Upgrade for PetroVietnam after positive credit moves

Vietnam’s robust socio-economic development strategy has aided PetroVietnam’s standing

Fitch Ratings has offered PetroVietnam a standalone credit profile at ‘bb+’, and first-time long-term foreign-currency issuer default rating (IDR) at ‘BB’ with a positive outlook.

PetroVietnam’s IDR is commensurate to that of its parent, the Vietnam sovereign (BB/Positive), under Fitch’s Government-Related Entities Rating Criteria.

The positive rating is expected to help PetroVietnam bolster its capital mobilisation capacity in the international market, and diversify capital sources for the group’s investment projects amid the government’s constrained guarantee scheme.

The rating also attests to PetroVietnam’s healthy business performance and financial stead as well as its upbeat future business perspective, helping to bring trust to investors, domestic and international financial institutions, and its strategic partners, especially at a time when PetroVietnam is propelling restructuring efforts.

In a statement, Fitch highlighted the robust state links with PetroVietnam, the group’s solid market position, and its integrated activities from upstream to medium and downstream sections which cover exploration, exploitation, petro-chemical refining, fertiliser production, gas and petroleum products distribution, and power generation.

“PetroVietnam has not required tangible financial support in at least five years due to its strong financial profile, although we expect support to be forthcoming if required,” Fitch said in the statement.

The agency also assesses the socio-political implications of a PetroVietnam default as “very strong”, and any disruptions in the group’s operations would have material implications for the entire energy value chain in the country.

“This very positive result attests to the close support and guidance from the Party and state leaders, and its effective co-operation with diverse ministries and sectors, as well as the total devotion and great solidarity of every member in the oil and gas industry in the past few years,” said PetroVietnam’s general director Le Manh Hung.

“The credit rating is also one of the fundaments for our group to review and improve corporate governance activities, particularly in financial targets governance, to ensure the positive rating will be maintained and further improved in the future,” Hung said. “We hold a trust that with clear leadership of the Party and the state, and total commitment of every PetroVietnam member, the group will make further strides in the path ahead with even bigger contributions towards national development.”

According to Nirukt Sapru – Standard Chartered Bank’s CEO in Vietnam, the ASEAN, and South Asia Cluster Markets – the ratings assigned to PetroVietnam will help the group attract more international investors, pledging that the bank will support PetroVietnam to realise its growth targets.

Fitch Ratings is one of the world’s three most prestigious credit rating organisations, alongside Standard & Poor’s and Moody’s.

In Vietnam, Fitch Ratings has also engaged in Vietnam’s sovereign rating, as well as assigning credit rating for Vietnam’s power authority Electricity of Vietnam, and several other leading players.

PetroVietnam holds interests in all of Vietnam’s upstream oil and gas assets, accounting for about a third of the country’s refined product output, and supplies gas for power plants which make up about 15 per cent of the country’s power generation.

The group also delivers about 80 per cent of Vietnam’s fertiliser production.

PetroVietnam’s investment is projected to rise significantly to VND321 trillion ($13.96 billion) over the next five years, from VND38 trillion ($1.65 billion) last year.

PetroVietnam estimates over half of its expected consolidated capital expenditure and investment will be used to develop its upstream resources, mainly gas fields.