The Ministry of Industry and Trade (MoIT) has sent a document to Prime Minister Nguyen Xuan Phuc following PetroVietnam’s proposal to use VND2.5 trillion (US$107.7 million) from its provision cost to complete the much-delayed Thai Binh 2 plant.
Earlier, the Viet Nam National Oil and Gas Group (PetroVietnam) – the investor of the VND41 trillion ($1.827 billion) Thai Binh 2 project – submitted a proposal to the ministry to use the project’s provision cost and some of PetroVietnam’s profits to resolve the difficulties. The costs would be independently audited.
The MoIT said PetroVietnam must report on the capital and specific targets and provide an overall evaluation of the project. In addition, the duties and responsibilities of the engineering, procurement and construction (EPC) contractor should be reviewed by the Commission for the Management of State Capital at Enterprises (CMSC).
Under the adjusted timeline, the project’s first turbine was expected to be complete in June 2020 and the second one four months later.
The ministry said the adjustment should not exempt the firm from its responsibilities as the investor under existing contracts and according to legal provisions.
State-run PetroVietnam (PVN) is building the 1,200MW Thai Binh 2 thermal power project, part of the Thai Binh Power Centre in the northern province of Thai Binh. PetroVietnam Construction JSC (PVC) is the EPC contractor with a $1.2 billion contract.
PetroVietnam also proposed exempting fines for PVC with the condition that PVC would make maximum effort to complete the project according to the adjusted schedule.
In response, the ministry asked PetroVietnam to report the proposal to the CMSC for consideration, as the exemption would affect the group’s rights and responsibilities.
Earlier, the MoIT handed over ownership of PetroVietnam to the CMSC.
The investor has disbursed more than VND31.2 trillion, accounting for 82 per cent of the project’s total investment. PetroVietnam said the project would be completed by 2020, meaning that Thai Binh 2 Thermal Power Plant was delayed by 55 months.
PetroVietnam said project difficulties include the fact that PVC has not had experience acting as an EPC contractor for thermal power plants. Inability to pay for completed works and sub-contractors is also a challenge.
More than VND1.1 trillion that PetroVietnam paid to PVC as an advance payment to implement the EPC contract for the plant was used to pay for PVC’s bank loans, causing a capital shortage for the project.
As reported by PetroVietnam, it is expected that when the project is completed, the PVC contractor would be short about $55.18 million compared to the value of the signed EPC contract after the total investment was adjusted 2nd time due to delay.
PetroVietnam still has difficulties due to the lack of capital. Many machines have not been put into use but have exceeded their warranty period, causing risks related to equipment quality.
“This is a large-scale project,” the ministry said. “If it is not completed soon it will lead to ballooning costs and big economic losses, affecting the supply of electricity and creating bad public opinion. The PVC contractor lacks the experience and financial capacity to ensure cash flow for project implementation.” — VNS