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Dung Quat plans a $1.2 billion loan for IPO

Released at: 08:40, 07/12/2016

Dung Quat plans a $1.2 billion loan for IPO

Photo: Duc Anh

Oil refinery to set target for a loan for IPO plan by Q3 of 2017.

by Khanh Chi

The State-owned Binh Son Refining and Petrochemical Company (BSR), the owner of the Dung Quat Oil Refinery in the central Quang Ngai province, has been seeking approximately $1.2 billion from overseas loans before its initial public offering (IPO) projected in 2017.

"The BSR has been in negotiation with some foreign partners from the Middle East and South East Asia on the company's stake sale of 35 per cent, maybe before IPO," Mr. Nguyen Hoai Giang, Chairman of the BSR, told VET. The company has been calculating the price, he said.

The oil refinery's expansion project will help to increase the capacity by 30 per cent, while helping to reduce manufacturing costs due to the cheaper oil price. The company has also been in the process of selecting consultants for that loan, according to Mr. Giang.

Mr. Giang also said that the BSR still has to set a target for IPO within Quarter 3 of 2017 as he told VET in several interviews previously. The company has been preparing for IPO, however, the exact time and quantity of offering stakes would depend on the market situation at that moment, he added.

After completing the expansion in 2021, Dung Quat Oil Refinery will be able to meet half of the country's fuel demands. Its current capacity is at 148,000 barrels per day, which can satisfy one-third of the domestic needs. The country's demands of oil and petroleum products have increased every year and the volume imported in 2015 rose by 18.7 per cent, according to data from the General Department of Customs (GDC) under the Ministry of Finance.

Dung Quat's expansion plan has been given in the context of the oil market's increased prosperity, especially as the oil price is increasing towards the strongest week since August 2015 after the OPEC's decision to cut down production for the first time in 8 years.

The BSR has been repeatedly seeking assistance from authorities for its difficulties, and a few months ago the government agreed to provide additional incentives to the company regarding tax reductions and financial autonomy, under which it foregoes compensation from PetroVietnam for any losses, from the beginning of next year.

The new regulations mean that petrol produced by Dung Quat Oil Refinery will have a sales price matching the price of imported products from South Korea and will be 10 per cent lower than the prices of products from other ASEAN countries. Specific preferential tax rates applied on imported oil and petroleum products from ASEAN were significantly lower than the tax rates on local enterprises.

However, based on the oil refinery's scale it has enough capacity to be in an excellent competitive position with effective production, not to mention the many incentives for the BSR in taxation and finance and the favorable location, according to Ms. Masami Kojima, the World Bank's Lead Energy Specialist. Although BSR has sent petitions many times to the authorities with regard to its difficulties in the consumption of its products due to unfair taxation policies, these seem to be unreasonable, she said.

When the company has financial autonomy, "it can be sure that local customers will buy BSR's products due to many advantages in domestic supply regarding transport costs, USD exchange rates, and tax payment timelines compared to imported products," Mr. Tran Ngoc Nguyen, CEO of BSR, was quoted as saying. "If the company can sell more products, Dung Quat will operate at its optimal performance and the State budget contributions are expected to increase by $100 million," he said.

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