Three state-invested biofuel projects in Vietnam with the total investment of over VND5.4 trillion (US$241 million) have either terminated construction or ceased operation over losses, a government report on Thursday found.
Vietnam’s Government Inspectorate on Thursday published its inspection report on the investment in biofuel projects by Vietnam National Oil and Gas Group, commonly known as PetroVietnam or PVN.
From October 2007 to March 2009, PVN was found to have directed its member companies to chip in money for the establishment of two joint-stock companies and one joint venture, the report reads.
The three companies were left in charge of developing three ethanol plants in the provinces of Phu Tho, Quang Ngai and Binh Phuoc.
Each of the plants was planned to be able to produce100 million liters of ethanol in a year, 30 percent of the cost for which was funded by shareholders while the remaining 70 percent was loaned from banks.
According to the inspection report, as of December 2014, the plants in Quang Ngai and Binh Phuoc had been finished, while the one in Phu Tho was still left incomplete as its contractor had ceased construction since November 2011.
The report blamed PetroVietnam Construction JSC (PVC), which was appointed contractor of the project in Phu Tho, saying the company lacked capability and experience in building biofuel plants.
The appointment of the project’s contractor by PVN instead of holding a contract bidding also violated Vietnamese laws, the report noted, which forced PVC to terminate its construction of the plant in 2011.
Phu Tho ethanol plant’s investment capital was also found to have been raised from the initial VND1.3 trillion to 2.5 trillion ($58.04 million – 111.61 million) over the course of its construction.
Though all activities at the project have been ceased since November 2011, incurred costs have amounted to VND392 billion ($17.5 million) at the time of the inspection in December 2014.
Meanwhile, Dung Quat ethanol plant in Quang Ngai also suffered from similar issues, as the project was constructed by appointed contractor PetroVietnam Technical Corporation, which had little experience in the field of biofuel.
Lengthened construction caused the plant to cost VND200 billion ($8.93 million) more than its initial capital of VND1.9 trillion ($84.82 million), the same report pointed out.
In 2014, the plant reported a VND164 billion ($7.32 million) loss, which was attributed to low market consumption of the biofuel.
Similarly, the ethanol plant in Binh Phuoc had only produced more than 16 million liters of ethanol biofuel before it was forced to halt operation in April 2013 due to low demand of the fuel.
With the investment capital of VND1.7 trillion, the inactive plant is generating an annual loss of around VND200 billion from asset depreciation, loan interests, equipment maintenance, and payment for workers.
The Government Inspectorate has submitted its findings to the Ministry of Public Security for further investigations into possible wrongdoings in the development of the plants.