SOE equitization: the second opportunity has come

 Vietnam once missed the opportunity in 2006-2007 to push up the state owned enterprise (SOE) equitization process and develop its finance market. Will it be able to grab the new coming opportunity?

Blackstone Group, the big US investment bank and asset management group, never showed its interests in the Vietnamese market before. But its name has been found recently on the list of the partners willing to become the shareholders of GAS, a Vietnamese gas company listing on the HCM City bourse.

In mid-January 2014, GAS once again asked the government to allow it to continue the equitization.

GAS proposed that the State either sell a part of the stakes it holds, or allow GAS to issue more shares to increase its chartered capital. The shares to be issued would mostly target foreign strategic shareholders.

Under its plan, the money to be collected from the share issue would be used to buy the Block B O Mon gas mine in the west of the southern region, which is believed to have the reserve big enough to ensure the input materials for five power plants. The purchase would be made by GAS, PetroVietnam and its subsidiaries.

The story of GAS

Sources said that the government has agreed in principle to allow PetroVietnam and GAS, a subsidiary, to buy B Block O Mon project with its own money.

GAS now needs a huge sum of money, nearly $1 billion, to buy the gas pipeline, 400 kilometers long, from the US Chevron group. And GAS needs to continue its equitization process to get money to implement the plan. This is believed to be the most feasible solution.

GAS once made an initial public offering (IPO) in 2010, when it successfully issued 62 million shares, or 3.28 percent of the state’s stakes. It has been the company with the biggest capitalization value in the stock market, thus having big influences to the VN Index. 2.5 percent of GAS’ stakes is being held by foreigners, while the amount of shares available for transactions is limited, just 0.78 percent.

Vietnam should not miss the second opportunity

In 2006-2007, before and after Vietnam officially joined the World Trade Organization (WTO), it once had the golden opportunity to accelerate the equitization and develop the finance market.

At that time, international experts said that billions of dollars worth of foreign portfolio investment was waiting to be disbursed for Vietnamese businesses’ IPOs. However, the opportunity was missed out.

And the second opportunity has come, even though it is smaller.

The government has urged big SOEs to restart the equitization process, which got stagnant recently because of the gloomy stock market.

In January 2014, the Ministry of Transport stated it planned to equitize ACV, which manages tens of airports nationwide, including the two biggest international airports of Tan Son Nhat in HCM City and Noi Bai in Hanoi.

ACV, with the total capital of VND14.6 trillion, would sell 25 percent of its stakes through an IPO.

The national flag air carrier Vietnam Airlines plans to complete its equitization within 2014 and collect $200 million from the IPO.

The Bank for Investment and Development of Vietnam BIDV is seeking foreign strategic partners, while the textile and garment group Vinatex is preparing for IPO.

TBKTSG