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Feb 08, 2018 / 15:22

Genco 3 IPO teeters on verge of apathy

Prospective investors have registered interest in less than 3% of the stakes the State is selling at the initial public offering (IPO) of Power Generation Corp. 3 (Genco 3), as stated in the Ho Chi Minh City Stock Exchange (HOSE)`s latest announcement.

As such, a total of 336 investors had registered interest in 7.5 million shares, equaling 2.8% of the stake on offer or 0.36% of Genco 3's charter capital. 
 
Genco 3 will offer 267 million shares through its IPO.
Genco 3 will offer 267 million shares through its IPO.
Specifically, foreign individuals and organizations registered to buy 40,700 and 3,356,000 shares, respectively.

Under the equitization plan, Genco 3 will offer 267 million shares through its IPO, with the initial price of VND24,600 (US$1) per share, equivalent to 12.83% of the company's charter capital. 

For this price, Genco 3's prospective price-to-earnings (P/E) valuation is 19 times, higher than the 15 times average reported by regional peers and 13 times of state electricity producer and distributor PetroVietnam Power (PV Power)'s IPO. 

After the IPO, Genco 3's charter capital is expected to increase from VND10.56 trillion (US$464.6 million) to VND20.8 trillion (US$915.2 million), equivalent to over 2.08 billion shares, of which Vietnam Electricity (EVN) will hold 51%. The company will then sell 36% to strategic investors and 0.16% for its employees. 

EVN held a roadshow for potential investors at its headquarters in Hanoi on January 9, which was attended by 7 investors who expressed interest in becoming strategic shareholders for Genco 3. 

Among them, 5 investors have signed a Non Disclosure Agreement (NDA) with Genco 3 before getting permission to access its data room as well as detailed information regarding the current business and financial situation of the company. 

To become strategic shareholders, 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 completing the equitization process in management, operating power plants, training human resources, and transferring technologies.

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. 

Last month, the government also raised US$492 million by selling 20% of the stakes at the IPOs of PV Power and state oil firm PetroVietnam Oil (PV OIL).