VietNamNet Bridge - Binh Son Refining & Petrochemical (BSR) is seeking a $1.26 billion government-guaranteed loan out of the total $1.8 billion needed to upgrade the Dung Quat Oil Refinery. 

In a report about submitted by BSR to MOIT in April 2017, the Dung Quat Oil refinery will be expanded to increase capacity from 6.5 million tons of crude oil to 8.5 million tons and be able to refine all kinds of crude oil, not only the oil at White Tiger, so that petrol products can be upgraded from Euro 2 standard to Euro 5 by 2021.

The total investment capital for the second phase of the Dung Quat Oil Refinery is $1.813 billion, of which 30 percent will be stockholder equity. The company will have to borrow 70 percent of capital needed.

The total investment capital for the second phase of the Dung Quat Oil Refinery is $1.813 billion, of which 30 percent will be stockholder equity. The company will have to borrow 70 percent of capital needed.

Tran Ngoc Nguyen, CEO of BSR, on July 18 told the local press that BSR wants the government to act as the guarantee for the loan with the lowest possible cost and longest possible term, especially from ECA (export credit agency).

Nguyen said in 2016, BSR once asked for the guarantee for a loan and it has been waiting for the government to check the projects it would provide guarantees for in 2017. 

“The project on upgrading and expanding the oil refinery is an effective investment project. It will satisfy the requirements of Euro 5 standards and bring long-term benefits,” Nguyen said about the feasibility of the project.

BSR affirmed that the oil refinery has been running effectively with post-tax profit of VND4.492 trillion in 2016 and the ROE of 14 percent. 

Therefore, BSR will focus on deep petrochemical processing which produces a higher profit margin than an oil refinery.

However, analysts warned that it would be not easy to seek the guarantee for such a huge loan of over $1 billion. 

The government has approved the medium-term debt management program in 2016-2018 in accordance with the NA’s Resolution 25/2016, under which the government has committed to cut the government’s guarantee for loans.

Under the debt management program, the government has stopped providing new guarantees for domestic and foreign loans, while it is checking priority projects to build up the guarantee granting program for 2016-2020 to ensure the debts are within the safety line. 

In mid-2016, MOF requested the government to carefully consider the guarantee for foreign loans. If the national oil & gas group PetroVietnam or Electricity of Vietnam ask for a guarantee for big loans, the government needs to report to the National Assembly for approval.

As such, the BSR’s loan of over $1 billion will need ratification from the National Assembly.

RELATED NEWS

Binh Son Refinery valued at $3.2bn ahead of IPO

Binh Son Refinery's IPO set for November 7

Chi Mai