Assessment of Production and Management Organizational Aspects

than the previous year and greater than the bank loan interest. The financing coefficient of the following year is higher than the previous year (0.04 < 0.2 < 0.34 < 0.4). Although it has not met the requirements, in reality, the business situation of Vietnam National Shipping Lines often has higher profits in the following year than the previous year. Borrowing and paying principal and interest to credit institutions on time.

B/ INVESTMENT PROJECT APPRAISAL

1. Legal basis of the project.

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The specialized container transport investment project “KEDAH” is based on the following:

- The project to develop Vietnam National Shipping Lines for the period 1996 - 2000 was approved by the Prime Minister in Official Dispatch No. 159/TTg dated March 15, 1996.

- Project for development of Vietnam National Shipping Lines in the period 2000 - 2001.

- Investment and business project of container ship "KEDAH" of Vietnam National Shipping Lines.

- Official dispatch No. 853/QD-HDQT dated November 27, 2000 of the Chairman of the Board of Directors of Vietnam National Shipping Lines approving the project to purchase the ship KEDAH

- Loan application dated November 20, 2000 of Vietnam National Shipping Lines.

- Draft contract (MOA) for purchasing ships.

- Letter of commitment to purchase hull insurance and P & I insurance.

- License for purchasing KEDAH ship from the Ministry of Transport.

- Minutes of the Credit Council meeting of Dong Da Branch of the Bank for Industry and Trade.

2. Assess the necessity of the project

Embarking on the process of reforming and developing the national economy towards industrialization and modernization" as well as the trend of regional and world integration, the Party and State of Vietnam have considered the Maritime industry as one of the key industries that need active investment to develop on the basis of existing potentials. To implement the policies of the Party and State, since its establishment, Vietnam National Shipping Lines has always focused on training and improving the qualifications of cadres and employees from management level to direct labor, continuously investing in purchasing specialized equipment to serve specialized work.

One of the most important strategic development goals of Vietnam National Shipping Lines is to invest in and develop a cargo transport fleet to quickly rejuvenate and restructure the fleet in a specialized direction in line with the development trend of advanced transport methods in the world and the region. To achieve this goal, the Corporation and its member enterprises have recently focused on investing in many specialized vessels to meet the needs of transporting domestic and export goods.

import of the country. Among the above specialized vessels, investing in a container fleet is one of the top priorities of the Corporation to keep up with the development of containerization trends in maritime transport worldwide, especially in the Asia-Pacific region. In the past 5 years (1996-2000), Vietnam National Shipping Lines has mobilized domestic and foreign loans to invest in 7 container ships with a total capacity of 4,241 TEU operating on intra-Southeast Asia shipping routes, including: 2 ships Me Linh, Van Xuan operating on the Hai Phong route

- Ho Chi Minh City - Singapore - Ho Chi Minh City - Hai Phong. Two ships Hong Bang and Van Lang are operating on the route Hai Phong - Hong Kong - Kaoshiung - Hong Kong - Ho Chi Minh City - Hai Phong. The ship Dien Hong is operating on the route Hai Phong - Da Nang TH Ho Chi Minh City - Hai Phong. Two ships Phong Chau and Phu Xuan are operating on the route Ho Chi Minh City - Singapore - Port Klang - Singapore - Ho Chi Minh City. The above container fleet of the Corporation has met part of the demand for transporting import and export containers (accounting for 15% of the transportation market share) and the majority of the demand for transporting domestic containers (accounting for 80% of the transportation market share). Continuing to invest in increasing the carrying capacity of the Corporation's container fleet is an urgent task that needs to be urgently implemented.

In the last months of 2000, the Corporation has continuously searched the international used ship market to select suitable containers in terms of both price and technical conditions. Because the price of 1000 TEU container ships in the international market has continued to increase since mid-1999, choosing a ship with a suitable price is very difficult. ... After receiving many offers from international brokers, the Corporation has now selected the KEDAH ship built in Germany in 1988 with a capacity of 1,020 TEU at a relatively competitive price. The KEDAH ship has a capacity similar to the two ships Phong Chau (1,088 TEU) and Phu Xuan (1,113 TEU) that the Corporation is operating. Certainly, purchasing and putting into operation the KEDAH ship on the route: Saigon - Singapore - Port Klang - Saigon will bring high efficiency, contributing practically to increasing the business capacity and development of the Vietnam National Shipping Lines.

3. Market assessment

3.1. Overview of product supply and demand:

Due to the exploitation and use of container ships with a capacity of 1,000 TEU -

1,500 TEU on short-haul routes has achieved high economic efficiency, at the same time, container shipping corporations have continuously opened more short-haul container shipping routes to improve transportation services and increase their competitiveness, increasing the pressure on the demand for this type of container ship. Since the beginning of 1999, the number of modern, high-speed 1,000 TEU - 1,500 TEU container ships has not been enough to meet the increasing demand. Therefore, many large shipping lines have had to apply for additional terms of use of 1,000 TEU - 1,500 TEU container ships with rental prices ranging from 6,000 USD - 7,000 USD/day. Due to the increase in container shipping activities in Asia, since July 1999, the rental rates for this type of container ship

1,000 TEU - 1,500 TEU operating in Asia continued to increase and the charter price was 1,000 USD higher than the charter price of the same type of container ship in the Atlantic region. The average charter price in Asia is about 7,700 USD/day, with high-speed ships (about 19 nautical miles/hour) the charter price exceeds 8,500 USD/day. The charter price of 1,000 TEU - 1,500 TEU container ships excluding 49 in January 2000 was about 6,500 USD/day but by April it had increased to 8,000 USD/day (achieving a growth rate of about 19%) (According to the results of MAERK BROKER SINGAPORE's container ship charter market research - September 1999).

Up to now, the rental price of this container ship continues to increase at a high level. The multinational container shipping group MAERSK LINES - SEALAND has rented the HELGA WEHR, with a load capacity of 19,440 DWT, a carrying capacity of 1,143 TEU, and a speed of 17.5 nautical miles/hour for a price of 9,750 USD/day. With the COLUMBUS OLIVOS, the load

24,000 DWT, capacity 1.4TEU, rental price increased from 9,500 USD/day. WANHAI Shipping Company (Taiwan), the largest container shipping company operating in Asia, has just signed a contract to charter the ship BUDI AMAN, capacity 14,000 DWT, capacity

1,020 TEU, speed 17 nautical miles/hour, at 8,750 USD/day. A new company participating in container transportation in Asia, NEW ECON LINES, has chartered NORDCLFF, load capacity 14,190 DWT, carrying capacity 1,158 TEU, speed 17 nautical miles/hour, at 9,250 USD/day a year ago, now increasing the charter price to more than 7,000 USD/day. (According to the container ship charter market research of CORE SHIPBROKING AS - July 2000). According to MAERSK BROKER SINGAPORE's assessment, the 1,000 TEU - 1,500 TEU container leasing market will continue to be vibrant in the next 2 - 3 years, especially in Southeast Asia and the Far East, where many new container shipping routes are being opened due to strong economic growth leading to increased cargo volume in the Asian region. Due to the ability to supply and build new 1,000 TEU - 1,500 TEU container ships not meeting the demand, in the next few years, the rental rates for 1,000 TEU - 1,500 TEU ships will certainly increase significantly.

3.2. Objects and methods of product consumption

Located in the most vibrant shipping region in the world, the development of the Vietnamese shipping fleet in general and Vietnam National Shipping Lines in particular is not outside the general development trend of the world and regional shipping fleet, and is also affected by the supply and demand market of shipping vessels, including specialized container ships.

In its strategic development orientation for the next 10 years, the goal of Vietnam National Shipping Lines is to strive to transport about 30% of Vietnam's total export volume, most of which is containerized cargo between Vietnam's ports and ports in Asia and regional transshipment centers. To achieve the above goal, in addition to hundreds of thousands of tons of bulk and liquid cargo ships, in the period of 2001 - 2010, the Corporation will continue to invest in 14 - 18 more container ships of 1,000 TEU - 1,500 TEU to rapidly increase capacity.

transport of container fleet and expand the scope of operation of this fleet on routes to China, Japan, Southeast Asian countries, India. In 1998 - 1999, Vietnam National Shipping Lines, using loans from domestic banks, purchased 2 container ships Phong Chau type 1,088 TEU and Phu Xuan type 1,113 TEU. Both of these ships were immediately put into effective operation on the route Ho Chi Minh City - Singapore - Port Klang - Singapore - Ho Chi Minh City, both serving the transport of import and export goods and also leasing to foreign companies on a short-term basis because the demand for this type of ship is very high in the Southeast Asian region. Currently, many foreign shipping companies have also asked the Corporation to long-term lease the ships Phong Chau and Phu Xuan to put into operation for container transport on these routes. During the operation of the two ships Phong Chau and Phu Xuan, the cargo volume on the route Ho Chi Minh City - Singapore - Port Klang - Singapore - Ho Chi Minh City was very stable, the operating efficiency often reached 75 - 90% of the ship's transport capacity, although on this route there were two other ships of more than 600 TEU of the Corporation and of foreign companies also participating in the transportation.

Based on the situation of the shipping and chartering market as well as the actual operation of the two ships Phong Chau and Phu Xuan, Vietnam National Shipping Lines believes that investing in a number of additional ships of 1,000 TEU - 1,500 TEU to put into operation in the Asian region (where the demand for 1,000 TEU - 1,500 TEU container ships is currently the highest) is necessary and suitable for the market demand while contributing to further improving the transportation capacity and competitiveness of the Corporation in the coming time.

The quantity of imported and exported goods is increasing, the transportation of goods by container is increasingly preferred by customers with advantages such as: low shipping costs, large volume transportation, goods are well preserved to avoid damage and loss of goods...

The fleet of the General Corporation's office mainly operates on foreign routes to achieve efficiency. Due to the growing exchange of goods between countries in the world, and Vietnam has been implementing an open-door policy, the exchange of goods with countries in the region and the world is increasingly expanding. Currently, countries in the region are recovering their economies such as Japan, South Korea, and ASEAN, so the demand for shipping by sea is increasing. After completing the purchase and registration procedures, the KEDAH ship will be leased for a fixed term to exploit containerized cargo on the route: Saigon - Singapore - Port Klang - Singapore - Saigon.

3.3. Market competition situation

Vietnam's current cargo fleet is mainly old ships with small tonnage, meeting only 20-30% of the demand for cargo transportation. On routes with many import and export goods such as: Saigon - Singapore - Port Klang - Singapore - Saigon, there are currently many shipping lines participating in transportation such as: APM, RCL, APS, Hub Line, CNC, GMT... Particularly, Phong Chau ship since being put into operation on the above route, has so far transported

total of about 60,000 TEU of import and export goods. According to the assessment of Vietnam National Shipping Lines, when the KEDAH ship is put into operation, it will initially transport about 900 TEU/trip for export goods and 600 TEU/trip for import goods. Putting the KEDAH ship into operation will increase the transport capacity of the domestic fleet, reducing the situation of foreign shipping lines entering Vietnam to compete, causing disadvantages for the Vietnamese fleet. The age of the ship is 12 years old, which is favorable for exploitation, including time charter. With a capacity of 1,020 TEU, there will be many customers hiring for transportation because it can transport a large volume of goods, the additional freight to be paid per 1 ton of goods will be lower than hiring ships with smaller capacity.

4. Technical assessment.

KEDAH was built in 1988 at Mathias - Thensen - Wertf, Wismar, Germany. It is a specialized container ship with a GRT/NRT capacity of 11,977/5,588 Mt; a total tonnage of 14,101 DWT; a carrying capacity of 1,020 TEU, a draft of 8.82m, an overall length (LOA) of 156.85; a width of 22.86m; a maximum height of 48.65m; main engine Cegilski Sulzer 5P. TA 58, MCR 7950 KW 127 RPM; fuel consumption 31 tons HFO/day (running), 2.5 tons MGO (in port); speed 17 knots; The ship is being inspected by Germascher lloy (GL) with an unrestricted operating area, determining the technical condition of the hull, engine system, and equipment in general to be up to standard, suitable for the age of the ship. The technical features and type of the KEDAH ship as above meet the business and exploitation capabilities of Vietnam National Shipping Lines and current transportation needs in the country and the region. Suitable for ports in the ship's operating area (expected exploitation route Saigon - Singapore - port Klang - Singapore

- Saigon).

5. Assessment of production organization and management aspects

- Business form: applying fixed-term lending method

- Project management organization model: The Corporation directly manages and operates under the direction of the General Director, ship management department, finance - accounting department...

- Personnel management mechanism: the entire crew is managed and paid directly by the Corporation.

6. Financial assessment.

6.1. Estimates and investment sources

The total cost of purchasing the KEDAH ship is expected to be 8,300,000 USD (ship price USD, other costs 100,000 USD). According to the calculation in the "KEDAH container ship purchase project", Vietnam National Shipping Lines is fully capable of paying the principal and interest of the bank loan (7,380,000 USD) and monthly interest for 7 years.

Balance investment sources:

+ Equity capital: 920,000 USD ~11% of total estimate. Of which: 820,000 USD is deposit for ship purchase; ship receiving cost 100,000 USD.

+ Loan capital: 7,380,000 USD ~ 89% of total estimate.

Economic efficiency of the project:

+ Annual depreciation: (8,300,000 - 952,500)/ 7 = 1,049,643 USD/year.

+ Repair costs and spare parts:

- Years of only regular repairs: 250,000 USD/year

- Periodic repair years (every 3 years): 300,000 USD/year

+ Insurance costs:

P&I Insurance: calculated = GRT x insurance rate (3 USD/ GRT) = 11,977 x 3 USD = 35,931 USD

Hull insurance is calculated = Ship value x 1%=8,300,000 x 1% = 83,000 USD Total = 35,931 +83,000 = 118,931 USD

+ Crew costs (Including salary, food, social insurance): = 150,000 USD/year.

+ Management costs and other costs: = 50,000 USD/year

Total cost:

+ For years the ship is not on the repair dock: 1,568,574 USD/day

+ For years the ship is on drydock for repairs: 1,668,574 USD/day

Mining time in a year: 340 days

+ Average cost for 1 day of train: 4,697 USD/day

+ Estimated price for time charter: 7,200 USD/day.

Total annual revenue = $7,200 x 340 days = $2,448,000

Profit (after interest deduction):

- First year: 288,725 USD

- Second year: 300,573 USD

- Third year: 284,301 USD

- Fourth year: $404,029

- Fifth year: 455,757 USD

- Sixth year: $439,485

- Seventh year: 1,206,914 USD

Total profit after 7 years: 3,379,784 USD

Thus, after investing in a 1,020 TEU KEDAH container ship, the basic results are as follows:

- Revenue increased by 1 year 2,448,000 USD

- Directly solve labor for 25 people (crew members), and other departments

- Average annual profit after tax increased: 482,826 USD

6.2. Capital efficiency indicators

*Investment recovery period (TVDT):

TVDT = Total investment capital / (profit used to pay debt + Total depreciation) TVDT = 8,300,000/(120,000 + 1,049,643) + 7 years 1 month

*Loan recovery period (TVV):

Tvv = Total loan capital / (profit used to pay debt + basic depreciation) Tvv = 7,380,000/ (85,742+ 1,049,643)= 6 years 6 months

* IRR = 9%/year

* NPV = 228,380 million

General comments on financial aspects:

- Own capital participates in the guarantee after new investment, annual revenue increases by 2,448,000; profit increases by 482,000 USD, creating more jobs in the industry.

- The debt repayment break-even point has not reached the optimal level (62%/60%) compared to the requirement (60% means the project is highly feasible).

- Regarding the index NPV = 228,380 >0, IRR = 9% > Bank loan interest rate.

C/ LOAN PLAN APPRAISAL AND DEBT COLLECTION

1. Loan options

Based on:

- Decree 99/1998/ND-CP dated November 28, 1998 on management of international purchase and sale of ships to Vietnam;

- KEDAH ship business investment project;

- Official dispatch No. 981/TCKT dated November 17, 2000 Regarding "Request for loan to purchase container ship KEDAH" of Vietnam National Shipping Lines;

- Loan application dated November 20, 2000 of Vietnam National Shipping Lines;

- Credit contract between Dong Da Industrial and Commercial Bank and Vietnam National Shipping Lines, the Bank will disburse the loan according to the ship purchase contract. Specifically: 3 days before the ship delivery date (ship delivery date in the ship purchase contract), the Bank will transfer the amount of 7,380,000 USD to the "Joint Owner" account in the name of the seller and the buyer at a Bank in Singapore to pay for the ship. The date of ship departure will be the date of debiting the amount of 7,380,000 USD to Vietnam National Shipping Lines.

2. Debt collection plan

Bank loan repayment term: 6.5 years = 78 months

6 month grace period: - 3 month waiting for ship purchase

- Painting, replacement, repair: 2 months

- Trial run: 1 month

Loan term: 78 months + 6 months = 84 months.

The total Bank loan is: 7,380,000 USD to be paid in 6 years and 6 months (6.5 years). The average annual payment will be: 7,380,000 : 6.5 = 1,135,385 USD.

Annual debt repayment source:

- Basic depreciation source (depreciation within 7 years - according to Official Dispatch No. 166/1999/QD-BTC of the Ministry of Finance dated December 30, 1999 allowing the purchase of ships to be depreciated from 7 to 15 years).

Remaining amount: $1,135,385 - $1,049,643 = $85,742 will be used for annual profit

to pay.

Annual debt repayment allocation plan: details in the following table

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