Genco 3's IPO did not go according to plan
Vietnam raised VND184.8 billion ($8.13 million) from the initial public offering (IPO) of Power Generation Corporation 3 (Genco 3), a subsidiary of Vietnam Electricity Corporation (EVN), on February 9.
The proceeds were a measly 3% of the government's target of raising at least VND6.5 trillion ($286 million) from the stake sale. Reflection low investor interest, only 7.45 million shares of the 267 million on offer were sold in the auction.
Genco 3's IPO did not go according to plan.
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The Ho Chi Minh City Stock Exchange (HOSE) earlier said in a statement published on its website that a total of 336 investors had registered interest in only 2.8% of the stakes-amounting to less than 0.36% of the company-by the February 1 deadline. According to analysts, the disappointing results were due to Genco 3 being overvalued.
Genco 3's prospective price-to-earnings (P/E) valuation is 19 times, higher than the 15 times average reported by regional peers and the 13 times of state electricity producer and distributor PetroVietnam Power (PV Power)'s IPO.
Genco 3 would also offer up to an additional 749 million shares, equivalent to 36% of its charter capital, to a maximum of three strategic investors, the power corporation said in a statement on its website.
To become a strategic shareholder, in addition to sufficient financial capabilities, investors must prove their expertise in operating power plants. Meanwhile, interested parties must make a long-term commitment to support Genco 3 after the equitization process, particularly in management, power plant operation, human resources training, and technology transfer.
Genco 3's charter capital was determined at VND20.8 trillion (US$917 million), in which the government ownership through EVN is estimated at 51%. It would divest its capital at the subsidiary to less than the controlling level after 2019 if the company manages to restructure its debts and successfully negotiate with lenders.
Genco 3's revenue in 2017 was estimated at over VND34.6 trillion ($1.52 billion), with profit at VND1.27 trillion ($55.8 million). Its total capacity reached 6,304MW, accounting for 16% of the national electricity system. The total capacity of the 4 Phu My Thermal Power Plants operated by Genco 3 (Phu My 1, Phu My 2.1, Phu My 2.1 Extension, and Phu My 4) is 2,540MW alone.
The government last month raised $492 million by selling 20% stakes in electricity producer and distributor PV Power and oil firm Petrovietnam Oil Corp (PVOIL).
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