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State could sell up to 49% in Vinachem

Released at: 21:00, 23/01/2017

State could sell up to 49% in Vinachem

Photos: Viet Tuan

Restructuring scheme to see government retaining 51-65% of Vietnam National Chemical Group.

by Duy Anh

Currently shouldering substantial debts, the Vietnam National Chemical Group (Vinachem), which has two loss-making fertilizer plants under its belt, could see the government selling up to 49 per cent of its stake.

Vinachem has submitted the corporation’s restructuring scheme for the 2016-2020 period to the Ministry of Industry and Trade (MoIT), with its equitization process set to take place from 2017 to 2019 and the government to retain a controlling stake of between 51 and 65 per cent post-equitization.

The corporation also proposed it actively prepare plans and a roadmap to entirely divest or sell part of its holdings in other enterprises.

It proposed raising its charter capital by VND5 trillion ($221.75 million) via a share issuance during equitization. For the Ninh Binh Nitrogenous Fertilizer Plant, Vinachem would continue to restructure the investor of the plant, the Ninh Binh Fertilizer Ltd Co.

The corporation also plans to entirely divest its holding from five subsidiaries, including 80 per cent at the Hanoi Soap JSC, 26.99 per cent at the Hanoi Synthetic Paint JSC, 36.1 per cent at the Vinh Phu Battery JSC, 53.5 per cent at the DAP No 2 - Vinachem JSC, and 49 per cent at the Southern General Import-Export JSC. The book value Vinachem needs to divest from these five enterprises is VND950 billion ($42.1 million).

The scheme also mentions lowering Vinachem’s ownership at eight enterprises, including the Ha Bac Nitrogenous Fertilizer and Chemical Company (Hanichemco), the investor in the Ha Bac Fertilizer Plant, to the 51 per cent cap, with the total book value of its holding falling to VND1.91 trillion ($84.7 million).

Vinachem’s consolidated financial statement for the first six months of 2016 showed a loss of VND200 billion ($8.9 million), in which the parent company’s losses were VND476 billion ($21.1 million). Many of the corporation’s projects were recording losses and on the verge of closing, including the Ninh Binh Fertilizer Plant, which has cumulative losses of nearly VND3.3 trillion ($146.4 million) since opening in 2012.

As at June 30, 2016, Vinachem’s total assets stood at VND58.92 trillion ($2.6 billion) while liabilities reached nearly VND37 trillion ($1.64 billion). At its year-end meeting, the corporation announced 2016 revenues of VND41.63 trillion ($1.85 billion), down 9.1 per cent against 2015. Profit, meanwhile, is yet to be disclosed. In 2017, the corporation has set a revenue target of VND33.56 trillion ($1.5 billion) and profit of VND155 billion ($6.9 million), with cash and cash equivalents to increase 5 per cent compared to 2016.

The Ninh Binh plant and the Ha Bac plant are among 12 loss-making projects under MoIT, which have resulted in losses totaling in the trillions of Vietnam dong. To secure capital for the Ninh Binh plant, Vinachem took on huge loans, with $250 million coming from the Chinese Eximbank and $152 million from the State-owned Vietnam Development Bank (VDB) in the 2008-2009 period.

Thanks to its numerous borrowings, Vinachem paid VND534.4 billion ($23.9 million) in interest in 2015. As the condition of the plant becomes more uncertain, both Vinachem and the Ninh Binh Provincial People’s Committee have made odd moves.

In early June, Vinachem submitted eleven plans to the government and MoIT, including closure. The chemical giant also “threatened” it would have to spend VND1 trillion ($44.8 million) per year on repaying its debts if the plant were to close.

In September, the Ninh Binh People’s Committee submitted proposals to the Prime Minister on extending the deadline for the plant’s debts to Chinese Eximbank by at least five years. It also proposed allowing the plant to apply safeguard measures on urea products, aiming to curb the volume of low-priced imports.

With VDB being a State-owned bank, the Provincial People’s Committee requested the Prime Minister turn the remaining VND2.7 trillion ($120 million) loan to Vinachem into a State capital contribution, a move rightly considered as asking the State to bear the losses.

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