KPI agrees in principle to waive interest on Vietnam refinery loans 

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KUWAIT CITY, Jan 22: The Kuwait Petroleum International company has tentatively approved a proposal to waive interest on partners’ loans in the Vietnam refinery, totaling around $4 billion until 2029, with KPI share amounting to approximately $1.4 billion. 

This is according to a document, a copy of which is seen by the daily, discloses the willingness of KPI to decrease the interest rate on refinery loans to the lowest possible level, potentially reaching 0%. 

In a letter sent to partners at the end of last December, the refinery company disclosed discussions about reducing interest rates on loans.  

Recognizing the significant burden and adverse impact of financing costs, especially the partners’ loans, on the expected financial performance in 2024 due to exorbitant interest rates, the company urgently sought a resolution. The proposal included a substantial reduction in the interest rate on loans. 

The refinery company mentioned that it updated its studies on interest options on loans in early 2023, engaging external consultants for studies on the interest rates applied to long-term loans.  

The studies revealed that the interest rate on the refinery company’s loans significantly exceeded market counterparts. As of December 2023, the outstanding balance of the loans amounted to $3 billion, with $1.8 billion as the principal and $1.2 billion as unpaid interest.  

The company projected that, from now until the final maturity in 2029, interest on the loan would accumulate to approximately $360 million annually, totaling around $2.1 billion over six years. 

The refinery company, expressing a substantial expected financial loss, emphasized that, from a cash flow perspective, without a decrease in interest on sub-loans, it could only pay interest starting in 2034 and would never be able to repay the capital. Reducing the interest on subsidiary loans would positively impact financial performance, enabling repayment of interest and capital to the partners. 

According to the latest financial model in 2023, if the sub-loan interest is reduced to 0%, the refinery company could begin paying interest to the partners in 2032 and repay the principal in 2034. 

The refinery company, in its letter, stated that there are no legal objections to agreeing to adjust the interest rate on loans. It proposed taking all possible measures to enhance its commercial performance.  

The Nghi Son refinery, situated in Vietnam, began operations in November 2018, with a capacity of 200 thousand barrels per day. The total cost of the project was $9 billion, with Japan’s Idemitsu Kozan and the KPI each holding a 35.1 percent stake, Vietnam Oil and Gas Group owning 25.1 percent, and Japan’s Mitsui Chemicals holding 4.7 percent. 

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