World recession is tough on Vietnam shipbuilder
Financial difficulties. . .
Vinashin’s subsidiaries have released reports that indicate the Vinashin group and a number of its subsidiaries are facing financial difficulties. Because the group is in arrears to customs agencies and foreign partners, subsidiaries cannot import goods needed to serve their shipbuilding projects.
On 16 October, a follow up story quoted Vinashin CEO Le Loc as agreeing that reports the Group is facing cash flow problems are correct. Vinashin’s situation mirrors that of the shipbuilding industry world-wide, he said. Business is bad because of the financial recession. Orders have been cancelled, or buyers are having trouble settling their debts – and though that impacts Vinashin’s own cash flow, the group’s overall situation is sound. Loc stressed that “we will pay what we owe.”
In June 2009, some Vinashin subsidiaries reported that the group was 150 billion dong (about USD 833 million) in arrears on payments. Most particularly noted was a comment by Nam Trieu Shipbuilding Industry Corporation (Nasico) that it could not import goods due to the group’s financial problems.
A report by the management board of a “national project,” the construction of a floating storage offloading unit (FSO-5) for PetroVietnam, showed that Vinashin’s debt to Monobuoy, an equipment supplier, alone has reached USD7 million.
Vinashin owes eight billion dong to the Customs Agency. If Vinashin does not pay the debt, Nasico will not be able to get the imports from Monobuoy, according to the representative of Nasico.
Not only FSO-5, a lot of other Vinashin projects are late in implementation due to the cash flow problems of Vinashin and some subsidiaries. The Dung Quat Shipbuilding Industry Corporation is eight months behind on construction of three oil tankers for PV Trans.
. . . have consequences
According to Nasico, equipment needed for FSO-5 has arrived at ports, but it cannot clear the goods either because it does not have money to make payment, has not fulfilled customs procedures, or has not paid storage fees.
For some imported products that Nasico already has in hand (lifeboats, valves, paint), the sellers have refused to provide instruction documents until they receive payment.
A PetroVietnam subsidiary has warned group headquarters that because Nasico/Vinashin has been late in paying debts, Monobuoy meanwhile cautions that some contractors may hold up deliveries or abrogate contracts to sell important equipment to Nasico/Vinashin.
PetroVietnam says it is losing USD12,000 per day due to the tardy completion of the FSO-5 project, now 15 months’ behind schedule, plus interest charges on borrowed capital. PetroVietnam’s Deputy General Director Phung Dinh Thuc told Tuoi Tre newspaper that FSO-5 will not be completed until March 2010.
The PetroVietnam-Vinashin deal looked good at first. Vinashin contracted to build FSO-5 at USD110 million, or USD50 million less than the price offered by foreign contractors. However, the cost of the projects has now been raised to USD169.2 million.
Nasico said that though PetroVietnam has disbursed money to Nasico, it needs another USD18.9 million to finish the project.
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On October 30, 2006, the Dung Quat Shipbuilding Industry Corporation, a Quang Ngai province subsidiary of Vinashin, began building the Dung Quat 01, a 104,000 DWT tanker, for PetroVietnam. The ship, valued at USD56 million (936 billion dong) was expected to be launched in March 2008.
Dinh Tien Dung, Deputy General Director of Dung Quat Shipbuilding Industry Corporation, said that the work has been delayed by Typhoon Ketsana, which wreaked damages of 400 billion dong on the Dung Quat shipyard.
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