EVN makes efforts to arrange capital for power projects in the 2019-2020 period

The investment capital demand of Vietnam Electricity (EVN) in the two years of 2019-2020 amounted to over 334 trillion VND. Mobilizing sufficient funding for these projects is not easy, especially in the current economic situation.

Numerous challenges exist

Mr. Franz Gerner, a Coordinator in the Energy Group of the World Bank in Vietnam, stated that Vietnam's traditional financial model for energy infrastructure development relies mainly on public investment carried out by EVN with the government guarantee, as well as the participation of domestic and international private sectors in the power generation sector. However, Vietnam stopped receiving concessional loans from the International Development Association (IDA) of the World Bank since 2017, resulting in a gradual reduction in access to high concessional loans. EVN and its subsidiaries are now required to mobilize alternative sources of finance for power generation and grid projects in the coming years.

Furthermore, in implementing the policy of reducing public debt, the Vietnamese Government has ceased guaranteeing loans for enterprises. This also poses difficulties for EVN, as foreign banks are only accustomed to lending to EVN and its subsidiaries for investment projects with government guarantees. Consequently, the time for contacting, exchanging, and searching for funding sources is prolonged, and the banks need to conduct a more detailed analysis of the enterprises' financial situation and repayment capacity.

On the other hand, domestic commercial banks with the capability to mobilize capital have already extended loans to EVN and its subsidiaries beyond the limits and capital adequacy ratio according to the Law on Credit Institutions. Therefore, to access this capital, EVN needs the approval of the Government and the State Bank of Vietnam. However, the procedures to obtain this approval are complex and time-consuming.

Needs for Synchronization solutions

In June 2018, EVN became the first state-owned enterprise in Vietnam to be rated by Fitch Ratings, one of the most reputable credit rating organizations worldwide. EVN was assigned a BB rating as a debt issuer, with a "Stable Outlook" for long-term foreign currency borrowing, on par with the national credit rating. Following that, in April 2019, the National Power Transmission Corporation (EVNNPT), a subsidiary of EVN, also received a BB credit rating from Fitch Ratings for long-term foreign currency debt issuance, with a "Stable Outlook," and a BB rating for senior unsecured debt. EVNNPT's independent credit rating was assessed at BB+ by Fitch.

These ratings not only enhance transparency and international integration for EVN and EVNNPT but also increase their access to capital sources. EVN is actively pursuing credit ratings for its member companies, creating a basis for accessing new funding sources and financial institutions.

In addition, EVN has implemented measures to improve production efficiency, cost savings, reduce power losses, achieve reasonable profitability, and ensure that its financial indicators meet lenders' requirements. EVN has also strengthened cooperation with bilateral and multilateral credit institutions to mobilize ODA and foreign concessional capital for electricity projects. Furthermore, EVN actively engages with foreign commercial banks and credit insurance organizations to seek funding for new projects through export credit agency (ECA) arrangements without government guarantees.

Based on the annual investment plan, EVN has registered with the State Bank and the Ministry of Finance for foreign borrowing under the self-borrowing and self-paying mechanism.

Moreover, EVN continues to work with domestic commercial banks to mobilize investment capital. It collaborates with these banks to propose the Government's approval of unique lending mechanisms for electricity projects, especially in cases where the credit limits for EVN and its subsidiaries are exceeded. For domestic banks without existing credit relationships, EVN aims to strengthen its access to them to secure loans for small-scale projects with fast capital recovery.

EVN's efforts to raise capital include issuing bonds in the domestic and international markets, utilizing depreciation funds, efficiently using budgetary resources, and expediting divestment in joint-stock companies.

Furthermore, Mr. Franz Gerner mentioned that the World Bank is assisting the Vietnamese Government in enhancing electricity access by promoting the involvement of the private sector and financial sources.

With these synchronized solutions, EVN has been and continues to mobilize sufficient capital and implement electricity projects according to the planned schedule during 2019-2020, contributing to ensuring energy security for the coming years.