Second largest electricity producer outpaces its equitization by seeking strategic partners

If the plan is approved, the Initial public offering (IPO) of PV Power may take place within three months.

PV Power, established in 2007, is wholly owned by PetroVietnam. It currently operates the Vung Ang coal thermal power plant; the Ca Mau No.1 and No.2, and Nhon Trach No.1 and No.2 power plants; and three hydropower plants namely Hua Nua, Dak Drink and Nam Cat.

The total capacity of these plants is 4,208 MW, accounting for 12 per cent of total electricity generation capacity of the country. The leading power company is still Vietnam Electricity (EVN) with more than 60 per cent of national generation capacity.

Under the equitization plan pending for approval, 20 per cent stake in PV Power will be put up for auction at the offering price of VND14,400 (roughly US$0.635). At this price, the company’s market capitalization is about US$1.48 billion, compared to the US$2.6 billion valuation announced by the MOIT.

The percentage of PV Power’s shares in IPO has increased significantly compared to the original plan of only four per cent, which will help increase PV Power 's free float stocks in the future when being traded on the stock market.

The State will hold a 51 per cent stake in the company as proposed by MOIT in order to fulfill its commitment to hold more than half of PV Power’s charter capital. This commitment was made under the requirement of foreign credit institutions when providing loans for PetroVietnam. According to the roadmap, this rate will be reduced to below 50 per cent after 2025.

Strategic investors will be allowed to buy 28.88 per cent stake in PV Power and can buy more in the IPO. The amount of stake will not be divided but the number of investors allowed to purchase PV Power’s shares has not been revealed yet.

The Company will have one year to sell its shares to strategic investors since the equitization plan is approved. Last September, the company met a number of investors such as Dragon Capital, Standard Chartered, VietFund AM, Mirae Assets Global Investments, Duxton, Phatra Capital and City Pacific to introduce the investment opportunities in PV Power.

By the end of 2016, PV Power had the charter capital of VND21,774 billion (roughly US$960.26 million) and total assets of VND69,732 billion (roughly US$3.075 billion). Last year, the company gained more than VND28 trillion (roughly US$1.23 billion) in revenue and VND1,517 billion (roughly US$66.9 million) in after-tax profit.

In the first nine months of this year, PV Power's revenue reached VND23,157 billion (roughly US$1.02 billion) and its pre-tax profit was VND1,664 billion (roughly US$73.38 million).

PV Power plans to raise the total capacity to 10,958 MW by 2026, 86 per cent of which are gas-fired power plants, to account for 15 per cent of Vietnam’s total capacity. PetroVietnam currently exclusively purchases and supplies gas in Vietnam, PV Power will have a great advantage to develop in Vietnam's power market.