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EVN set to launch US$1 billion int’l bond issue
The Government of Vietnam has agreed in principle to provide guarantees for State utility Electricity of Vietnam (EVN) to sell US$1 billion worth of corporate bonds on international markets to mobilize much-needed capital for power projects.
The move comes after the Government turned down an EVN proposal that the Government should sell bonds in foreign currency on global markets to raise funds for lending on to the energy giant as was done with Vietnam Shipbuilding Industry Group (Vinashin).
In the middle of June the Government endorsed the EVN bond sale but required the company to formulate an issuing plan based on the prescribed criteria.
EVN said in a statement that it would launch the debt paper in the fourth quarter of the year.
Speaking at a seminar on capital markets for the electric power industry in Hanoi on Wednesday, EVN Deputy General Director Dau Duc Khoi said, "State-owned enterprises are all cash-strapped."
He noted State companies could not take out commercial bank loans at an annual interest rate of 14-15% to finance power generation projects that would take four to five years to come on stream while power stations were not allowed to sell electricity at market prices.
Moreover, 80 to 90% of equipment for power stations is imported from other countries, meaning almost all input costs are decided by the market, but power tariffs are capped, thus leading to low profitability in power projects.
EVN will kick off the debt paper sale when it completes all requirements and procedures such as the credit rating for the company over the past three years; and choosing a bond underwriting and issuing consultancy, markets for the issue and an issuing date.
The sixth Power Development Master Plan estimates power demand growth of 17% a year in 2006-2015, so a staggering US$35 billion would be needed to fund the development of new power sources to reduce recurrent power blackouts. But EVN still lacks around US$13 billion to develop 37% of the total capacity envisaged in the master plan until 2015.
Along with EVN, Vietnam Coal and Mineral Industries Group (TKV) and Vietnam Petroleum and Gas Group are also planning to raise funds from international markets.
Pham Hong Thai, head of finance at TKV said at the seminar that local capital markets had developed but not as fast and efficiently as required. There are few professional investors, so companies will find it hard to sell bonds on local capital markets, he said, indicating the rationale of international bond sales.
TKV succeeded in two bond sales worth a combined VND3 trillion in 2007 and 2009 through Citibank. It is in talks with foreign banks to select a consultant for an international debt paper issue, probably in the fourth quarter.
The sale is expected to total about half a billion U.S. dollars or above. "We will have to go through all the steps needed to gauge market conditions before a final decision is made," Thai told the Daily on the sidelines of the seminar.
Last year TKV was internationally rated Ba3/BB by Moody's and Standard & Poor's. Thai said, "This can be seen as a passport for TKV to gain access to international capital markets."
TKV expects to need US$1.5 billion to US$2 billion for each coal mine so as to meet the Government's requirement for boosting coal output to 100 million tons by 2015.
The coal mining major will also have to mobilize up to US$7 billion for developing six thermo-power stations between now and 2020 with total capacity of 1,550 MW.
As for Vietnam Petroleum and Gas Group (PVN), a PVN official said the group's total financial needs in 2009-2015 were hefty, and that loans alone would amount to an estimated US$10 billion.
Therefore, PVN is considering issuing US$1 billion worth of bonds to partially meet its financial requirements though early this year it borrowed US$1 billion from the Government's international bond sales.
VietNamNet, SGT
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