Binh Son Refining and Petrochemical Co Ltd (BSR), the operator of Dung Quat Oil Refinery, wants the Government to provide guarantee for its loans of US$1.26 billion out of US$1.8 billion needed for the second phase of the upgrading and expansion project of the refinery.

According to a statement submitted to the Ministry of Industry and Trade in April, the refinery would be upgraded to increase its capacity to 8.5 million tons of crude oil by 2021 from the current 6.5 million tons.

BSR general director Tran Ngoc Nguyen said that the company expects the Government to help it borrow long-term loans with the lowest interest rate.

The company is operating effectively with after-tax profit of VND4.5 trillion (US$200 million) and return on equity of 14% in 2016. BRS will focus on petrochemical development due to higher profit than oil refining.

However, the company has faced numerous difficulties as the Government has approved the medium-term debt management program for the period 2016-2018, backing off from providing government guarantee for loans taken out by State enterprises.

Accordingly, the Government will stop underwriting domestic and foreign debt repayment capability, revise preferential projects in the 2016-2020 period and maintain debts at a safe level.

In mid-2016, the Ministry of Finance proposed the Government to consider guaranteeing overseas loans. The Government has to submit loan guarantee proposals of the Vietnam Oil and Gas Group, the Vietnam Electricity Group and BSR to the National Assembly for approval.

The ministry has agreed to give a guarantee to the US$170-million foreign debt of the National Power Transmission Corporation since March.

Unlike cement processing and hydropower projects, investors of fuel and electricity projects always pay their debts punctually.

However, the proposal of BRS will be hardly accepted when it plans to launch initial public offering (IPO) at the end of this year with less than 50% of its shares held by the State. Similarly, the State had to seriously consider granting a guarantee to Vietnam Airlines’ aircraft acquisition as it had launched IPO in 2014.

SGT