Hong Ha assigned the Ministry of Transport to continue handling the petition of the investor according to its functions, tasks and signed contracts. The Ministry of Transport reports the results of the handling according to its authority.

This is the second time in less than 2 months that the Government leader has had to give instructions on the shortcomings and difficulties at the National Highway 51 BOT Project. Previously, in Official Dispatch No. 8793/VPCP-CN dated November 9, 2023, the Government Office said that, implementing the direction of the Prime Minister and the recommendations of the investor of the National Highway 51 BOT Project, Deputy Prime Minister Tran Hong Ha assigned the Ministry of Transport to preside (as the competent state agency and the agency signing the BOT contract), coordinate with the Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Justice to work with the investor of the National Highway 51 BOT Project to consider and resolve within their authority the legitimate recommendations of the investor in accordance with the provisions of the law on PPP on the principle of shared risks and harmonious benefits.

“If necessary, Deputy Prime Minister Tran Hong Ha will chair a meeting to consider and resolve investors' recommendations on matters under the Prime Minister's authority based on the report of the Ministry of Transport,” Official Dispatch No. 8793/VPCP-CN stated.

About 1.5 months after the above direction, the Ministry of Transport issued Official Dispatch No. 15229/BGTVT-CĐCTVN to Deputy Prime Minister Tran Hong Ha to report on the handling of the petition of the investor of the BOT National Highway 51 Project. It is worth mentioning that in this dispatch, the Ministry of Transport has not yet provided any specific solutions to handle the differences in viewpoints between the competent state agency and the project enterprise.

According to the Ministry of Transport, of the 64 BOT projects managed by the ministry, by the end of 2024, construction had been basically completed and were in operation, while some projects had temporarily stopped collecting tolls due to the end of the capital recovery period. The problems and difficulties in settlement work mainly occurred in projects signed contracts in the period from 1997 to 2023.

During this period, BOT project contracts (including the National Highway 51 BOT Project contract) include equity preservation fees and toll collection periods that generate profits in the financial plan. From 2009 to present, BOT projects do not include equity preservation fees in the financial plan, only calculating profits on the equity portion during the business exploitation period, so there is no problem in settlement.

Regarding the cost of preserving equity, the Ministry of Transport said that in Notice No. 336/TB-KTNN dated August 11, 2017 and Notice No. 337/TB-KTNN dated August 11, 2017, the State Audit proposed that the Ministry of Transport reduce the cost of preserving equity for 9 BOT contracts for the exploitation phase in the financial plan (including the National Highway 51 BOT Project).

Implementing the opinion of the State Audit, the competent authority assigned by the Ministry of Transport to settle the projects, the Vietnam Road Administration, has negotiated with investors to settle the contracts. “However, the settlement process has been difficult and complicated because some investors have not agreed with the State Audit’s deduction of this equity preservation fee. To date, the Vietnam Road Administration has reported that it has not calculated the equity preservation fee in the financial plan for 5/9 contracts,” stated Official Dispatch No. 15229/BGTVT-CĐCTVN.

Regarding the time for collecting tolls to generate profits, the Ministry of Transport said that 13/64 BOT contracts have provisions for calculating the time for collecting tolls to generate profits in the financial plan. During the project implementation, some conditions of the contract changed, leading to the parties having to negotiate and calculate adjustments to re-determine the payback period, as well as the time for collecting tolls to generate profits for the investor.

Up to now, the Vietnam Road Administration has negotiated and agreed with investors on a plan to adjust the toll collection period to create profits for 7/13 BOT contracts (basically the rate of return on equity converted is similar to the rate of return on equity of BOT projects from 2012 to present), the remaining 6/13 BOT contracts are still under negotiation.

The Ministry of Transport admits that the above-mentioned problems are all difficult issues, the cited legal regulations are not complete and clear, so there are still problems between the parties in the settlement process of some contracts.

Regarding the National Highway 51 BOT Project, implementing the Prime Minister's direction, on November 15, 2023, the Ministry of Transport chaired a meeting, coordinated with the Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Justice to work with investors and lending banks.

“The Ministry of Transport has established an independent review team to review and resolve investors' recommendations to handle existing problems and difficulties in the above-mentioned projects (including the National Highway 51 BOT Project) according to the Government's direction and the State Audit's conclusions on each project,” the leader of the Ministry of Transport informed.

Investors want to continue collecting fees

The BOT National Highway 51 project has a more complicated history than other BOT projects implemented from 2012 to present. Specifically, before the project was implemented, the Ministry of Transport implemented a project to expand National Highway 51 using loans from the Vietnam Development Bank (VDB), and reimbursed by toll collection at station T1, National Highway 51.

However, due to the ineffectiveness of the investment, the Ministry of Transport proposed that BVEC receive the right to collect fees at toll station T1 with the contract value of the right to purchase 400 billion VND, the capital mobilization interest rate is fixed (7.75%/year), not including the profit for the investor. Next, in the process of formulating the policy for the National Highway 51 Expansion Investment Project, the value of the transfer of the right to collect fees at toll station T1 was included in the total investment of the Project.

According to the contract between the Vietnam Road Administration and BVEC signed in 2009, the capital recovery period of the Contract in principle for transferring the right to collect fees at station T1 is July 10, 2013; the total contract toll collection period for the National Highway 51 expansion investment project is about 20.66 years, of which the capital recovery period is about 16.66 years (from August 3, 2012 to March 27, 2029); the profit-generating period is 4 years (from March 28, 2029 to March 28, 2033).

By the end of February 2017, the toll collection period for the Project was adjusted to 20 years, 6 months and 11 days, that is, from July 1, 2009 to January 12, 2030, including 4 years and 24 days of collection according to the Contract for selling toll collection rights at station T1 (from July 1, 2009 to July 24, 2013) and 4 years of toll collection to generate profit.

By the end of 2018, due to some changes related to input factors and recommendations from the State Audit, the Vietnam Road Administration recalculated the time to collect tolls to generate profits. The method chosen by the representative of the competent state agency to recalculate the time to collect tolls to generate profits is the expected profit method (the profit that the investor will earn in 4 years of collecting profits according to the financial plan excluding capital preservation interest for both the construction and operation phases). After recalculation, the Vietnam Road Administration reduced the time to generate profits from 4 years to 9 months.

To avoid BVEC from collecting tolls beyond the time limit, on January 9, 2023, the Vietnam Road Administration issued Document No. 137/CDBVN to temporarily suspend toll collection at toll stations of the National Highway 51 BOT Project from 7:00 a.m. on January 13, 2023.

It should be added that the time for collecting tolls to generate profit is among the five groups of issues with a huge gap between BVEC and the Vietnam Road Administration in the process of finalizing and determining the time to stop collecting tolls of the BOT contract of the Project. The four remaining groups of issues include: equity preservation fee; interest on loans to pay bank interest and use revenue to pay contractors; toll revenue for the period 2009 - 2015; interest calculation plan for deductions during the exploitation period.

In Document No. 109/CT-TCKT dated October 2, 2023 sent to the Prime Minister to propose removing obstacles and administrative measures causing damage to investors of the BOT National Highway 51 Project, the representative of BVEC affirmed that the unilateral imposition of a reduction in the time to generate profits and the temporary suspension of toll collection by the Vietnam Road Administration has made it impossible for the project enterprise to pay the remaining investment loans worth VND 470 billion to the 3 capital-funding banks; unable to repay VND 307 billion to shareholders contributing capital...

“The Vietnam Road Administration’s unilateral suspension of toll collection and early termination of the contract will lead to legal disputes between the parties. Due to the long waiting time for the final judgment, it will lead to continued large costs that will ultimately be borne by VEC,” Mr. Dinh Hong Ha, General Director of BVEC, worried.

It is known that in Document No. 109/CT-TCKT, BVEC proposed to keep the capital preservation fee during the investment and exploitation phase; keep the profit-making period of 4 years as stipulated in the signed contract and contract appendix. The project enterprise also proposed that the Prime Minister direct the Ministry of Transport and the Vietnam Road Administration to review and agree with the investor on the expenses (mainly loan interest) that have been cut by the Vietnam Road Administration.

“If the above proposal is approved, assuming BVEC is allowed to collect fees again on January 1, 2024, the project enterprise will continue to collect fees to generate profits until August 27, 2027,” VEC leaders calculated.

In the past, the Vietnam Road Administration has negotiated with the investor of the BOT National Highway 51 Project and related agencies 19 times to handle some existing issues of the project such as: time to collect tolls to create profits, fees to preserve equity during the construction and operation phases, toll revenue for the 2009-2015 period, interest on loans for amounts deducted according to recommendations of inspection and auditing agencies... However, the parties have not reached a consensus on these issues.

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