EVN reshuffles deck for winning card

The group plans to issue VND10 trillion ($483 million) worth of bonds in domestic market, while converting its debt to PetroVietnam  into bond debt via a VND14 trillion ($673 million) issuance.

An Electricity of Vietnam (EVN) source said the projects could be completed in mid 2013, but the coupon rate and the term were unknown, which would be based on market conditions.

“For the VND14 billion worth of bonds, the rate and term must depend on the negotiations with PetroVietnam. For the VND10 billion worth of bonds, I think the coupon rate of 12-13 per cent is considered reasonable which will be based on the mobilisation interest rate plus 3-4 per cent,” said the source.

He added that 2013 would be  favourable for EVN’s bond issuance because EVN had begun to report profits. Previously, EVN deputy general director Dinh Quang Tri said EVN was expected to report profit in 2013 which would help it compensate the losses of previous years of about VND3.5-4 trillion ($168- $192 million).

In early November 2012, the Government Office released Announcement 368/TB-VPCP, saying that EVN would have two bond issuance projects in the coming time, with the target to serve its power projects and to pay debt for PetroVietnam and Vinacomin.

The announcement stated that the Ministry of Industry and Trade (MoIT) would be responsible for combining with the Ministry of Finance and other concerned agencies to guide and approve EVN projects.

Many experts said it would be difficult for EVN to get MoIT permission for this debt restructuring method because the issuance of bonds would increase the country’s public debt, which was reportedly surpassing safe thresholds, and EVN’s losses.

A Ho Chi Minh City-based securities firm analyst had a cautious response to EVN’s issuance plan, saying that few investors were willing to participate, especially after bond scandals of some state-owned enterprises such as Vinashin.

He said it was estimated that in 2013 the group would earn additional VND7 trillion ($336 million) from the power price hike, effective from December 22, 2012. “In addition, the group will have to withdraw its capital from non-core business fields under the government’s direction. Therefore, in general, EVN’s cash flow is still good and it is definitely capable of paying debt.”

“However, the problem is that its payment will be late, which will cause opportunity costs for the cashflow of investors [those to be EVN bond holders],” said the analyst.

He added that the expected rate of 12-13 per cent was reasonable compared with others in the same sector such as Vinh Son-Song Hinh Hydropower Company with the coupon rate of 12 per cent, per year.