The group is seeking government support for the factory, which has somehow woven itself into a perplexing financial mess
A file photo of PetroVietnam's Dinh Vu polyester fiber and yarn factory in the northern city of Hai Phong. Photo credit: Vietnam Pictorial
Higher-than-expected costs and uncompetitive products are driving a polyester fiber and yarn factory of Vietnam's state energy giant PetroVietnam to the verge of bankruptcy, local media reported.
Dinh Vu factory in the northern city of Hai Phong, also known as PVTex, has been shut down since September last year, more than a year after coming into operation. The venture cost US$325 million, of which 74 percent was from PetroVietnam.
PVTex posted a loss of over VND1.25 trillion ($55.25 million) at the end of last year and negative equity of VND504 billion ($22.27 million), news website VnExpress reported, citing figures from PetroVietnam.
In a financial statement released early this week, PetroVietnam's fertilizer and chemical subsidiary PVFCCo, which owns a stake of 26 percent in the factory, said it has already taken the investment off its books.
The subsidiary's investment was evaluated at VND198 billion ($8.75 million) at the beginning of last year, a drop of 64.7 percent from the end of 2014, according to VnExpress.
PetroVietnam has sent a letter to the government, asking for help in selling the factory's products to local garment makers, news website Saigon Times Online reported on Thursday.
The letter came after the oil giant's many vain efforts to receive tax breaks and other incentives for PVTex, it said.
Aiming to meet 40 percent of local demand for staple fibers and 12 percent for yarns, PVTex has never been able to live up to expectations. Its products were more expensive than those of other producers and imports, a problem that was worsened by quality inconsistencies, according to the website.
In a report on the factory's shutdown last year, the Ministry of Planning and Investment's website Dau Tu said it has built up a stockpile of more than 9,400 tons of staple fibers and yarns. That is a relatively large number considering that the factory was operating at less than half of its designed capacity of 500 tons a day.
Local media reported that its production costs were unusually high. Its annual electricity bill, for instance, hit $12 million, compared to an original estimate of only $4.7 million. Its workforce expanded to more than 1,000 people, more than twice as planned.