11:38 (GMT +7) - Monday 20/08/2018

Vietnam Today

EVN receives first credit rating from Fitch

Released at: 14:17, 08/06/2018

EVN receives first credit rating from Fitch

Photo: EVN

Positive rating enables electricity provider to issue international bonds, diversify financing sources, and reassure domestic and foreign institutional investors.

by Linh San

Electricity of Vietnam (EVN) is one step closer to issuing US dollar bonds and strengthening its financing capacity following an endorsement from Fitch Ratings of its credit profile.

Now assigned an Issuer Default Rating (IDR) of “BB” with “Stable Outlook” for long-term foreign currency, EVN’s ratings align with Vietnam’s sovereign rating. Its sustainable financing strategy is supported by technical assistance from the World Bank.

“This positive rating enables EVN to issue international bonds, diversify our financing sources, and reassure domestic and foreign institutional investors,” said Mr. Dinh Quang Tri, Acting CEO of EVN. “We are now on a stronger footing to deliver more reliable electricity in Vietnam.”

The World Bank’s Energy and Extractives Global Practice supported the credit rating exercise through a combination of financing and advisory support, including by appointing Mizuho Bank to prepare for credit rating readiness and the subsequent rating exercise, which the Global Infrastructure Facility (GIF) actively managed. After this readiness work concluded in February, EVN appointed Fitch Ratings to conduct the rating exercise.

“The 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 (PPAs) 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, over any planned bond issuance by EVN.”

Fitch’s ratings assignment is premised on EVN’s strong links to the State, its market position, and robust demand for electricity, coupled with solid collection rates. “Creating an enabling environment for more private sector investment and helping EVN benefit from the discipline that comes with access to capital markets is what took place in Vietnam,” said Jordan Schwartz, Co-chair of the GIF Governing Council and Director of the Infrastructure, PPPs & Guarantees Group at the World Bank. “We expect this process to help the financial health of Vietnam’s power sector in particular and the country in general as it diversifies its sources of financing to the benefit of consumers and taxpayers.”

Vietnam’s development record over the past 30 years has been remarkable. Economic and political reforms under the “doi moi” (renovation) process, launched in 1986, have spurred rapid economic growth and development and transformed Vietnam from one of the world’s poorest nations into a lower middle-income country. Economic performance in 2017 was resilient, reflecting robust export-oriented manufacturing, strong domestic demand, and the gradual rebound of the agriculture sector, with GDP growth estimated at 6.8 per cent; the highest in the last decade.

Propelled by favorable domestic and external conditions, Vietnam’s economy also posted its strongest first quarter growth in ten years, with real GDP expanding nearly 7.4 per cent year-on-year. 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.

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