EVN divestment facing difficulties

The divestment of Vietnam Electricity Group (EVN) has been facing many difficulties, mainly due to several inconsistencies, varied interpretations and too many agencies pouring conflicting ideas.

Currently, EVN is also having difficulty in transferring Duyên Hải 3 Thermal Power Plant to Evngenco 1. Photo: LONG THANH

Currently, EVN is also having difficulty in transferring Duyên Hải 3 Thermal Power Plant to Evngenco 1. Photo: LONG THANH

Overlapping and inconsistent laws

In its report on the implementation of restructuring, renewing enterprises and divesting, submitted to the Commission for Management of State Capital of Enterprises (CMSC) in the second quarter of 2019, EVN admitted that the process of its divestment was facing a lot of difficulties.

Among them, the biggest barrier is that of many agencies who have their own ideas affecting the process of divestment, such as the Government Office, the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Justice, and CMSC.

However, each of them has own way to explain the legal documents and the decisions of the Prime Minister. This has led to overlapping and inconsistencies. According to EVN, the research and settlement of ministries, sectors and CMSC has taken a lot of time.

For example, the equitization process of Power Generation Corporation 2 (Evngenco 2) could be delayed because CMSC has not approved the plan and the estimated cost, especially not chosen the valuation consultancy.

Without the official letters, the approval decision and the directive of the related authorities, the Evngenco 2 value publication is very difficult to meet within the required time.

What is more, the equitization process of Evngenco 1 and the finalization documents of Evhenco 3 have to wait for comments of CMSC and the directive from the government.

On August 23, 16.25 million shares of EVN Finance's 18.75 million shares owned by EVN were successfully auctioned, at a price of 13,480 VND/share. This helped EVN collect VND 219.05. billion. Therefore, EVN currently holds only 2.5 million shares in EVN Finance, equivalent to 1% of chartered capital in this company.

However, only a few auctions were "smooth" like EVN Finance. "Normally, it took more than one month to have the comments. Particularly, there were some cases that we had to spend almost five months to get a directive. Thus, we missed a lot of chances when the stock market flourished, wasted more time and money in share evaluating”, said EVN in their report.

At present, EVN has submitted a proposal to CMSC to review and give instructions to EVN on the finalization of equitization of Evngenco 3. The company has also reported to the Government to ask for approving the adjustment of the time for evaluating and the equitization of the parent company Evngenco 1.

EVN has also asked the Government to approve the transfer of the investor of the Duyen Hai 3 Thermal Power Plant project from EVN to Evngenco 1, after the project was completed and put into commercial operation.

The company also proposed CMSC to review and approve the plan of equitization Evngenco 2, in order to send a document to the State Audit on the registration of the audit plan for determining the value of enterprises to equitize Evngenco 2. Up to now, however, EVN still has to wait for the authorities.

Need prompt coordination

EVN is among the big names that domestic and foreign investors are particularly interested in. As planned, this year EVN will continue to divest and equitize many enterprises.

For equitized enterprises, EVN will take steps to list them on the HOSE. Specifically, for Power Generation Corporation 1 (Genco 1), EVN is developing a plan and organizing divestment of all or some capital of Genco 1 in JSCs, such as Da Nhim, Ham Thuan and Da Mi Hydroelectricity, Vietnam Electricity Development Company, Quang Ninh Thermal Power. Genco 1 is expected to divest all of its capital in JSCs in 2019.

EVN will transfer capital at EVN Finance, Dong Anh Electrical Equipment Corporation and Thuan Binh Wind Power JSC. The group is also transferring its capital at Power Engineering Consulting JSC No. 3 and Power Engineering Consulting JSC No. 4 and will complete this year.

Coordination among authorities on equitization guidance is currently very loose. Lack of specific regulations and instructions to implement and diverse ways to understand documents of each agency makes it not only hard to divest, but also difficult to attract investors.
Dr. Vu Dinh Anh, economist
Also in 2019, as Genco 3 has completed equitization since 2018, EVN will reduce the debt to equity ratio by three times. The enterprise will also complete the settlement of costs and hand over capital and assets to JSC. Then, it will take steps to bring Genco 3 to HOSE this year.

According to Mr. Nguyen Xuan Nam, Deputy General Director of EVN, the unit is actively deploying divestments in the remaining businesses, with the basic goal of completing its divestment in 2019.

In addition, all member and affiliated companies in the group, which have met the conditions, have registered for listing and trading in the stock market. Now, all of them have a market capitalization much higher than the value of the initial capital from the owner.

However, the process of divestment and equitization of EVN hasn't gone off without a hitch so far. Up to now, although it is near the end of Q3 2019, the workload in the plan still has many unfinished contents, due to difficulties in approving land use plans, identifying excluded assets, handling financial management, evaluating enterprises, and selecting consultants.

Among them, conflicting interpretations and inconsistencies in direction and administration by authorities is an obstacle in the process of divestment and equitization.

In this regard, according to many experts, it is necessary to build a coordination mechanism to make all parties have the same way of understanding the documents, as well as giving guidelines for implementation for enterprises.

Translated by Francis

Lưu Thủy

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