Equitization of EVNGENCO 3: Attractive to strategic investors

According to Mr. Dinh Quang Tri, Vice President of EVN, the growth rate of Vietnam's electricity demand has been high for many years and is forecasted to keep increasing at more than 10% per year in the coming years. Together with the recovery of the stock market, this is an opportunity for investors to take part in the power industry in general and Power Generation Corporation 3 (EVNGENCO 3) in particular.

Top position ...

At the Presentation on introduction of investment opportunities in EVNGENCO 3, Mr. Dinh Quang Tri said that after 5 years of establishment and development, EVNGENCO 3 has always affirmed its role and position of the leading power generating organization of EVN. The Corporation manages the second largest capacity in Vietnam’s electricity generation market - just after Vietnam Electricity. The total installed capacity of EVNGENCO 3’s power plants is 6,304 MW, equivalent to 16% of the total installed capacity of the national power system. In addition, EVNGENCO 3 has diversified power generation technologies (gas turbines, coal fired thermal power plants, hydropower plants), which are capable of flexibly entering the electricity market.

Talking about investment policies, Mr. Barry Weisblatt, Head of Investment Analysis of Viet Capital Securities Joint Stock Company (Viet Capital), a member of the consultant consortium assisting EVNGENCO 3 equitization process, said that EVNGENCO 3 takes charge of major power plants, including Phu My Gas Fired Thermal Power Complex, Vinh Tan 2 Thermal Power Plant, Mong Duong 1 Thermal Power Plant, Buon Kuop Hydropower Plant, etc. located near Southern and Northern load centers. Among which, nearly 50% of EVNGENCO 3's capacity is situated in the Southern Economic Triangle, an area with constantly high electricity demand. Having that advantage, the power plants of EVNGENCO 3 have been dispatched to their full capacity, the electricity generated is transmitted in not far distances, ensuring electricity supply to areas with large energy demand of the country.

In particular, power plants under EVNGENCO 3 have a great price advantage when participating in the competitive electricity generation market. Specifically, production costs of Phu My gas fired thermal power plants are about 10.3% lower than other gas fired plants in the region. The contracted price of Phu My power plants is about 33% lower than the average price of the competitive electricity market for gas fired plants. The contracted price of Buon Kop Hydropower Plant is also 45% lower than the market price.

EVNGENCO 3 has a crew of personnel with high qualification and advanced governance capacity. This edge enables EVNGENCO 3 to promptly adapt to changes in the electricity market, creating a solid foundation in the future.

Besides the mission of electricity generation, EVNGENCO3 plans to commence two solar power projects in 2018. At the same time, the Corporation will carry out investment procedures for Long Son Power Complex Project, using liquefied natural gas (LNG) in Ba Ria - Vung Tau province. This investment trend demonstrates the intelligence of the EVNGENCO 3’s top management as the Government has been motivating the development of new energy sources, especially renewable energy.

EVNGENCO 3 has the second largest generation capacity in Vietnam - just after Vietnam Electricity

Equitization plan is attractive to strategic investors

Under the equitization plan approved by the Prime Minister at Decision No. 2100/QD-TTg dated December 27, 2017, EVNGENCO 3 will be equitized in the scheme that the existing state capital of the Corporation will be preserved, at the same time additional shares will be issued to increase the charter capital. Of which, more than 749,124,000 shares (36% of the charter capital) will be sold to strategic investors.

According to Mr. Huynh Minh Tuan, Investment Director of Bien An Toan Training and Consulting Company, the ownership of shares of EVNGENCO3, a business having the largest market share among power generation corporations, will definitely create special benefits to strategic partners. It is estimated that to develop a large power plant in Vietnam would normally require USD 1.5 – 2 billion and need to go through a series of procedures. The opportunity to possess a business with six large power plants of diversified generation types is available to investors now.

In particular, after the IPO on February 9, 2018, the number of unsold shares will be sold to strategic partners, possibly increasing the ownership percentage of strategic investors to nearly 46% of the charter capital. This scheme is very attractive because owning a large stake allows strategic investors to have higher power of control, facilitating their involvement in developing future power plants in collaboration with EVNGENCO3.

EVN will hold 51% of the charter capital until 2019. From the year 2020, in case of successfully restructuring debts and negotiating with lenders, EVN will consider further withdrawing its capital in EVNGENCO below the dominant level. The equitization is expected to create favorable conditions for EVNGENCO 3 to borrow for investment in new power projects, in realization of long - term development strategies of the Corporation.

On March 21, 2018, EVNGENCO 3 stocks were officially traded on UPCoM.

Stock Code: PGV.

Type of stock: Common stock.

Reference price in the first trading day: 24,800 dong / stock.

Number of stocks in the market: 7.1 million.

Business performance of EVNGENCO 3 in 2017

Electricity output: Nearly 33 billion kWh, accounting for 17% of the country's electricity output.

Estimated revenue: about VND 34,632 billion.

Profit gained from power generation: About VND 1,276 billion, or 218.7% of the plan.