FEASIBILITY STUDY REVIEW
ON
TAN THANH PORT DEVELOPMENT
( Summary )


APRIL 1998


NIPPON KOEI CO., LTD.

CONSULTING ENGINEERS


PROJECT PROMOTER : VUNGTAU SHIPPING AND SERVICES COMPANY
87 - Ly Thuong Kiet Street - Vung Tau city - Viet Nam
Tel : 84-64-852185. Fax : 84-64-858919. Email : vtauship@hcm.vnn.vn

CHAPTER 1 : INTRODUCTION

1.1 Background of Tan Thanh Port Development

The government's policy of transforming the national economy from a centralized and state-subsidized to more market-oriented has strongly encouraged the development of Vietnam's economy. Both foreign and domestic seaborne trades through HCMC ports has recently experienced a significant increase both in quantities and kinds of commodities.

According to the economic study by SPC in June 1995, it is estimated that by the year 2010, the amount cargo throughputs in the Southern Focal Economic Area (SFEA) will be roughly 120 million tons per year, while the maximum throughput capacity of the existing HCMC ports in 2010 will be around 25 million tons per year, therefore, the remaining 100 million tons needs to be shipped in and out through a newly established port complex

In anticipation of this traffic growth in the Southern Vietnam, TEDI-South completed in 1991 the master plan study on "Thi Vai - Vung Tau Deep Water Port Complex", which will cater for the seaborne cargo demand in SFEA and facilitate the efficient sea transportation by large size vessels to integrate into the world's sea transport market

In Saigon Port, the container cargo traffic has been significantly expanding and an urgent rehabilitation project is under way to upgrade the existing poor handling capacity, focusing on the container terminal expansion.

Outside the HCMC area, the regional economy, well influenced by the dynamic economic growth in the HCMC and surrounding industrial and agricultural zones, is also booming. To cope with the glowing local cargo demand, port development would be also an important factor to boost the economy of the Southern Vietnamese as a whole. Thi Vai Port complex should be developed in full coordination with inland river transport linked to many regional ports nearby.

To meet the imminent port demands in the Southern Vietnam, in the Phu My Port Division of Thi Vai Port Complex, BARIA SERECE has constructed the bulk-cargo berth, but this ongoing port developments in the Phu My Port Division, in terms of overall port demands in the Southern Vietnam, will not be sufficient. As such, in 1994, the HGL- SAIGON PORT-VUNG TAU SHIP submitted an application to the State Committee of Cooperation and Investment (SCCI) to build an integrated port in Phu My, Tan Thanh district, Baria Vung Tau province. The scope of the project comprises 1960m water front with 7 berths for 30,000 DWT Vessel and 13 berths for 500 DWT barge. Total investment capital was 197,679,000 USD, with a capacity of 8 million tons. Tons cargo per year such as general cargo, container, rice, fertilizer, steel etc. SCCI has not issued a license for the JV because it has not fulfilled the necessary requirements.
Currently, among 1960 m long water front, the downstream section of 760 m has been firstly formulated as a fast-track port development under the name of KYOEI-VTS JV Port (Thi Vai Port). Therefore, the revised feasibility study targeted at the remaining 1200 m water front, which is newly named Tan Thanh Port, is quite essential to tally with the new situation surrounding the port hinterland, such as ongoing development of new industrial estate planned along the national highway of No 51. The basic concept of Tan Thanh Port is as follows:

- Land lease in this area is 3750USD/ha/year
- Waterfront will be 1200m 
- A continuous construction.
The above changes of the port requirement will affect the project feasibility, even though the project is still viable based on the assessment of the investment capital which had been made by the Norwegian experts in cooperation with TEDI South. The main content of this project was already presented in the 1994- port development plan

Basically following the development concept, the feasibility study focusing on the development of Tan Thanh Port has been prepared as detailed in this port investment report.

1.2 Documents for Feasibility Study
1.2.1 Legal Documents
- Based on legal documents such as the Decree promulgating the Law on Foreign Investment in Vietnam, General report on ""Plan for Thi Vai- VungTau Deep Water Ports" by TEDI South, Approval No 55/TTg dated 5/11/1 992 of the Prime Minister on the Master Plan for Thi Vai, Approval No. 2495/KHHD dated 6/8/1993 of the Ministry of Transport on Cargo Traffic through HGL-VIETRANSCIMEX- VUNGTAU SHIP joint venture port and other related documents and reports.

1.2.2 Basic Documents

Report on "Major orientation for industrial development and infrastructure which serve for the key economic Southern area" of State Committee of Project Planning. 06.1.1995
- "Orientation for strategic transport development of Mekong delta" of Transport and Economic Science Institute in 07/1994
- Project "Renovation and Development of Saigon Port and Construction of Deep Water Port System in Thi Vai -VungTau" of Transport infrastructure to year 2010!.
- "Masterplan for development of transport infrastructure to year 2010".
- "Orientation for development of port system in Vietnam to year 2010" of Vinamarine 06/1994.
- "Masterplan for transportation in key economic Southern area" of Transport and Economic Science Institute 09/1994.
- Cargo forecast through ports in the area to year 2005" of Economic Institute of Ministry 
of Transport and Communications
- Site Survey Report, TEDI South, 1991
Construction & Hydro-Geographical Survey Report, TEDI South, 1991
- Summary Report on Meteorological, Hydrological arid Movement Conditions on Ganh Rai Estuary -VungTau, 1991
- Report on Construction Hydrology of Thi Vai Project and Port Access Channel, 1988
- Report on Water Level Regimes, Ganh Rai Estuary -VungTau, 1983
Pre-Feasibility Study on HGL-VIETRANSCIMEX-VUNG TAU SHIP Joint
Venture Port prepared by TEDI South and EIDE CONSULT A/S, INSTANES
A/S Norway) in 1992
- Feasibility study of HGL-VIETRANSCIMEX-VUNGTAU SHIP prepared by TEDI South, EIDE CONSULT A/S, INSTANES A/S NORWAY) in 1992.
- Feasibility study of HGL-SAIGON PORT-VUNGTAU SHIP prepared by TEDI South in 1994.

CHAPTER 2 : EXISTING CONDITION

2.1 Project Site of Tan Thanh Port Development

The project site of Tan Thanh Port is located in the upstream of KYOEI-VTS JV Port in the Phu My Port Division of Thi Vai River Port Complex. The port site will be bordered in the downstream by cooling water outlet of Phu My Power Plant, and in the upstream by a liquid cargo berth for Phu My Power Plant The detailed coordination of the project port site is set out as follows :

Table 2.1. Project Site Coordinates

2.2. Natural Conditions of Project Site
2.2.1 Topography

The Thi Vai river system comprises Thi Vai river, Go Gia river and Cai Mep river. Thi Vai - Cai Mep river is about 40 km long, running in the north-south direction, nearly parallel to the National Road 51. The average water depth is 15 - 20 m and the deepest place (at Thi Vai -Go Gia -Cai Mep crossing) is 30m. The width averages 500- 600 m. On Cai Mep river, in particular, there are places where the river is 1000 m wide.
Along the river bank extends tidal unexploited land area covered by saline woods. The port area is rather even, sloping down gradually from National Road 51 towards the river bank. At the proposed port. development area, the elevation near National Road 51 is +5.0m, at the river bank, +0.7 m (Mui Nai datum).

2.2.2 Meteorology, Hydrology and Oceanography

(1) Winds and Storms
The meteorology in the coastal areas of Vietnam is characterized by two monsoon wind seasons, North-East and South-West, with an average wind spend ranging from 5 to 10 m/s. According to the wind data of the Vung Tau Meteorological Stations the dominant wind direction in dry season is North-East and in rainy season South-West. Short-term observations at Thi Val shows that from December 1986 to April 1987, the South-East direction is dominant, while in other months, the wind directions vary. 
(2) Rainfalls
The rainy season in this area is from May to October Rainfall characteristics in Thi Vai area can be taken from the data of the Ba Ria Meteorological Station, 17 km from Thi Vai. Average total rainfall observed from 1914 to 1944, 1960 to 1970 is 1,568 mm. Maximum rainfall is 2,383 mm (1934). Average rainfall The rainy seasons is 1,505 mm.

(3) Visibility
Mist is rarely seen in Vung Tan sea areas; on average, there are only about 11-12 misty days per year. However, due to heavy rainfall, visibility can be limited for about 142 hours each year.

(4) Temperature and Air Humidity
Average annual air temperature is 260C, maximum temperature is 350C and minimum 190C. Average absolute humidity at Thi Vai is 28.1 mb. Average relative humidity in peak month is 91 %, annual average is 82 %.

(5) Hydrological Condition
The hydrological condition at Thi Vai river section is governed by the hydrological patterns of the adjacent East Sea. Variation in water levels and currents has visible diurnal tidal condition. Water levels are taken from Mui Nai datum. Average water level in several years at Thi Vai is +21 cm maximum +193 cm, minimum -223 cm. At the port site, the governing direction of current is North-East (rising tide) and South-West (ebbing). The main force affecting the current is tide Maximum velocity reaches 148 cm/s.

2.2.3 Geology

For the preparation of the Master Development Plan and the Feasibility Study, TEDI South has conducted some boring holes along Thi Vai river; on ground as well as in the water

Through laboratory testing, foundation layers at this place can be concluded as follows; on top is a layer of clay mud mixed with organic substances 9 m thick on average, the deepest location at boring hole MECS has a depth of 23 m. This is a weak load supporting layer. Below the clay mud is a soft plastic sand clay layer with depth varying from 3 - 9 m, This layer has low load bearing capacity. The strongest load bearing layer is medium size sand.

2.2.4 Hydro-geology
In order to assess the hydra-geographical condition of the site, one boring hole was executed. Water sample was taken from the boring well for composition analysis and sanitary tests. The supply capacity of a boring well is 20 m3/hr.

2.3 Existing Transport Network
2.3.1 Roads

Thi Vai Port is located 3 km from NR 51, which links HCMC to Vung Tau. This is an important transport link with many ongoing and planned rehabilitation and expansion projects in the South Vietnam. The distance irony the port to HCMC is 8O km, to Bien Hoa Dong Nai is 50 km and to Vung Tau City is 50 km.

2.3.2 Inland waterways

The Thi Vai, Go Cia river system is connected to other rivers, canals, streams, most of them with a depth not permissible for large vessels, but enough for easy access of 300 -800T barges.
From Long An to the port, the waterway is via Vam Co Tay river- Vam Co river- Soai Rap river - Long Tau river - Dong Tranh river Tac cua river - Go Gia river- Tac Ong True - Thi Vai river (or from Go Cia river bordering the downstream section of Thi Vai river) - the distance is about 190 km.
From Tay Ninh via Vam Co Dong river - Vam Co river and from here follow the same route as from Long An. Distance is about 224 km. From other provinces of the Mekong delta, the same routes as above can be used

2.3.3 Conditions of Access Channel from the East China Sea to the Port
The access channel from the sea to the port follows the deep portion of Ganh Rai estuary to Thi Vai River. Total distance from Buoy 0 to the port is 41 km. On this channel, there axe two shallow sections:
· First section is at the Ganh Rai estuary of shout 5 km long with depth of 10.6 m.
· Second section is a sand bar at Cai Mep river mouth 4 km long, with the same minimum depth of 10.6 m.
Based on the studies made before 1975 and by TEDI in recent years, it can be said that the natural channel! fins bad no significant changes in depth as well as in shape. The depth at Cai Mep river mouth tends to have cyclic changes with 1m variance. In five recent years, the depth has had no significant variation and has an approximate value of 13.2 m (Hon Dau datum )
The portion of channel on Thi Vai and Cai Mep rivers, resulting from measurement of 10 cross sections, shows no deformation. With the natural depth of the channel, vessels up to 15,000 DWT can get through Thi Vai river at any time. If taking advantage of the tides, vessels up to 30,000 DWT can still have access daily without requiring large volume of dredging.

The Ministry of Transport and Communications has actually given direction to prepare a study on the access channel to Thi Vai river. Therefore, this Study does not take into account the costs of the channel component.

CHAPTER 3 : CARGO DEMAND FORECAST

3.1 Methodology of Demand Forecast

Two methods are conceivable as the approach to the cargo demand forecast for Tan Thank Port. One is the macroscopic approach which firstly analyses commodity-wise demand and supply in the South of Vietnam and then breaks down cargo throughputs by port and commodity. The other is the microscopic estimate of cargo throughputs of Tan Thanh Port based on the analysis of industrial development mainly led by foreign investment in the hinterland of Ba Ria - Vung Tau Province.

The latest feasibility study conducted by TEDI South estimated cargo projection by the step-wise method starting from Ho Chi Minh - Vung Tau area to the breakdown of cargo demand of the objective ports called HGL This chapter basically follows the previous F/S in the light of methodology, but major difference would be more detailed analysis of cargo projection based on demand and supply of commodities in the South of Vietnam.
As to supply side, both published government plans and fresh data on direct foreign investment have been taken into account to estimate the likely production capacity period by period. The change in supply side condition directly affects the flow of commodities (particularly import commodities). Thus, supply side has been defined as the likely production capacity estimated at the time of this Study.

The thirteen commodities/cargo are as follows.

1) Steel
2) Cement
3) Coal
4) wheat flour
5) Coffee
6) Rubber
7) Agricultural products
8) Frozen stuff (Reefer cargo)
9) Crude petroleum and petroleum products
10) Container cargo
11) Chemical fertilize
12) Rice
13) Bitumen

All commodities have been independently forecast, where miscellaneous cargo categorized as "General Cargo" are not specifically projected. Perhaps, Tan Thanh Port would handle the kind of "General cargo", but their volume to be handled will be negligible. Thus the cargo termed as "General cargo" has been excluded from he comprehensive analysis of commodity projection

3.2 Projection of Cargo Throughputs in the South

The results of supporting data have been arranged for a time-series commodity/cargo flow of import, export and domestic. The following table summarizes the projection of cargo throughputs in the South.

Table 3.2 Cargo Forecast in the South

Cargo throughputs in the South is expected to be about 42 million tons in 2000 and 53 million tons in 2005. 


3.3 Commodity Distribution for Tan Thanh Port
The type of commodity/cargo and their volumes to be handled in Tan Thanh Port are summarized below. The cargo throughput implicitly indicates potential cargoes which would go through Tan Thanh Port. 

Potential Cargoes Through Tan Thanh Port.

Cargoes Throughputs in Tan Thanh Port

CHAPTER 4 : PORT FACILITIES REQUIREMENTS

4.1.1 Container Cargo Demands

The container cargo demands projected in Chapter 3 can be further broken down on a cargo characteristic basis ft' the target year of 2000, 2005 and 2010.

Table 4.2 Container Cargo throughputs

4.1.2 Container Berths
The container berth development will be implemented phasewisely to meet the container demands in the respective target years. The first-phase development is targeted at the year 2005 and the second-phase (full scale) at 2010.

4.2 Break-Bulk Terminal
4.2.1 Break-Bulk Cargo Characteristics

As briefed in Chapter 3, staple break-bulk cargoes will consist of rice in bags, fertilizer in bags, asphalt in drums and general cargoes In the port planning, the above break-bulk cargoes would be categorized into two groups, dirty cargoes like asphalt arid fertilizer and clean cargoes like general cargo and rice. In terms of safety cargo shipments, rice and fertilizer should be separately handled in berth usage and especially in cargo storage areas. In the sense, the berth storage plan should be carefully worked out considering the above cargo characteristics.

4.2.2 Break-Bulk Cargo Demands
         The annual throughputs of break-bulk cargoes have been projected as follows :

General cargo berths will be arranged as 1 berth for the first phase and one berth for the second phase.

4.3.1 Barge Cargo demands

The annual throughputs of the barge berth have been projected as follows.

4.3.2 Barge Berths

All the bagged barge cargoes will be handled by mobile quayside cranes with loading/unloading capacity of 210 ton/shift. Assuming that average cargo size is 300 tons, 0.5 day would be required to complete the unloading/loading operation. 6 berths are needed for barge.

4.4.1 Electric Supply 

To run the port operation, sufficient electric supply should be provided. Electricity for a large port zone should normally come from a stable and continuous source; direct electricity supply from a power plant or from the national network will be required. Actually, a 110 kV-3 overhead transmission line parallel to the National Road 51 from the Long Binh central transformer station to Ba Na supplies electricity to Vedan Go Dau monosodium glutamate factory at 33 MW capacity. If necessary and under the system of the Power Company No.2, the port can be supplied by the 110 KV high voltage power of this line

(I) 110 KV source:

Depending on the point of time, scope of operation of the port, requirement of electric quality, the intermediate transformer station can supply 110 kV by 1 to 2 overhead lines connected to Phu My Power plant or by national 110KV power network Baria-Long Binh.


4.4.2 Water Supply 

Up to year 2,000, the main water source shall be from the ground water wells drilled at the back site area of the port. The wells shall have a depth from 60 m to 100 m depending on the foundation structure. From year 2005, to ensure adequate water supply volume required for the completion period of Fu My port zone, the water supply system will take water from Phuoc Thai lake (Capacity W = 16 million m3, flow Q = 69,000 m3/day), or from Da den lake (W = 50 million m3, Q = 12,000 m3/day). The port can also take the water from the system constructed for the whole area or from two additional wells.

4.5 Navigational Facilities

4.5.1 Waiting Basin

As explained in 4.1.3, the provisions of stand-by anchorage would be absolutely necessary to allow efficient turn-rounds of ships in the port area. This temporary basin should be provided close to the Tan Thanh Port, but sufficiently away from the navigation channel zone in order not to cause any interruption to the channel traffic.
Since the swinging basin will be provided in front of the berths of Tan Thanh Port, no mooring space for stand-by anchorage could be provided. In the downstream of the port, the existing width of the river is as large as 600m, so most likely, temporary anchorage basin could be provided there, leaving 200-250 m wide channel zone in front.

4.5.2 Swinging Basin

Swinging basin is an important part of the port plan In order to ensure safety for the vessels in turning in or out for berthing or sailing in a water area n~ the berths, there should be a swinging basin with proper depth and width.

The diameter of the swinging basin shall depend on the swinging technique. For 30,000 DWT vessels, tugboat assistance is needed. In this case, the diameter of swinging basins shall be 350 m.

The depth of swinging basin is designed for 30,000 DWT vessels affecting the turn at water level of -0.6 (1401) Dau Datum). At this water level, the level of river bottom at swinging basin shall be -13.2 m(Hon Dau Datum).

4.5.2 Access Channel

The access channel from the East Sea to the port will go through Ganh Rai estuary and enter Thi Vai River. Total distance from Buoy No. 0 to the Port is 41 km This channel has two shallow sections. The first section at Ganh Rai estuary is about 5 km long with a minimum depth of 10.6 m The second section is the sand bar at Cai Mep river mouth, 4 km ion & also with a minimum depth of 10.6 m. With the natural depth of the channel, vessels of 15,000 DWT can navigate in and out at any time. By taking advantage of the tides, vessels of 30,000 DWT can navigate in and out daily without dredging requirement. Pursuant to Maritime Circular 11/94/ECT dated 24/02/1994 of Vinamarine, navigation of 20,000 DWT vessel can be up to buoyant No.15 which is 3 km upstream from the JV port.
Aside from the channel depth clearance, more careful consideration should be given to the horizontal aliment of the navigation channel, especially at the bending portions of the channel.

CHAPTER 5 CARGO HANDLING EQUIPMENT REQUIREMENTS

5.1 Container Cargo Handling

Table 53 Container Cargo Handling Equipment (Full-scale Development)

5.2 Break-Bulk Cargo Handling

Break-Bulk Cargo Handling Equipment

. The equipment for miscellaneous cargo handling are summarized as below


Table 5.5 Miscellaneous Cargo Handling Equipment

CHAPTER 6 : PORT DEVELOPMENT PLAN

6.1 Port Layout
6.1.1 General

The development of TanThanh Port will be implemented within the coordinates of the port boundary as designated in 2.1. The waterfront of the Port facing the Thi Vai River is 1,200 m long, and the coastal strip dedicated to the back-up port area is 500 m wide.

The port will be linked to the national highway No.51 through a newly developed access road that will run south of the Phu My Power Station. To the south of Tan Thanh Port lies anew port for VINAKYOFI, and to the north of the Port is expected the construction of a liquid cargo berth for the Phu My Power Station.

The container terminal complex of Tan Thanh Port will be developed in the southern part of the Port, covering about two third of the designated port area. The general cargo terminal, which will handle general cargo and break-bulk cargoes like rice fertilizer and asphalt, will be located to the north of the container terminal. In addition the barge terminal will be developed in the waterfront extending at right angled-return from the northern edge of the general cargo berths. The access road to the national highway will run immediately behind the port zone with two main gateways located, one for the container terminal and another for the general cargo terminal

6.1.2 Container Terminal Layout

In the ultimate stage of the port development, three 30,000 DWT container berths will be constructed in the river side with a total berth length of 800m. The 50 m wide apron inclusive of the gentry crane travelling area will be built along the quayside. Inshore of the apron, about 220-250 m wide container marshalling yard will be constructed to provide a total ground slots of 4,860-5,454 TEU

Inshore of the container marshalling yard will be built empty container stacking yards. Closer to the access road, CFS and port operational buildings will be aligned. The gateway of the container terminal will be located in the center, provided with 8-lane entrance & exit gates exclusively used for container traffic. The free-entrance for the port related traffic other than container trailers will be separately provided next to the Container traffic gates. Inside this port gate, will be constructed a container terminal operation building, which will command a wide view of containers operation in the marshalling yard.
In the inshore southern end of the container terminal, the space for the railway spur lines will be reserved for the marshalling of rail-based container traffic in future. Large parking space for container trailers will be provided between the gateway and the marshalling yard as well as adjacent to the railway marshalling yard. 

6.1.3 General Cargo Terminal Layout

Two general cargo berths will be constructed in the upstream of the container berths. inshore of 50 m wide apron, a total of 16 break-bulk cargo storage areas will be constructed in full-scale development, including open storage yards, covered sheds and silos.
Fertilizer storage will be located close to the barge terminal. To secure a buffer zone that will prevent mixture of rice and fertilizer storage, warehouse zones will be provided in between. The 25 m wide internal port road will be aligned in between the storage areas. The port operational buildings such as utility, workshop and wastewater treatment facilities will be located close to the access road area. A port operation building for the general cargo terminal will be located near the gate house separately from the container terminal operation building. 

6.1.4 Barge Terminal Layout

Along the waterfront facing Thi Vai River, six barge berths capable of receiving 500 DWT barges will be constructed. The triangle-shaped back-up port area behind the barge berths will contribute to unloading/loading operation of barge cargoes.

CHAPTER 8 : IMPLEMENTATION PLAN

8.2 Investment Program

In line with thc investment strategy mentioned in the preceding section, the capital investment program has been prepared in three scenarios, namely Scenario A, Scenario B-1, and Scenario B-2

Scenario-A (Original Concept)

This scenario will be the same as proposed in Chapter 6, which both container and break-bulk cargo berths will be developed jointly.

Scenario-B (Additional Recommendation)

In this scenario, only container berths will be developed together with minimum requirements of back-up port facilities, covering both civil and mechanical components. No break-bulk cargo berths will be constructed. The container berths will be expanded in step with the growth in container demands. Most likely, 400 m long container berth construction will be initiated, then followed by additional expansion of 400 m long container berth The timing of the berth expansion should be subject to the reconfirmed container demand forecast, which will be made on completion of the first container berth. In the financial analysis, the container cargo demands forecasted in Chapter 3 has been tentatively used, but the actual implementation timing of the second container berth should be determined after the first container terminal operation, taking into account the actual container demands at that time.

Considering all the likely cargo demand prospects, the development program of Scenario B has been further divided into two programs.

Scenario B-1

Only container berth (400 m long) will be developed together with the minimum backup port facilities inshore, including container yard and necessary container marshaling equipment. The container cargo demands in the first year of the operation could be 10,000 TEU, expanding linearly year by year Up to 250,000 TEU level within the time span of five years. To meet the container demands of 480,000 TEU within the time span of 10 years additional container berth of 400 m long wilt be constructed. No break-bulk cargo berth will be developed

Scenario B-2

Scenario B-2 will be basically the same as Scenario B-I., except for the size of the initial container shipment, which will be enlarged to 50,000 TEU at least. Within the time span of 10 years, the container cargo demand will grow up to 480,000TEU.
In addition to the above-mentioned development scenarios, the approach of the cost -sensitivity analysis has been further considered for Scenario A. The cost increase of 10% has been considered to the proposed original cost.
As such, the investment capitals for Scenario A and Scenario B have been estimated as follows :


Scenario-2

The cargo demand, both container and break-bulk cargo, will decline 10%, compared to the original forecast made in Chapter 3

Scenario-3

The cargo demand, both container and break-bulk cargo, will decline 20%, compared to the original forecast made in Chapter 3.

In addition to the above three (3) traffic forecast scenarios, optional container demand forecast as presented in 8.2 will also be considered.

8.4 Implementation Scenarios

The possible development schedules have been discussed in the foregoing sections. To visualize all the development schedules which will vary in both investment costs and cargo traffic, the following five (5) development scenarios have been considered

Case A

The investment cost Table 8.1) and he traffic decline of 20% have been applied.

Case B

The investment cost (Table 8.1) and the traffic decline of 10% have been applied

Case C

The investment cost (Table 8-2) and the original traffic forecast have been applied.

Case D-1

The investment cost (Table 8-3) and the original traffic demand of container cargo have been applied

Case D-2

The investment cost (Table 8.3) and the aggressive approach of container shipment in the initial development years have been applied.

8.5 Other Investments

The other investments besides the above capital investment will consist of the following
Items :
Pre-operation expenses (JV establishment, feasibility study, etc.)
Land compensation
Cost for the right to use land

The cost for the other investments is estimated as follows :

8.6 Working Capital

The working capital as a part of equity will be required for the initial operation of the Project. The working capital is estimated to be 23,000 thousand US$

CHAPTER 9 PORT OPERATION AND MANAGEMENT

9.1 Organization of Tan Thanh Port

General

The fundamental policy of port operation and administration will be determined by the board staff of Tan Thanh Port Under the top management group, five (5) port operation & management divisions will be organized namely Marketing & Administration Division, Technical Division, Break-bulk Terminal Operation Division, Container Terminal Operation Division and Maritime Control Division

CHAPTER 10 FINANCIAL ANALYSIS

10.1 General

The financial analysis of a project to be implemented by private sector initiative aims at evaluating firstly whether a project as a whole is financially viable and secondly whether a project is expected to generate adequate cashflows/returns on the equity investment, under a major premise that the project is consistent with the overall and sectoral objectives of the country


The former one is represented by an indicator of Return on Investment (ROI), where the viability of a project is judged from the viewpoint of the project as a whole focusing on the return on the total investment, and the latter one by an indicator of Return on Equity (ROE), where the viability of a project is judged from the viewpoint of an equity investor and a debt financier, focusing on the return on the equity capital and loan re-payability

ROI is one of the major important indicators, vital to the implementation of a project on a private initiative basis, by which a potential investor ~l show an intention for investment

Under a pro-condition that a project be intended to be executed, ROE is recognized as a highly important indicator; the magnitude of which will affect the behavior of potential investors (equity finance) as well as debt facilities (debt finance)

Both analyses are canned out on a cashflows basis ROI is induced from several factors such as capital investment, revenues, operation cost, etc., where any equity/debt allocation, income tax, etc are not taken into consideration. On the other hand, ROE is induced from, in addition to those used in ROI calculation, equity/debt allocation, interest rate of debt finance, income tax etc

10.2 Method of Analysis
The major parameters used for analysis of ROI and ROE are presented in the table below
The ROI, the internal rate of return on investment, is determined as the discount rate that equalizes the present value of the streams of financial costs represented by capital investment and profits represented by turnover minus operating cost over the project life

The ROE, the internal rate of return on equity, is determined as the discount rate that equalizes the present value of the streams of financial costs represented by investor's equity and profits represented by net income after tax plus (depreciation + amortization), namely "cashflow" in the international accounting standards, over the project life.

Investment in major construction works and equipment is summarized as follows :

(3) Other Investments

The other investments besides the above capital investment, consist of the following items;

Pre-operation expenses (feasibility study, etc..)
Land compensation
Cost for the right to use land
Training, computer facilities, etc.

The cost for the other investments is estimated as follows:

(4) Working Capital

The working capital as a part of equity will be required for the initial operation of the Project. The working capital is estimated to be 23,000 thousand US$


10.4 Estimation of Port Revenues

10.4.1 Basis of Port Revenues

Port charges are based on decision No. 58/VGCP-CNTDDV dated 7/11-1997 of the Sate Commission on Prices for sea going vessel and cargo import/export through Vietnamese sea ports and Decision No. 60/VGCP-CNTDDV dated 7/11-1994 for vessel transporting cargo between the sea ports of Vietnam.
Furthermore with reference of Decision No. 145/QD-TTKT of Saigon Port dated 27/03-1995 announcing domestic tariffs

10.4.2 Cargo-Based Revenues

The cargo-based revenues stipulated in BERTHAGE-WHARFAGE DUES include the followings :
1-1 Receives of inward cargoes or shippers of outward cargoes shall pay berthage-wharfage dues.

1-2 Charges for closing/opening hatches
1-3 Charges on sweeping & cleaning cargo holds, ship's deck
1-4 Charges for dumping services
1-5 Fresh water supply services
1-6 Charges for delivery/receiving cargoes

The cargo-based revenues stipulated in CHARGES ON CARGO HANDLING SERVICE include the followings:

2-1 Charges for loading/discharging cargoes
2-2 Charges on loading/ discharging containers
2-3 Storage charges

10.4.3 Revenues projection

The revenues at the year of 2001, 2005 and 2010, are estimated based on the data scrutinized in the previous sections and the cargo projection in Chapter 3

The summary of the revenues projection are presented below:

The analysis of the revenues at the year of 2001, 2005 and 2010 is presented on Annex A.

10.5 Estimation of Port Operation Cost
10.5.1 Annual ordinary expenses

The annual ordinary expenses consist of the following items :

(1) Administration and wages

The cost is shown on Table 10.1

Table 10.1 Administration and Wage Cost

The year of 2005

Salaries for Administration : 631,300 US$
Social security 17% : 107,300 US$
Total : 738,500 US$

Wages for Workers :
Skilled workers : 972,000 US$
Unskilled Workers : 144,000 US$
Social security 17% : 189,700 US$
Total : 1,305,700 US$

The year of 2010

Salaries for Administration : 840,000 US$
Social security 17% : 142,800 US$
Total : 982,800 US$

Wages for Workers :
Skilled workers : 1,584,000 US$
Unskilled Workers : 216,000 US$
Social security 17% : 306,000 US$
Total : 2,106,000 US$

(2) Fuel & electricity :

The year of 2010 : Total cost : 3,063,000 US$

(3) Maintenance

The cost for maintenance of equipment is estimated at 5 to 10% of the initial cost of the respective equipment and the cost for maintenance of major construction works at 1 to 2% of the initial cost as shown on Tables 10.13 & 10.14, respectively

(4) Office cost
The office cost is estimated at 5% of the above administration and wages

(5) Insurance
The insurance cost is estimated at 1% of the capital investment

1O.5.2 Depreciation

The depreciation is estimated at 6 to 12 % of the initial cost for the equipment and 4 to 5% of the initial cost for the major construction works by a straight-line method, the rate of which is consistent with Decision No 507-CT/DTXD dated 22 July 1996 The depreciation after 2010 onwards, is assumed to be the same as the previous year. The depreciation for the respective item is shown on Table 10.13 & l0.14

10.5.3 Amortization

The amortization for the pre-operation expenses and land compensation ,included in the other investments is estimated equally over a period of 5 years
The amortization for the right to use land included as well in the other investments is estimated equally over a period of 40 years

10.5 Re-investment Cost

The replacement or re-investment for the respective equipment is planned to take place at an interval of more than the economic life, under such an assumption that the equipment has realistic expectations of an operating period more than the economic life/period. The re-investment is intended to be financed by internal funds with a condition that the amount should be within the retained earnings and the current assets. 

10.6 Financial Analysis

10.6.1 Conditions

The financial viability of a project can be determined from the following viewpoints, particularly in case that the project be implemented on private-initiative basis : 

a. All capital which looks at the operating profits to all real investment flows for the project as a whole irrespective of whether these come from equity or loans. (Concept of the "all capital" invested approach or ROI )

b. Equity capital which looks at the proponent's equity contributions as the investment such that loan proceeds are treated as inflows while loan repayments are treated as outflows. (Concept of the "equity capital" invested approach of "ROE")
The financial analysis is carried out under the fo11owing basic conditions.
The time frame of 40 years for ROI and ROE calculation
The capital cost and other ordinary cost are estimated at 1997 price
The amount is denominated in US$
Customs duties on imported capital equipment be exempted
VAT (10%) (effective from 1.1.1999 ). But turn-over tax to be replaced by VAT is disregarded in this analysis.
Income tax of 10% be applied for initial 15 years and 20% thereafter. The loss can be carried forward over a period of up to 5 years.

10.6.2 Base Case

Both financial revenue and costs for "Base Case" are discussed in the preceding sub-chapters. The ROI for "Base Case" is calculated at 11.8%.
The capital structure is principally established for the financial analysis on ROE basis as follows :

Capital structure :

Shareholder's Equity 30%
Loan portion : 70%

The financial analysis has been made on ROE basis. The ROE is calculated at 16.7% for "Base Case", which may be marginally attractive for the potential investors, because it is slightly above the generally accepted rate of return of 15% in the international infrastructure market. This appropriate rate of return of 15% is composed of the yield of US 30-year Treasury Bond, forex risk, cost of fund of the investors, etc. and, in other terms, is represented by the average yield of the long-term investment in the security market.

10.6.3 Sensitivity Analysis

There are many potential, foreseen or unforeseen, risks which may affect the profitability of a port project, among which the forecast of cargo throughputs in the future will play an important role in the project formulation stage.

The cargo throughputs are technically forecasted based on the natural conditions in the southern area and the socio-economic conditions in the southern area/the whole country as well as the past performance of the port (facility) operation in other Asian countries.

The conditions for sensitivity analysis for "Base Case" discussed in chapter 8 "Implementation Plan" are as follows :

The ROI for "Base Case" is calculated at 11.8% above 10% and the ROE is more than the appropriate rate of return of 15%. Furthermore, even in case that the investment cost be increased by 10%, the ROI and ROE could be slightly above 10% and around 15%, respectively It should be noted that these rates of return could be attained under such conditions that the international financial institutions interested in infrastructure development by private sector initiative, are invited to participate in this project, in form of "Equity participant" and/ or "Debt Participant".

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