Seventeen investment funds have shown interest in Dung Quat’s IPO, expected to take place by the end of the year.
Besides investment funds, the list of investors gunning for a Dung Quat stake includes the world’s leading conglomerates in the oil & gas sector, including Repsol (Spain), Gazprom (Russia) and Petrolimex, where the Japanese JX Nippon Oil & Energy is a strategic shareholder.
The oil refinery, which holds one-third of the petroleum market share in Vietnam, plans to sell 4-6 percent of its stake.
The shares will be offered at the starting price of VND14,600 per share. If successful, Dung Quat would have capitalization value of $2.1 billion, while the State would collect $83.6 million from the deal.
After the IPO, the Ministry of Industry and Trade (MOIT) plans to continue transferring a 49 percent stake to strategic shareholders by 2018, which means that the State’s ownership ratio in Dung Quat will be lower than 50 percent. This will allow private investors to control the No 1 oil refinery in Vietnam.
“Oil refineries really attract investors,” said Michel Tosto from Ban Viet Securities.
Dung Quat’s business performance is impressive. In 2016, it had VND74 trillion in revenue and net profit of VND4.492 trillion, which means a rate of return on equity at 14 percent.
In the first half of the year, the revenue of the oil refinery reached VND38.6 trillion, an increase of 15 percent over the same period last year. The amount of cash Dung Quat has is VND15.179 trillion.
Under the current law, foreign investors are not allowed to distribute petrol products in Vietnam, unless they have oil refineries in Vietnam.
Therefore, analysts predict that foreign conglomerates will buy a stake in Vietnam’s oil refinery to obtain the right to distribute petrol products.
The Vietnamese energy market is witnessing the highest growth rates in the region. The total demand for petroleum products in Vietnam in 2015 was 17.5 million cubic meters. According to the World Bank, the average petroleum consumption per capita in Vietnam has increased by 5 percent per annum. The demand mostly comes from three sectors – transport (65 percent), industrial production (20 percent) and people’s consumption.
Dung Quat’s biggest rival in the upcoming years is Nghi Son Refinery. The $9 billion project is nearly completing construction before the trial run by early 2018. If running at full capacity, Nghi Son would be able to provide 80 percent of the domestic petroleum demand.
Source: VietNamNet