Fitch Ratings has assigned EVN an Issuer default rating (IDR) of ‘BB’ with a stable outlook for long-term foreign currency, its ratings aligned with Vietnam’s sovereign rating.
This is the first Government-linked non-financial corporate rated by Fitch Ratings in Vietnam.
EVN’s standalone credit profile benefits from its position as the owner and operator of Vietnam’s electricity transmission and distribution network, having nearly 61 per cent share of the country’s power generation capacity.
The company also operates the national power-dispatch system, selling electricity to more than 25 million customers across the country. It has steadily augmented its generation capacity and cut transmission and distribution losses over the previous few years.
Fitch Ratings expects the electricity demand in Vietnam to continue to increase at an average rate of nine per cent per annum, driven by rising industrialization, urbanization, and affluence.
It also expects the company to generate more than $3.5 billion in operational cash flow each year through 2020. However, it is likely to face large negative free cash flow owing to its high capital expenditure plans and will require external funding to manage its capital expenditure targets.
Fitch Ratings' assignment is premised on EVN’s strong linkages to the State, its market position, and robust demand for electricity, coupled with solid collection rates.
According to acting CEO of EVN Dinh Quang Tri, this positive rating enables EVN to issue international bonds, diversify its financing sources, and reassure domestic and foreign institutional investors. The company is now on a stronger footing to deliver more reliable electricity to Vietnam.
“This positive credit rating will give assurance to the private sector and commercial lenders about the financial and technical capacity of EVN and will alter their risk perception in signing long-term power purchase agreements and extending credit," said Ousmane Dione, World Bank Country Director for Vietnam.
"The credit rating will also provide comfort to institutional investors, both domestic and foreign, for any planned bond issuance by EVN,” he added.
Propelled by favorable domestic and external conditions, Vietnam's economy posted its strongest first-quarter growth in a decade, with real GDP expanding nearly 7.4 percent year-on-year during the first quarter of 2018.
The electricity sector has been critical in supporting economic development by achieving almost universal electricity access and reducing technical and commercial losses, in line with international best practice.