Public-private project operators struggle to recoup investment

By Doan Loan   September 8, 2020 | 11:42 pm PT
Public-private project operators struggle to recoup investment
A motorbike driver passes by Deo Ca Tunnel which connects the provinces of Khanh Hoa and Phu Yen. Photo by VnExpress/Xuan Ngoc.
Transport infrastructure works built by public-private partnerships are reporting plummeting revenues, raising fears that, without government intervention, this could lead to bad debts.

PhuHa Bot Co. Ltd., which operates the Van Lang Bridge between Hanoi and its northwestern neighbor, Phu Tho Province, collects only 20-30 percent of the targeted toll daily.

Luu Phu Khanh, deputy CEO of the company, said at a forum on Tuesday this is because vehicles prefer to use another bridge nearby that does not collect toll from cars with nine seats or less.

This was not factored in before construction, he said.

"Even if we continue to collect tolls for the next 100 years, we won’t be able to recoup our investment."

He wanted the government to buy back a share of the project or provide the company with financial support.

Others expressed similar concerns at the forum.

Bach Dang Bridge in the northern province of Quang Ninh collects only 30 percent of the targeted toll since traffic is 40 percent less than estimated.

Van Thanh Tam, deputy CEO of Bach Dang Bot Jsc, said the company is struggling to repay loan interest and has asked the government to do it.

The company also offered to sell the bridge back to the province, but has not got approval.

Changes in policies have also caused problems for operators.

Phan Van Thang, deputy chairman of Deo Ca Group Jsc, which operates the Deo Ca Tunnel connecting the central provinces of Khanh Hoa and Phu Yen, said the government had approved seven toll booths originally, but later reduced it to five, hitting revenues.

Besides it agreed to contribute VND5 trillion ($215 million) to the project, but has so far paid only 77 percent, leading to higher loan interest and delaying break-even, he said.

Other operators are concerned that their bank loans will turn into bad debts.

Dinh Van Tiep, CEO of Phuong Nam Investment Jsc, said as traffic declines because of the pandemic and the government refuses to allow toll hikes, his company might not be able to pay its loans.

It operates a section of the national highway in the southern province of Binh Thuan. Tolls on the section were supposed to have been increased, but the government has not approved them, Tiep said.

The highway has been in use for nearly six years and is in need of maintenance, but that would not be possible if the company could not borrow from banks, he added.

Some public-private partnership (PPP) transport projects, especially those built on a build-operate-transfer (BOT) basis, have acquired a bad reputation in recent years, with people living near some of them complaining bitterly that they have to pay to travel around in their neighborhood since toll booths have been set up there.

This has caused more hurdles for other PPP projects, further affecting their capability to borrow from banks, Tran Van The, deputy chairman of the Vietnam Association of Road Traffic Investors, said.

Some banks have simply stopped lending to BOT projects, he pointed out.

As of April 22 this year 58 out of 60 BOT projects had failed to meet their revenue forecasts, with 17 making less than half the target, according to the Ministry of Transport.

"If we want to attract private companies to infrastructure development, we need policies to ensure they can recoup their investment," The said.

He said the government should allow operators to issue bonds guaranteed by it so that they could manage without bank loans.

Other experts hoped that the new PPP Law, which will come into effect next year, addresses these issues through a mechanism for sharing financial risk between the government and private companies.

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