Desperately seeking capital

Succeeding in international bond issuance would help Vietnamese firms raise sufficient investment with longer repayment terms for deployment of mega projects, said an executive from a big local financial institution.

Chairman of the state-run PetroVietnam Dinh La Thang said his group needed $5-6 billion to get its projects rolling in 2011 and could only satisfy 30 per cent of the capital demand.

Electricity of Vietnam (EVN) is in the same position. In the past five years, EVN built and brought into use 21 power projects with a total accumulative capacity of 6,280 megawatts (MW) including 770MW brought from China. EVN is carrying out 15 projects with a total capacity of 10,581MW and needs as much as $9 billion worth in total investment.

Besides, EVN is about to invest in another 11 projects with a combined capacity of 7,285MW while other five power projects are in the legal setup process. With such intensive investments, EVN is looking into raising capital from international bond issuance.

For the Vietnam National Coal Mineral Industries Group (Vinacomin), the group will need VND261.3 trillion ($13.06 billion) from 2011-2015. Of which it could only raise VND32.4 trillion and plan to source another VND183.8 trillion from commercial loans.

Not only state-owned firms, big private groups such as Hoang Anh Gia Lai and Vincom had also planned international bond issuance due to finite domestic capital sources.

“I believe international bonds will become a crucial investment channel for Vietnamese firms in the next five years,” said general director of PetroVietnam Finance Joint Stock Corporation Nguyen Thien Bao.

PetroVietnam delayed issuing international bonds worth $1 billion in total amount in late days of 2010.

“We postponed the issuance due to unfavorable market conditions. In fact, some other big state-owned groups are also in the same position,” Thang said.  

He also noted that in the coming period PetroVietnam would continue its plan to call for investment from issuing international bonds, if market conditions allow.

In a related development, Vinacomin and EVN both planned to mobilise $500 million-$1 billion in the world marketplace in the fourth quarter of 2010. They, however, had to delay the issuance like PetroVietnam.

Earlier, in preparing for the launch, these three groups had registered international credit rating with prestigious organisations such as Standard & Poor’s and Moody’s in the second quarter of 2010. The collapse of state-owned group Vinashin in mid-2010, however, had a detrimental impact on their plans to raise international capital.

The rating of Vinacomin was downgraded from BB to BB- (according to Standard & Poor’s appraisals) because the consulting firm underestimated the possibility for the Vietnamese government to help state-owned groups in paying debts. PetroVietnam was in a similar situation as the group had to receive some loss-making affiliates from Vinashin.