Many challenges are ahead
Mr. Franz Gerner – the Country Energy Coordinator of the World Bank (WB) in Vietnam said that Vietnam's traditional financial model for energy infrastructure development relies mainly on public investments done by EVN with the Government’s guarantee, or the participation of domestic and international private investors in electricity generation. However, Vietnam has been no longer eligible for receiving concessional loans from the International Development Association of the World Bank since 2017, the accessibility to highly concessional credits thus has gradually decreased. EVN and its member units have been mobilizing other financial resources for power generation and grid projects in the coming years.
Besides, in execution of the policy of public debt cutback, the Government of Vietnam has discontinued providing guarantees for loans of businesses. This has caused a lot of difficulties to EVN, since foreign banks have not got used to providing non-sovereign loans to EVN and its member units to invest in power projects. Therefore, it would take the business longer time to access banks, seek out and negotiate loans. At the same time, banks must conduct their due diligence of financial performance and debt coverage capability of the business in a more careful manner.
On the other hand, domestic commercial banks which have sufficient capacity of capital mobilization have already lent EVN and its member units to an extent exceeding their capital adequacy ratio and threshold according to the Law on Credit Institutions. Therefore, in order to get loans from these commercial banks, EVN must attain approvals from the Government and the State Bank of Vietnam. Nevertheless, the procedure for getting this approval is quite complicated and time consuming.
The financial arrangement for EVN’s power generation and grid projects faces many difficulties
Synchronous solutions are needed
In June 2018, EVN was the first state-owned enterprise in Vietnam being assigned by Fitch Ratings (one of the prestigious credit rating organizations in the world) as an issuer default rating of BB with a "stable outlook" for long term foreign currency, which is at the same level as that of Vietnam’s sovereign rating. In April 2019, the National Power Transmission Corporation (EVNNPT) was assigned by Fitch Ratings as a long term foreign currency issuer default rating of BB with a stable outlook and a senior unsecured rating of “BB”. Fitch Ratings assesses EVNNPT’s standalone credit profile at BB+.
These credit ratings not only help EVN and EVNNPT operate more transparently and integrate into the globe in a more extensive and intensive manner, but also increase their access to financial sources. Currently, EVN is promoting the credit rating of its member organizations, creating a premise for accessing new financiers as well as new financial sources.
EVN has been implementing solutions to improve production and business efficiency, save costs, reduce power loss, gain reasonable profits and ensure financial indicators in compliance with requirements of donors; at the same time strengthen cooperation with bilateral and multilateral credit institutions to mobilize foreign ODA or preferential loans for power projects; actively work with foreign commercial banks and export credit agencies to arrange finance for new power projects under ECA scheme without the Government’s guarantee, etc.
Based on the annual investment plan, EVN has registered with the State Bank and the Ministry of Finance its required amount of self-borrowing, self-repayment foreign loans, etc.
In addition, EVN has kept on working with domestic commercial banks to mobilize financial resources; coordinate with banks to put forward recommendations to the Government on a special lending mechanism applicable for power projects, in case banks exceed their credit limits for EVN and its member units. EVN will enhance its access to new commercial banks with whom no credit relations have been established to arrange finance for small scale power projects with short payback periods.
Striving to mobilize capital from domestic and international bond issuance, EVN has utilized its basic capital depreciation sources; efficiently used state budget sources; accelerated the divestment progress in joint stock companies, etc.
Mr. Franz Gerner also added that the World Bank is helping the Government of Vietnam to improve the access to electricity through promoting the participation of private investors and financial resources.
With synchronous solutions, EVN has been trying to mobilize sufficient financial resources to perform power projects in the period of 2019 – 2020 on schedule, contributing to ensuring energy security in the following years.