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Genco 3 to conduct IPO in February

Released at: 15:20, 29/12/2017

Genco 3 to conduct IPO in February

Headquarter of Genco 3 (Photo: EVN)

$289 million expected from selling 12.8% stake in Power Generation Corp. 3 at an initial price of VND24,600 per share.

by Quang Huy

Vietnam hopes to raise at least $289 million from selling shares in an electricity generation company through an initial public offering (IPO) in February, demonstrating the government’s efforts to liberalize the sector.

The government aims to raise at least VND6.57 trillion ($289 million) by selling a 12.8 per cent stake in the State-owned Power Generation Corp. 3 (Genco 3). Shares would be sold through the IPO at an initial price of VND24,600 per share, implying a valuation of $2.2 billion.

In addition to the IPO, the government said it plans to sell a 36 per cent stake in the company to strategic investors at a price to be decided later.

The share sale is expected within three months, the government said, without giving specific details.

Electricity of Vietnam (EVN) will maintain its ownership of Genco 3 at 51 per cent until 2019 and would consider divesting further. Mr. Dinh Quang Tri, EVN’s Deputy CEO, said many potential investors from Japan, South Korea, the Middle East, and Thailand were meeting with the group.

With total assets estimated at VND91.8 trillion ($4 billion) as at January 1, 2015, Genco 3 generated VND35.9 trillion ($1.6 billion) in revenue and VND265 billion ($11.7 million) in after-tax profit in 2016. It is one of three power generation corporations under EVN’s management, with a capacity of 6,304 MW and accounting for 16 per cent of the country’s total electricity network.

The IPO comes at a time when Vietnam’s historically low electricity tariffs increased above the general rate of inflation since 2015, on December 1; the first time EVN used its “ratchet system”, with Decision No. 24 in 2017 allowing it to increase electricity prices by up to 20 per cent per year to reflect increases in its underlying costs.

With an increase of up to 3 per cent in each quarter possible without seeking government approval, and 5 per cent with trade ministry approval, it went straight to the top of the decision tree with a 6.08 per cent increase that required the Prime Minister’s approval.

Together with Genco 3, the government has also lined up a series of IPOs of other major power corporations, including the PetroVietnam Power Corp. (PV Power) on January 31 and the Binh Son Refining and Petrochemical Co. (BSR) on January 17, in the hope of easing electricity shortages, attracting more investment, and boosting economic growth.

Vietnam is forecast to suffer an electricity shortage in the next four years as installed capacity growth is estimated to range from 4.6 to 10 per cent per year during the 2017-21 period, lower than the projected 10-11 per cent annual growth in electricity consumption over the next four years.

Electricity consumption, which grew 12 per cent per year from 2006-16, will likely pick up in the coming years given that foreign direct investment (FDI) in the manufacturing sector, which accounts for 50 per cent of total electricity consumption, has doubled over the past four years, reaching $63.1 billion.

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