List of loss-making projects under Dinh La Thang

(Baonghean.vn) - There were many "scandalous" projects at the Vietnam Oil and Gas Group when Mr. Dinh La Thang was chairman; causing losses of thousands of billions of VND, and loss of many state assets.

"Swamp" Trinh Xuan Thanh and PVC lost more than 3,300 billion VND

On April 26, 2017, the Central Inspection Committee issued information on a number of violations by the Standing Committee of the Party Committee of the Vietnam National Oil and Gas Group (PVN) in the period 2009 - 2015, in which it proposed to consider and take disciplinary action against Mr. Dinh La Thang, currently holding the position of Secretary of the Ho Chi Minh City Party Committee.

PetroVietnam Construction Joint Stock Corporation (PVC) was once considered the darling of PVN as one of the first listed companies of the Group. But since then, PVC has become a problem for the oil and gas industry in general and PVN in particular.

Led by former Chairman Trinh Xuan Thanh, in 2009, PVC listed on HNX, its charter capital rapidly increased from 2,500 billion in 2010 to 4,000 billion in 2012. Of which, 86% (equivalent to 3,371 billion) was contributed by PVC to 40 member companies.

As of the end of June 2013, the company's production, business and financial situation was very difficult.

These companies continued to pour money into the construction, real estate, and financial investment sectors. By 2011, many companies began to suffer losses, and PVC fell into a multi-industry quagmire. In 2013, PVC accumulated losses of nearly VND3,300 billion.

Faced with such serious losses, Mr. Trinh Xuan Thanh and PVC's senior leaders were prosecuted and temporarily detained by the Ministry of Public Security.

PVTex project "shelved", loss of 7,000 billion VND

A rather scandalous investment of PVN is Dinh Vu Polyester Fiber Factory - PVTex (Hai Phong). PVN holds over 75% of the shares with a total investment capital of 325 million USD (equivalent to about 7,000 billion VND).

According to the plan, the factory had a capacity of 170,000 tons of fiber products/year from imported raw materials and was expected to operate from 2012. However, when it started operating in May 2014, the factory faced the problem of not being able to sell its products and was forced to temporarily stop.

Suffering losses and running out of working capital, PVN requested the Ministry of Finance to impose import tax and quota on imported polyester fiber products. At the same time, it requested exemption from many types of taxes and fees such as value added tax; electricity, water, land rent, management, wastewater treatment of Dinh Vu Industrial Park with PVTex for two years...

A corner of Dinh Vu Polyester Fiber Factory (Hai Phong).

Not stopping there, PVN also asked the Ministry of Industry and Trade to require domestic textile enterprises to use PVTex products. Up to now, PVTex is still under wraps, former General Director Vu Dinh Duy is still wanted by the police for the crime of intentionally violating the State's regulations on economic management causing serious consequences.

Due to heavy losses, the factory ran erratically and had to be "shelved" many times, until the end of 2015 when it stopped completely.

Lost 800 billion VND in capital contribution from PVN to OceanBank

With the goal of building a multi-industry corporation, in 2008, PVN began investing in Oceanbank.

Specifically, PVN is a strategic shareholder with 20% of shares in Oceanbank; with the collapse of Oceanbank and the Ha Van Tham case, contributing capital to OceanBank caused PVN to lose 800 billion VND.

In 2008, Oceanbank increased its charter capital to VND2,000 billion, so Vietnam Oil and Gas Group (PVN) contributed VND400 billion (equivalent to 20% of shares) by transferring from its deposit account to Oceanbank's account. Next, Oceanbank increased its capital to VND3,500 billion in 2009, VND4,000 billion in 2011, then PVN contributed VND300 billion and VND100 billion respectively to maintain the 20% share ratio.

According to published documents, as of March 31, 2014, OceanBank had bad debt of nearly 15,000 billion VND, pre-tax loss of more than 10,000 billion VND, negative capital of 249% of owner's equity.

In May 2015, the State Bank bought OceanBank for 0 VND and changed its name to Ocean Commercial Bank Limited Liability Company. This also means that 800 billion VND, equivalent to 20% of PVN's shares, will also be lost.

During the time of capital contribution to Oceanbank, to manage and supervise capital, PVN sent people to Oceanbank and they had to report monthly, quarterly and yearly. However, all reports did not have any warnings or dangerous signals about capital. In addition, PVN also conducted external supervision, this process also did not detect any violations.

Series of biofuel projectsunfinished

PVN decided to invest in 3 ethanol biofuel factories in Phu Tho, Quang Ngai, Binh Phuoc from October 2007 to March 2009. Each factory has a capacity of 80,000 tons of fuel ethanol/year, the investment capital is contributed by shareholders 30%, the remaining 70% is borrowed credit. However, now all are in the same "shelved" state.

According to the Government Inspectorate’s inspection conclusion, the amount spent on the Dung Quat ethanol project was more than 2,100 billion VND, exceeding the total approved investment by hundreds of billions of VND. Completed in 2014 with the expectation of creating a source of cheap, environmentally friendly E5 gasoline, but since then, the factory has only been operating for maintenance.

The Binh Phuoc ethanol plant, worth more than VND2,200 billion, was started in 2010 and inaugurated in December 2012, with a capacity of 300,000 liters of E5 gasoline per day. However, weak management capacity and exhausted financial capacity have led to a gloomy business situation, and since 2015, the plant has been under a blanket.

Phu Tho ethanol project "shelved" while investment is still unfinished.

In the same situation, Phu Tho Ethanol Biofuel Factory with a capital of 2,400 billion VND was expected to go into production in 2012, but due to lack of capital, at the end of 2011, although about 80% of the work was completed, the factory stopped construction, and the farmers who had to give up more than 50 hectares of land to build the factory could not help but feel regretful.

Losses at Thai Binh 2 thermal power project

According to the conclusion of the Central Inspection Committee, the appointment of the EPC package at Thai Binh 2 Thermal Power Plant violated the law, causing serious consequences.

Thai Binh 2 Thermal Power Plant Project is invested by PVN, PVC is assigned as the contractor responsible for designing construction drawings, purchasing goods, equipment and materials, construction, acceptance, training and handover of operations...

PVC's key staff directly signed and approved financial procedures for the thermal power plant project with a designed capacity of 1,200 MW and a total investment of more than VND34,295 billion (equivalent to USD1.7 billion).

It is known that PVC signed an EPC contract with the Thai Binh 2 Oil and Gas Power Project Management Board - PVN with a value of about 918 million USD and 5,874 billion VND. Also in 2011, the Vietnam Oil and Gas Group (PVN) signed an EPC contract and advanced 1,312 billion VND and 6.6 million USD for this project.

Regarding the Thai Binh 2 Thermal Power Plant project, according to PVC's consolidated financial report, as of June 2016, the total estimated contract value that the Corporation signed with contractors for this project exceeded the value of the signed EPC contract.

Lost more than 500 million USD in the 1.8 billion USD super joint venture with Venezuela

During the period 2006 - 2011, PVN also spent money on a number of foreign projects, including a $1.8 billion super joint venture to exploit oil in Venezuela. With a capital contribution ratio of 40%, PVN can earn 4 million tons of oil/year, expected to recover capital after 7 years.

At that time, PVN leaders ignored the recommendations of experts and Vietnamese ministries and branches about the political situation in Venezuela, and oil reserves were not as PVN predicted.

PVN also spent money on a number of foreign projects, including a $1.8 billion super joint venture to exploit oil in Venezuela.

The result was a grand launch for the project that went nowhere. The cash that PVN directly gave to Venezuela alone amounted to 532 million USD that never returned, not to mention the investment costs amounting to hundreds of millions of USD.

In April 2013, with no oil yet collected, the new leadership of PVN decided to abandon this project to "save" the amount of money to be paid up to 142 million USD, accepting to pay more than 500 million USD.

"Ghost" company PVFC Invest with capital of 500 billion VND sold for 20 million VND

Established in 2007, by 2010, Petroleum Investment and Finance Joint Stock Company (PVFC Invest) had almost no investment activities, except receiving entrusted capital from Petroleum Finance Joint Stock Company (PVFC), then buying and selling shares, and investing capital in "paper" projects.

PVN is the parent company that owns 78% of the capital at the subsidiary PVFC, PVFC in turn owns 59% of the capital of the subsidiary PVFC Invest.

By the end of 2010, PVFC Invest had accumulated losses of 559 billion VND, negative charter capital of 59 billion VND, the company fell into a particularly difficult situation and was fully qualified for bankruptcy.

By 2012, after many name changes, PVFC Invest was sold for 20 million VND, or 1 VND/share. Along with that, PVFC had more than 8,500 billion VND of bad debt from most customers who were unable to pay such as Vinashin, Vinalines...

Ngoc Anh

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