MoIT requests discount on Phuong Nam pulp mill auction

12:08 | 19/06/2018
After being ignored at its first three auction attempts, VND3.4 trillion ($148.9 million) Phuong Nam pulp mill has been seeking the prime minister’s approval to hold the fourth auction at a discount price.
moit requests discount on phuong nam pulp mill auction
Phuong Nam pulp mill has been failing to arouse investors' interest

The Ministry of Industry and Trade (MoIT) has been waiting for the approval of the PM to reduce the selling price of Phuong Nam pulp mill managed by state-run Vietnam Paper Corporation in the southern province of Long An, after being ignored by investors at the past three sales.

Previously, MoIT asked Vietnam Paper Corporation, in collaboration with a consultancy firm to continue to build other auction plans as well as plans to deal with the assets that could not be auctioned off, according to regulations.

However, MoIT admitted that there has been no official document providing guidance on the adjustment of the starting price for subsequent auctions in case the first failed.

MoIT expects to receive the approval from the PM and complete the sale of Phuong Nam pulp mill this year.

As a result, MoIT proposed the PM to issue a resolution on specific mechanisms for auctioning Phuong Nam pulp mill, with similar mechanisms as those outlined in Decree No. 61/2017/ND-CP, which stipulates the assessment of the reserve price of bad debts and assets put up as collateral for bad debts.

Notably, after the first failed auction, the firm will be permitted to discount the selling price by 10 per cent at the next auctions. The discount cannot be applied more than twice.

In case the project is still unmarketable after two auctions at the discounted price, the owner of the project will appraise each asset and then continue to organise auctions for these assets.

MoIT expects to receive the approval from the PM and complete the sale of Phuong Nam pulp mill this year.

The mill’s construction was kicked off in March 2006 with the initial investment capital of VND1.487 trillion ($66.3 million) by Transport and Communication Development Investment Company (Tradico). The mill was expected to produce the best quality pulp in Vietnam, reaching European standards.

At the time, the province encouraged farmers to grow on nearly 9,000 hectares in Thanh Hoa, Moc Hoa, and Tan Thanh districts to supply materials for the mill.

In 2007 the mill entered its test run and in November Tradico decided to increase the total investment capital to VND2.286 trillion ($102.5 million).

However, the test run was suspended due to machinery breakdown.

In 2009, Tradico was licensed to transfer the pulp mill to Vietnam Paper Corporation. The expected cost of the project increased to VND3.4 trillion ($148.9 million).

However, after Vietnam Paper Corporation took over the mill, it was upgraded and started operation again, but the malfunctions remained.

Vietnam Paper Corporation organised three auctions at the starting price of VND1.885 trillion to sell Phuong Nam pulp mill, but failed.

The first time was on June 12-July 14, 2017.

The second time was on July 20-August 9, 2017 with the extension of 15 days.

The third time was on August 23-September 22 with the extension of 30 days.

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