Hanoi (VNS/VNA) - Thefailure of the Power Generation Corporation 3 (Genco 3) to sell its stakethrough initial public offering (IPO) has raised concerns about the upcomingIPOs of the two other similar companies – Genco 1 and Genco 2 – at the end ofthis year.

In early February 2018, Genco 3 offered 267million shares for IPO sale, equal to 12.48 percent of its charter capital, atthe starting price of 24,600 VND (1.09) per share.

However, the company only sold 7.5 millionshares at the IPO, collecting 184.4 billion VND (8.1 million USD) from the IPO.

The deal was considered a failure. Thesubsidiary of the State-owned conglomerate Electricity of Vietnam (EVN) alsowanted to sell 36 percent of its charter capital to the strategic investorwithin a month of the IPO.

In late January 2018, EVN Deputy General DirectorDinh Quang Tri told local media that four investors from India, Thailand, theRepublic of Korea and Middle East had registered to purchase 36 percent stakeof Genco 3.

However, it was difficult for Genco 3 to carryout the strategic deal due to shortage of time for potential investors toprepare their finance and required procedures.

According to deputy minister of industry andtrade Dang Hoang An, the size of Genco 3 was big, making its value quite highto investors, leaving many unable to purchase all of shares offered.

“State-owned enterprises (SOEs) having soldState capital before Genco 3 had attracted most of investors’ attention, plus,their market capitalisation was also huge so it was difficult for investors toabsorb Genco 3 at the IPO and the strategic sale later,” Dau Tu (Investment)newspaper quoted An as saying.

Before the IPO of Genco 3, three energy firmswho launched their IPOs were Binh Son Refining and Petrochemical Company (BSR),PetroVietnam Oil Corporation (PV Oil) and PetroVietnam Power Corporation (PVPower), selling total 17 trillion VND (749 million USD) worth of shares.

According to Nguyen Trong Oanh, General Directorcum Chairman of Da Nhim-Ham Thuan-Da Mi Hydropower JSC (DHD), it often takesministries and sectors several years to make investment in a hydropower plant,therefore, it is impossible for a strategic investor to purchase a majority ofownership in a power company in just a few months.

“After DHD was equitised in 2010, a number offoreign investors were interested in becoming the firm’s strategic investors.They brought along lawyers, consultants and financial analysts to work with DHDofficials to study the company, and it took them a few months to decide to buy35-49 percent of DHD charter capital,” Oanh said.

“In the case of Genco 3, a 36 percent stake islarge for any investors to afford. In addition, it should take investors timeand effort to study a corporation of many power plants, and it is muchdifferent to studying a single power plant,” he said.

According to some foreign investors, insightfulcorporate assessments will be conducted on Vietnamese power firms as Vietnam’selectricity prices are not cheap. In addition, the implementation of theproject would often cost more than the initial plan, so it often takes yearsfor them to make the final decision.

Foreign investors are concerned about the qualityof transparency, corporate governance and accounting among Vietnamese firms, Oanhadded.

All power plants of DHD are hydropower plants –which are completely different from Genco 3 which is made up of thermal, coaland hydro power plants and those plants are located in different places – so itis easier for investors to do business evaluation on DHD than on Genco 3,according to Oanh.

“Investors would prefer making investment in DHDthan other power firms due to its visibility of assets and finance despite lowefficiency, plus, the issue of electricity prices has remained unclear,” hesaid.

According to Deputy Minister of Industry andYrade Hoang Quoc Vuong, foreign investors are not keen on investing in alarge-cap power corporation like Genco. But it may be easier to lure them tobuy shares of Genco power plants due to accessibility of informationdisclosures and fewer risks.

The two other EVN sub-units – Genco 1 and Genco2 – are preparing for their IPOs this year by selling shares of the twocorporations, not shares of their power plants.

According to some analysts, the two firms’ IPOshave encountered some challenges regarding their land use rights as their assetevaluations have followed the instructions stated in the Decree 59/2011/NĐ-CPand not matched requirements of lately-issued policies such as the Decree126/2017/NĐ-CP and Circular 41/2018/TT-BTC.

They could have to re-evaluate their landproperties and submit to the authorised government agencies for approval beforemaking final decisions on the IPOs.

Electricity price is also another major concernand the pricing policy needs clarification of EVN and must be transparent,analysts said.

Those issues will take more time and effort forthose two firms to throw their IPOs this year and may discourage investors fromtaking part in those deals, they said.-VNS/VNA