Vietnam National Oil and Gas Group, known as PetroVietnam, is privatising power generation subsidiary PV Power via an initial public offering to raise at least 6.74 trillion Vietnamese dongs ($297 million; €242 million).
The unit, which supplies around 10 percent of the country’s total power output, owns and operates a 4.2GW portfolio of coal-fired, gas-fired and hydropower generation facilities.
More than 676 million shares of PV Power, equivalent to 28.88 percent of its capital, would be sold to strategic investors, while 20 percent would be offered through an IPO on the Hanoi Stock Exchange on 31 January. About 0.11 percent would be acquired by PV Power’s own staff.
PV Power is looking to prioritise strategic investors with oil and gas exposure, as well as coal mines, to provide fuel to the company’s power generation facilities in the long run. The starting price of the IPO is set at 14.4 dong per share, valuing the company at around $1.5 billion. Foreign investors are allowed to acquire up to a 20 percent stake in the company.
The move is part of the Vietnamese government’s privatisation plan to boost the performance of state-owned companies and strengthen the state budget. Two other PetreVietman subsidiaries – oil refinery firm BSR and oil distributor PV Oil – are also being privatised this month. BSR’s shares were 2.7 times oversubscribed at its Ho Chi Minh Stock Exchange IPO on Wednesday.
The opening price of PV Power shares is seen as reasonable, given its profit-to-revenue margin stood at less than 10 percent in 2017, Andy Ho, chief investment officer of Vietnam-focused investment firm VinaCapital, told Infrastructure Investor. He also said a 20 percent public offering is a good stake.
The offering should boost PV Power’s efficiency and could lead to growth of as much as 80 to 90 percent in earnings in the coming year, he said. The fund manager expects PV Power’s IPO to be successful, with significant interest from domestic and international investors.
In the longer term, the Vietnamese government’s stake in PV Power might be reduced to less than 51 percent after 2019, once the unit successfully concludes negotiations with international investors over the restructuring of financing for the Vung Ang 1 thermal power plant, according to the firm’s general director, Nguyen Xuan Hoa, at a roadshow on 16 January.