VietNamNet Bridge – The national oil and gas conglomerate would have to undergo a major surgery for restructuring. However, experts have warned that it would be a very complicated operation.




PVC, or PetroVietnam Construction Joint Stock Corporation, alone has 15 subsidiaries and 13 associated companies. The numbers of “son” or “grandson” companies in other oil and gas corporations are nearly the same.

Meanwhile, PVC is just one of the 26 biggest corporations, in which PetroVietnam holds 100 percent of stakes, or contributes no less than 35 percent of capital.

It is obvious that it would be a very complicated process to restructure a conglomerate with such a large network and expanded scale.

From civil engineering, real estate development…

On March 31, 2012, PVC stated that it has completed the plan to increase its chartered capital from 1500 billion dong to 4000 billion dong, which was approved by the State Securities Commission in November 2011.

There was a noteworthy thing in the share issuance by PVC that PetroVietnam spent 1100 billion dong to obtain 110 million shares. The affair helped PetroVietnam raise its ownership ratio in PVC from 41.21 percent to 53.26 percent.

The move of injecting more capital in a construction company was taken by the oil and gas conglomerate at the time, when the government requested state owned economic groups and general corporations to withdraw capital from less important projects to gather strength on their core business fields.

On January 6, 2012, President of PetroVietnam Phung Dinh Thuc made a statement to the press that PetroVietnam has withdrawn from the Petro Tower project to obey the Prime Minister’s instruction to quit the real estate development field.

However, the tower project later was allocated to PVC, where PetroVietnam holds the controlling stakes, which means that PetroVietnam does not intend to “give up the game.”

Explaining this, PetroVietnam’s leadership affirmed that the 1100 billion dong worth of capital PetroVietnam has injected in PVC via the share issuance, would not be used to develop real estate projects.

Thuc emphasized that PVC would undertake the projects on building and installing oil and gas works ashore, while PTSC or PV Drilling, also the subsidiaries of PetroVietnam, would undertake the works on the open sea.

Thuc also pointed out the five business fields PetroVietnam would focus on, including oil and gas exploration and exploitation; petrochemistry and oil filtration; gas industry; electricity industry; and high quality oil and gas services.

The Hanoi Stock Exchange HNX has released a notice about the halt of the trade of PVC’s shares since September 12, 2012, because the undistributed post tax profit of PVC dropped to minus 343.3 billion dong. The notice immediately led to the dramatic fall of PVC’s shares to 5400 dong per share on September 11.

… to finance investment

The Prime Minister has decided that PetroVietnam will not maintain PVFC, a finance company, and that it will hold no more than 35 percent of the total capital in PVI, an insurance subsidiary.

PVFC now has the chartered capital of six trillion dong, of which PetroVietnam holds 78 percent of stakes. PetroVietnam now also holds 20 percent of stakes at Ocean Bank, while PVFC plans to shift to operate as a bank.

Under the current regulations which stipulate that a legal entity must not hold more than 20 percent of stakes at a bank and must not contribute to two banks. This means that if PVFC turns into a bank, PetroVietnam would have to withdraw capital from one of the banks, and if it sells stakes now, it would not be able to take back 4500 billion dong worth of capital it poured into them before.

Things seem to be simpler with PVI, because PetroVietnam now holds only 35.5 percent of stakes in the company. However, it is not easy to sell stakes to withdraw capital at this moment.

DDDN