Report of Ministry of Planning and Investment (MoPI)
showed that Electricity of Vietnam Group (EVN)’s liability ratio on equity is
currently at 4.35 times. Meanwhile, according to MoPI, the safe threshold for
enterprises is only three times.
Report on pilot results for
establishment of state-run economic group submitted by MoPI showed the average
debt ratio on equity of enterprises was 1.98 times (figures were based on
report from nine groups). This ratio was lower than the average level of the
country’s all enterprises (2.33 times) and most of groups have ensured the
capital adequacy ratio (CAR) as prescribed (less than 3 times).
Explaining more about EVN’s
CAR, a leader of the group said that the debt ratio on equity of the holding
company is still under the safe threshold (less than 3 times). However, if
including the debts of its subsidiaries, this ratio is higher. In the near
future, EVN will plan to reduce the debt ratio via dealing with member
companies and hiking the chartered capital of the group.
However, notably, EVN and
Vietnam Construction Industry Group have reported the relative high debt ratio
on equity at 4.25 times and 3.91 times respectively. Of which, till the end of
2010, EVN’s ownership capital reached 56.41 trillion dong, according to the
group’s report. Thus, it’s easy to see that EVN’s debts exceeded its total
assets, estimating at about 215 trillion dong in 2010 (the figure was announced
by EVN’s general director, Pham Le Thanh on December 9).
According to the draft decree
on capital investment and financial management of state-owned enterprises
(SOEs) submitted by the Ministry of Finance to be issued in 2012, with the
aforementioned debt ratio, EVN will not be able to continue to borrow capital
for production and business unless the group gets the prime minister’s
approval.
Earlier, according to EVN’s
general director, Pham Le Thanh, in the 2006-2010 period, EVN invested some 203
trillion dong in expanding the production and power transmission network. This
is properly the main cause of the group’s aforementioned “huge” debts. However,
it was also undeniable that a huge part of capital has been invested in
non-core sectors by EVN with not very high efficiency, resulting in low
solvency.
According to the report of
MoPI, EVN has invested over 2.107 trillion dong in non-core sectors, including
over 2.1 trillion dong (accounting for 99.8%) for sensitive sectors with high
risks such as banking, securities, real estate and insurance. As a result,
although the group has still gained average profit of about two trillion dong
per year (except the loss in 2010 due to the group had to offset for the
electricity price), the group’s basic ratios such as return on equity (ROE) or
return on assets (ROA) reached only 3.84% and 1.13% respectively. These figures
were less far from the average level of listed firms on the stock market in the
same period (at about 16% and 6.7%).
Therefore, based on the group’s
debt ratio compared to production and business efficiency, MoPI said that EVN’s
financial situation is at a "high risk". "With the groups having
effective and sustainable business performance, if ROE is higher than the
interest rate of debts, the owner will be more beneficial for bigger loans. But
for the groups with less effective business performance, they will fall into
more difficulties if borrowing more loans" deputy minister, Dang Huy Dong
explained.
Meanwhile, groups in
construction and real estate sectors posted lower ratio with the debt ratio on
equity at 3.91 times like Vietnam Construction Industry Group.
According to MoPI, some
companies under this construction group are falling into insolvency for due
foreign debts. For example, Dong Banh Cement Joint Stock Co cannot pay the
principle debt and interest of over 141 billion dong and now is lacking of 607
billion dong to pay for debts in 2011-2015 period. A similar situation also
occurred at Construction Engineering Corp and other subsidiaries. Thus, the
Ministry of Construction has to propose to be supported for repayment for foreign
debts for members of this group.
MoPI also reported, the total
investment in non-core sectors of 11 groups is now at 19.5 trillion dong, of
which, Vietnam National Oil and Gas Group (PetroVietnam-PVN) took the leading
position with 6.708 trillion dong and then Vietnam Rubber Group with 3.848
trillion dong.
In 2011, these groups need
about 26% of their total assets and 72% of chartered capital for non-core
investments, mainly focusing on high risk sectors such as finance, banking and
real estate. Meanwhile, authorities also confirmed the non-core investments of
groups did not gain effectiveness, even suffered losses, causing implications
for the overall development, of which Vietnam Shipbuilding Industries Group
(Vinashin) is an unforgettable lesson.
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