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Asia300

Hanoi debuting scandal-plagued SOEs with executives in court

PetroVietnam aims to raise $573m from stock market, three former chairmen face prison

PV Oil is one of three PetroVietnam units going for IPO this month.

HO CHI MINH CITY -- Vietnam National Oil and Gas Group (PetroVietnam or PVN) is sending three subsidiaries to market this month with initial public offerings (IPOs) that coincide with corruption trials involving former senior officials.

The hearings began on Monday, and among the defendants is a businessman Vietnam has been accused by Germany of abducting from a Berlin park.

According to the most recently disclosed information, two PVN subsidiaries will debut on the Ho Chi Minh Stock Exchange -- Binh Son Refinery on Jan. 17, and PV Oil on Jan. 25, listing 8% and 20% of their outstanding shares, respectively. PV Power will list 20% on the Hanoi Stock Exchange on Jan. 31.

The estimated combined value of the shares on offer is 13 trillion dong ($573 million), based on their reference prices.

Along with mobile operator Viettel and Petrovietnam Gas, PVN is one of the three biggest state-owned enterprises (SOEs) in Vietnam, and a major contributor to state coffers. It has 15 direct units, 18 subsidiaries, and 46 affiliates.

Former executives at PVN have been investigated as part of a widespread crackdown on SOEs in the energy and banking sectors. One of the high profile executives arrested was Dinh La Thang, PVN's chair from 2008 to 2011. Thang was also a former politburo member; he was dismissed following the losses at PVN and fired as party leader in Ho Chi Minh City. He is the first Vietnamese politburo member to have been arrested.

Hearings opened at the Hanoi People's Court on Monday involving 22 SOE executives. The corruption scandals at PVN have produced three cases involving more than 100 individuals, and Thang is expected to serve prison time. The chair at PVN was left vacant for a year until early this month, and Thang's last successor in the position, Nguyen Quoc Khanh, is also being prosecuted. Prime Minister Nguyen Xuan Phuc has instructed that the group's chronically unprofitable projects be sorted out by the new chair, Tran Sy Thanh, former communist party secretary of Lang Son province in northern Vietnam.

In the 2018 budget, Vietnam's state revenue is projected to be $58 billion with expenditures of $67 billion. The expected deficit of $9 billion will have to be covered by borrowing while payments on principals total $7 billion this year.

By the end of 2016, there were 583 SOEs in Vietnam generating total revenue of some $66.5 billion. Their total pretax profit was about $6.1 billion, with the majority accounted for by Viettel ($1.71 billion) and PVN ($1.16 billion), according to the finance ministry.

In 2016, PVN group paid 90 trillion dong ($3.9 billion) to the government in dividends and tax, which increased to more than 97 trillion dong in 2017. In the past, PVN group's dividend used to account for over a fifth of total annual state budget revenues. But the contribution to the state coffers has decreased in the last few years because of the global drop in oil prices compounded by mismanagement and corruption.

Vietnam has accelerated efforts to sell attractive assets, including the three PVN units that were originally due for IPO in 2017. The three companies are also seeking to sell stakes ranging from 28% to 49% to strategic investors. PVN expects to reduce its ownership to 51% in both Binh Son Refinery and PV Power, and to 35% in PV Oil. 

PVN itself will remain a wholly state-owned company, but a deadline has been set for 2020 to divest shares from most of its subsidiaries to enhance transparency and efficiency. Shares in PetroVietnam Fertilizer and Chemicals, PV Trans, PetroVietnam Insurance, and others should therefore come to market in the next three years.

(Nikkei)

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