Performance of Project Lending Forms at Oil and Gas Finance Company

The customer department is responsible for proactively searching for, developing specific plans and programs to meet with customers. At the same time, it is responsible for preliminary appraisal of customers and projects, and has a preliminary assessment report submitted to the credit granting unit's leaders for review and transfer of the file to the officer directly appraising the credit.

Step 2: Credit appraisal and credit application preparation.

2.1. Credit appraisal

During the credit appraisal process, credit officers need to review and evaluate PVFC's ability to meet the conditions specified in the "Credit Guidelines".

2.2. Appraisal of collateral (if any)

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Based on customer assessment, CVTD agrees with customers on forms of credit guarantee:

 Not secured by assets;

 Asset security.

The results of the appraisal process are presented in the Credit Proposal and Independent Appraisal Report (if any).

2.3. Prepare Credit Appraisal Report

After completing the loan appraisal of the customer, CVTD prepares a Credit Proposal. The Credit Proposal includes but is not limited to the following contents:

 Customer introduction :

 Fully calculate the quantity and legality of loan documents.

 Legal capacity of the borrower

 Business lines

 Organizational model, labor arrangement

 Customer relations with PVFC and other credit institutions

 Customer's production, business and financial situation

 Introduction to investment project :

 Purpose and necessity of the investment project

 Investment capital needs

 Investment capital structure

 Determine loan needs

 Project efficiency and debt repayment capacity:

 Evaluate input factors, evaluate current and future output markets

 Determine the appropriate size of the project

 Preliminary assessment of project site, equipment and environmental conditions

 Analysis of project efficiency and debt repayment capacity:

 Determine the available capacity of the project

 Business performance analysis

 Determine cash inflow, cash outflow and cash balance

 Determine the discount rate and financial indicators: net present value NPV, internal rate of return IRR...

 Calculate and balance debt repayment

 Sensitivity analysis

 Analyze potential risks and propose measures to limit and prevent them.

 Analyze and select loan security measures, determine the value of collateral.

 PVFC's ability to meet capital requirements, loan currency and loan interest rate.

 Suggested opinion :

Based on analysis and evaluation of customers and loan projects, credit officers must make recommendations on:

 Loan: Loan amount, interest rate, currency, loan term, repayment period, repayment amount per period, loan security form, etc.

Conditions to be completed before signing a Credit Contract or disbursing.

 If not lending: Must state the reason clearly

Step 3: Approval

After completing the credit appraisal work for the customer's credit, the credit specialist submits the customer's credit file to the competent authority for approval, including:

1) Credit application form.

2) Credit collateral appraisal report.

3) Independent appraisal report (if any).

4) Credit application file prepared by customer.

5) Other documents related to the credit.

Step 4: Sign the contract .

Based on the decision of the competent authority approving the credit, the credit officer shall carry out other necessary procedures for PVFC and the customer to sign the credit contract, loan guarantee contract, financing contract or trust contract (if any).

Step 5: Disbursement

Based on the customer's disbursement request, check the documents proving the disbursement purpose, request the customer to supplement if missing, prepare the disbursement file, submit the disbursement file to the credit unit leader to check and sign the disbursement file and submit it to the competent authority for approval. After the competent authority signs and approves the disbursement file, the credit specialist transfers the disbursement file to the Accounting Department, Cash Flow Management Department to proceed with disbursement to the customer according to PVFC's regulations. The credit specialist is responsible for

Monitor and urge departments/offices to transfer loans to customers on schedule. And update customers' loans into the credit software.

Step 6: Post-loan management

Post-loan management is performed by CVTD according to the following contents:

 Customer profile management

 Collection of principal and interest

 Post-loan review and revaluation of collateral:

If the above factors have fluctuations that greatly affect the customer's debt repayment situation, the credit specialist will submit his/her opinion to the leader of the credit granting unit and the credit approval level to work with the customer to find a solution to overcome the problem, stop lending or proceed with early debt collection.

 Check loan security measures:

- Periodically re-evaluate the value of credit collateral to assess fluctuations in asset value due to increases or decreases in market prices, and due to asset exploitation, use, and preservation.

- In case the guarantee is a third party guarantee, the credit specialist regularly checks and monitors the financial capacity of the third party guarantor to ensure the performance of the third party's obligations when required.

 Handling arising issues:

In case the customer cannot pay the debt (principal and interest) on time and has a written request for extension or adjustment of the repayment period, the credit specialist will review, propose a report to the credit management and credit approval level and prepare a Proposal for extension or adjustment of the repayment period.

Handling of loan-related issues including: Debt restructuring, overdue debt transfer, debt cancellation must be carried out in accordance with the regulations of the State Bank and PVFC.

Step 7: Liquidate credit contract and save records

After the customer completes the obligation to repay the principal and interest due, including the prepayment loan to PVFC, the credit specialist will proceed with the procedure to submit the credit contract liquidation file to the customer, including:

- Mortgage release request with documents proving the loan payment on maturity or before maturity (if secured by assets);

- Notice of release of mortgaged assets / Notice of cancellation of registration of secured transaction assets / Notice of release of valuable documents, stocks, investment fund certificates, valuable documents, stock investment trust contracts;

Submit the credit contract liquidation file to the competent authority for loan approval.

After the competent authority approves the mortgage release, CVTD transfers it to the customer and instructs the customer to carry out the mortgage release.

Export the customer's original asset documents to the Accounting Department to receive all original asset documents.

Sign to receive the handover of the customer's original property documents and transfer the Notices related to the release of the property mortgage to the customer to carry out the release of the property mortgage.

Project lending process of Petroleum Finance Company

2.2.3. Performance of project lending forms at Petroleum Finance Company

Project lending is the main form of business at credit institutions in general and the Petroleum Finance Company in particular. This activity brings the main revenue to the company but is also the activity that contains the most risks. Project lending is very diverse and rich. It includes the following forms:

Direct lending :

Direct lending is done when PVFC has sufficient financial resources and is not limited by credit limits for loan projects. Direct lending helps customers reduce the cost of borrowing, so interest rates are more competitive. On the other hand, lending procedures are quick and convenient, loan approval time is also shorter, creating conditions for effective capital use.

Regarding the operation of direct lending at PVFC, the company has implemented the motto of "using all types of capital sources to form a harmonious and highly competitive interest rate", meeting the maximum credit capital demand of projects in the industry, especially promoting medium and long-term lending. The average growth rate of lending to credit institutions in the period 2002-2006 reached 164%/year. The average growth rate of direct lending to economic organizations and individuals in the period 2002-2006 reached 148%/year. After equitization, in 2007, lending to credit institutions reached 1,800 billion VND, direct lending to domestic economic organizations and individuals reached 9,200 billion VND. The total outstanding loan balance for the period 2007 - 2011 is expected to be 90,000 billion VND, of which the expected loan balance for enterprises and projects in the industry is about 30% (equivalent to more than

30,000 billion VND), meeting nearly 40% of the industry's loan demand. Annual growth rate is about 18%.

Chart 2.2: Results of direct project lending activities in the period 2001-2007

Billion VND 3500

3000

2500

2000

1500

1000

500

2001 2002 2003 2004 2005 2006 2007

Lending to industry players

Loans to credit institutions Loans to economic organizations and individuals

Source: PVFC's financial statements and performance reports

Co-sponsor :

This is an activity in which PVFC coordinates with other intermediary financial institutions to contribute capital to make loans for a project. Here, PVFC can be the focal point in lending activities, or a member organization contributing capital. The relationship with other credit institutions helps PVFC always ensure that the customer's project with a large loan demand exceeding the capital supply capacity as well as the lending limit of a credit institution will be funded by syndicated capital from the most optimal sources, with the most competitive interest rates. With this activity, PVFC can not only finance projects exceeding the credit limit but also create relationships between customers and the company and PVFC with other credit institutions.

For this task, PVFC has maintained and continued to successfully co-finance all development investment projects of the Group and its member units, and finance projects of other organizations and individuals in line with PVFC's business and cooperation objectives. PVFC has and will continue to expand its service network, coordinate

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