Ministry wants clear responsibilities in huge loss-making fertilizer project

The Ministry of Industry and Trade yesterday required Vietnam National Chemical Group, the management board of Ninh Binh Nitrogenous Fertilizer Plant project and Ninh Binh Nitrogenous Fertilizer Ltd Company to clarify responsibilities of teams and individuals relating to wrongdoings causing the plant thousands of billion dong losses.

Ninh Binh Nitrogenous Fertilizer Plant has continuously reported losses after coming into operation in 2012

The requirement was made in the ministry’s announcement of inspection results over the company’s construction investment management at the fertilizer plant in the northern province of Ninh Binh.

The plant has been loss-making after coming into operation in 2012. Financial reports show a total loss of VND1,719 billion (US$76.17 million) in 2012-2014, exceeding the plan of VND694 billion ($30.75 million).
Besides the responsibility clarification, the ministry instructed the above to handle violations within their jurisdictions or proposed authorized agencies to do so.
The ministry also assigned its functional agencies to put forward measures to overcome difficulties, stabilize production at the plant, prevent state asset loss, ensure workers’ rights, supervise and speed up the implementation of the inspection’s conclusions.
Ninh Binh nitrogenous fertilizer project broke ground in 2008 with the total investment capital of US$667 million and designed capacity of 560,000 tons of urea a year in Khanh Phu industrial park.
Investor is Vietnam National Chemical Group and engineering procurement construction (EPC) contractor is Chinese Huanqiu Contracting & Engineering Company.
In September 2012, the contractor handed over the plant’s command to the project management board, which then temporarily transferred the facility to Ninh Binh Nitrogenous Fertilizer Ltd Company to start operation in the following month.
According inspection results, the chemical group has approved adjustments in the project on the basic of low financial efficiency estimations with many latent risks.
Forecast work has been limited and the appointment of the project management board’s director has not abided by regulations. For the plant’s trial operation, the group supplied the contractor with coal exceeding the regulated volume in the EPC contract.
After many negotiations, the investor and contractor have yet to reach an agreement on the value and responsibility of each side for the excessive coal supply. Worse, the contract contains a disadvantageous point for the investor about the coal supply. This is one of reasons for the delay of the EPC contract account.
Contractor Huanqiu Contracting & Engineering built the plant 420 days later than the time in the contract, resulting in large costs including VND527 billion ($23.19 million) loan interest. However the investor and the contractor have failed to determine the penalty for the slow progress.
After four years of commercial operation, they have neither checked and taken over the plant nor defined responsibilities for problems of the project. At present, they are still working to solve the problems.
So far, a lot of items have been forced to remove from the contract account covering construction, mechanics, electricity, measurement, repair, compensation for parameters behind requirements and works without acceptance with the total value of US$2 million and VND114 billion ($5.04 million).
The group, the management board and the fertilizer plant have not handled changes in the project and showed shortcomings in instructing, inspecting and supervising the project’s implementation.

By Van Phuc – Translated by Hai Mien

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