Coal piles up as VN firms prefer imports

by Thiên Lý

Why did coal purchases increase so sharply?

Market observers said global coal prices fell strongly due to a sharp fall in demand caused by the prolonged economic downturn and general switch to less polluting fuel.

But coal production in many countries remains unchanged.

In the event, the prices have dropped by than 10 per cent.

In August alone the price in Australia’s Newcastle Port dropped from US$84 per tonne to $74.

In Việt Nam, the price of coal 11A  sold by TKV was $69 per tonne while China sold the same variety for $45-$56 exploited from open-cash mine.

Worse still, costs for domestically exploiting coal have also been increasing by 3 or 4 per cent per year due to difficult exploitation conditions.

Analysts said domestic prices are high because taxes and charges on coal products have been rising relentlessly in recent years.

A 12 per cent natural resource tax is slapped on coal mining, and the rate goes up to 14 per cent in case of open-cast mines.

The comparable taxes are 7 per cent and 6 per cent in Australia and 3 per cent and 7 per cent in Indonesia. In China, they range from from zero to 4 per cent.

Not surprisingly, many electricity companies have switched from domestic to imported coal.

Since the beginning of this year, many of Electricity of Việt Nam (EVN)’s subsidiaries have sought permission to import coal.

EVN itself plans to import around 10 milion tonnes for its three thermal power plants, namely the 600MW expanded Duyên Hải Project No.3, the 1,200MW Vĩnh Tân Project No.4, and the 3,000MW Duyên Hải Project.

PetroVietnam is seeking coal for five thermal electricity plants with a combined capacity of 6000MW. The company intends to use imported coal for Long Phú 1, Quảng Trạch 1 and Sông Hậu 1 plants.

In February PVN signed an agreement in principle with an Australian company to import around 3 million tonnes a year.

The downside is that, with Việt Nam itself being a large producer of coal, the rising imports mean the domestic coal industry is saddled with increasingly large inventories.

According to the Ministry of Industry, at the end of April the inventory was 11 million tonnes as only three million tonnes were exported.    

Experts said the quality of coal is affected severely if left unused for a long time after being mined, making exports even harder.

UPCoM listing by firms sees major shareholders sell out

The Southern General Import-Export Joint Stock Company (SGIEC), a strategic shareholder in the Việt Nam Seafood Corporation (SEA), made the decision to sell its stakes immediately after the latter listed on UPCoM on December 23.

SGIEC has registered for selling 18.75 million shares of SEA, equivalent to 15 per cent of the company’s prescribed capital. If the transaction goes through, SGIEC would no longer be a SEA shareholder.

The main reason for the separation is believed to be a difference of opinion between SGIEC and SEA’s state shareholder over developing a real estate project in downtown HCM City.

Similarly, the Pacific Petroleum Transportation Joint Stock Company listed its shares on UPCoM on December 12.

Immediately afterwards a major shareholder with a 10.13 per cent stake, PVI Asset Management Joint Stock Company, announced it would sell all its shares in Pacific.

Not only are some big stakeholders selling out their shares but even parent companies are doing so from their subsidiaries.

For instance, the Sông Đà 5 Joint Stock Company has decided to sell 13.2 million shares, or 88 per cent of the legal capital of its subsidiary, Sông Chảy Hydro Power Company, after the later listed on UPCoM.

Some State agencies too are doing this.

The People’s Committee of the northern mountainous province of Lạng Sơn recently registered for a second time to sell more than 2.2 million shares of the Lạng Sơn Water Drainage and Supply Joint Stock Company, which will reduce its ownership from 95.05 per cent to 51 per cent.

After the company listed on UPCoM in late July the People’s Committee had once tried to sell its shares, but in vain.

Analysts said the rush to disinvest is caused by a desire to restructure investments to improve their effectiveness.

Besides, many investors looking to pull out are simply taking advantage of the fact that many companies are listing on UPCoM and hoping to get better prices for their shares.

It is benefiting the market by increasing liquidity and its sheer size by increasing the free float of shares.

Bad debts continue to squeeze banks’ profits

In the third quarter of the year Kienlongbank’s gross profit decreased by nearly 12 per cent.

As a result, in the first nine months of the year Kienlongbank’s pre-tax profits were worth only VNĐ19.8 billion (US$88,000).

The bank management attributed the profit drop to increasing operation costs and risk provision for bad debts.

The lender’s bad debts ratio increased from 1.12 per cent at the beginning of the year to 1.46 per cent. Significantly, irrecoverable debts increased by 54 per cent to VNĐ187 billion ($381,111).

Kienlongbank will thus find it difficult to achieve the year’s pre-tax profit target of VNĐ300 billion.

Eximbank, quickly recognising the difficult business situation, has tweaked its business plans.

By late second quarter the bank’s bad debts had increased sharply to 5.3 per cent despite the fact its credit growth rate was minus 4.62 per cent.

Consequently, its first half pre-tax profit was only VNĐ80 billion.

In the first nine months of the year Eximbank had a pre-tax profit of VNĐ202 billion but an after-tax loss of VNĐ43 billion.

Its bad debts were 3.35 per cent of total outstanding loans.

In the face of the downbeat situation, Eximbank’s executive board slashed the full-year profit target by 44 per cent to VNĐ400 billion.

State giant BIDV had to make risk provision of nearly VNĐ7 trillion in the first nine months of 2016, an 80 per cent rise over the same period last year.

According to the HCM City Banking University, in 2016 the banking sector had to set aside VNĐ91.374 trillion as bad debts provisions, much higher than the VNĐ74.828 trillion in 2015 and VNĐ59.287 trillion in 2014.

Of this figure, provision for bad debts amounted to VNĐ53.098 trillion, and bonds issued by the Việt Nam Asset Management Company against bad debts were worth VNĐ38.276 trillion.

These ate into the profits of banks, including major ones, and as a result shareholders did not get dividends.VNS