Abandoned bioethanol plant in central Vietnam causes big waste

The VND2.22 trillion ($90.22 million) Dung Quat Bioethanol Plant, located in the Dung Quat Economic Zone in Quang Ngai province, has been closed for many years, causing significant waste to the state budget.

Its construction began in September 2009, with Central Biofuels JSC (BSR-BF), a subsidiary of Binh Son Refining and Petrochemical JSC (BSR), as developer. Binh Son, the operator of Dung Quat oil refinery, is a subsidiary of state-owned Petrovietnam.

Covering 24.62 hectares, it was the largest biofuel production facility in central Vietnam, utilizing modern technology with a maximum capacity of 100,000 cubic meters of ethanol per year.

The bioethanol here was made from dried cassava slices and was used to blend with A92 gasoline to create E5 gasoline for distribution in the market.

The plant not only contributed to the development of the clean fuel industry but also enhanced the economic efficiency of cassava products and provided jobs for hundreds of local workers.

In February 2012, the plant launched its first batch of bioethanol after several months of operation and testing. However, contrary to expectations, after two years of official operation, the Dung Quat Ethanol Plant was forced to operate at a reduced capacity and incurred losses.

In April 2015, it suspended production due to ethanol prices in the market being lower than production costs, leading to losses and eventual closure. This project is among 12 loss-making projects of the industry and trade sector that must be restructured in the past several years.

The plant is now in a state of abandonment, with overgrown weeds and deteriorated workshops. Local residents complained that the abandoned project wastes land while they lack land for cultivation and employment.

A leader of the Dung Quat Economic Zone and Quang Ngai Industrial Parks Management Board stated that the Dung Quat Ethanol Plant has been inactive for many years due to various reasons.

"The project did not yield results as expected, especially after the investor had spent a substantial amount of capital. We hope that it will soon have its problems removed and resume operations to avoid wasting both capital and land," he said.

BSR-BF’s shareholders includes BSR, holding 61% of the charter capital; Petrovietnam Oil Corporation (PV Oil), 38.75%; and Petrosetco General Services JSC, 0.25%. They are all subsidiaries of state-owned Petrovietnam

Recently, BSR, the parent company of BSR-BF, announced its reviewed consolidated mid-year financial statement which showed that on February 22, 2024, BSR-BF filed for bankruptcy at the Quang Ngai provincial People’s Court.

On May 27, 2024, the court issued a decision to initiate bankruptcy proceedings against BSR-BF, thereby terminating the company’s control over BSR-BF. Consequently, the financial statement of BSR-BF has been no longer integrated into BSR's mid-year financial statement from this date.

BSR also confirmed that BSR-BF suffered losses and was no longer its subsidiary from May 27, 2024.

Previously, in 2021, banks that provided credit to BSR-BF, including OceanBank, PVcomBank and Vietcombank, filed a lawsuit against BSR-BF to the Quang Ngai provincial People's Court regarding overdue loans and debt recovery measures related to the credit contracts for the plant.

On September 26, 2023, the court issued a judgment partially approving the banks' lawsuit and requiring BSR-BF to pay them a total of approximately $64.4 million as of September 18, 2023.

As of December 31, 2023, BSR-BF's short-term liabilities exceeded its short-term assets by VND1.53 trillion ($62.18 million), with a cumulative loss of VND1.59 trillion and overdue debts amounting to approximately VND1.57 trillion.

The overdue debts as of December 31, 2023 included about VND439.6 billion ($17.87 million) in interest and VND1.13 trillion ($45.93 million) in principal.