A0 leaves EVN, Ministry of Industry and Trade worries about capital difficulties, needs money from EVN

Must be raised to 4,296 billion VND

On September 25, the Ministry of Industry and Trade sent a document to the Ministry of Planning and Investment for comments on the project to separate A0 from Vietnam Electricity Group (EVN), and place it under the Capital Management Committee before transferring it to the Ministry of Industry and Trade.

According to the Project's content, the charter capital of the National Electricity System and Market Operation Company Limited (NSMO) is expected to be 776 billion VND (including 735 billion VND according to the Financial Report of the second quarter of 2023 and 41 billion VND is the volume of completed, accepted, and paid projects in the 2023 investment plan that EVN has approved and is implementing at A0).

This is the expected charter capital when transferring NSMO's assets from EVN in their original state at the time of company separation.

A0 will separate from EVN to establish the National Electricity System and Market Operation Company Limited (NSMO).

The Ministry of Industry and Trade said: In the 5-year production and business plan of NSMO, there are 26 items, with a total investment of more than 5,165 billion VND, of which 9 urgent projects have been and are being implemented, all of which are key.

The Ministry is concerned that in the case of newly established A0, accessing loans from credit institutions or other sources will be very difficult. If financial issues are not guaranteed, it will directly affect the business activities of the enterprise, therefore, it is necessary to arrange enough capital for these 9 urgent projects as soon as NSMO is established.

In addition, for the remaining 17 projects (total investment of VND 1,759 billion), the Ministry of Industry and Trade calculates that it is expected to need to arrange 30% of counterpart capital in the charter capital at the time of establishment (VND 527 billion) so that NSMO can easily mobilize capital for the next phase.

"In the early stages of establishment, with the small scale of the company, the ability to balance capital and mobilize capital will be difficult to meet the development of infrastructure investment needs in a short time, causing financial imbalance and inability to arrange capital for the above projects," the Ministry of Industry and Trade stated its opinion.

Accordingly, the Ministry of Industry and Trade believes that it is necessary to propose a plan to approve the overall charter capital for the entire 2023-2028 period when establishing NSMO, including capital arrangements for 9 key projects (VND 2,993 billion). Otherwise, it will lead to the possibility of disruption of NSMO's production and business activities, affecting the security of electricity supply.

Based on the above bases, it is necessary to consider the appropriate charter capital level when separating A0 into a LLC of about VND 4,296 billion (VND 776 billion of intact assets transferred from EVN + VND 2,993 billion of investment capital for key projects + VND 527 billion of counterpart capital for the remaining 17 projects) to ensure that NSMO operates stably and without interruption immediately after its establishment.

Advance money from EVN for the 'new' A0 to operate

Regarding NSMO's working capital, the Ministry of Industry and Trade said: In the 2023 production and business plan approved by EVN, the total cost for A0's regular operations is VND 333.17 billion. However, if fully calculated, the actual total cost for regular operations is VND 451.617 billion/year.

Of which, salary expenses and salary deductions are 183.6 billion VND, material expenses are 26.7 billion VND, purchased services are 173.5 billion VND, other expenses in cash are 67.5 billion VND, and major repair expenses are 0.5 billion VND.

In the 2024-2028 period plan, the total cost for NSMO's regular operations is 3,343 billion VND, an average of 668.6 billion VND/year (including costs for salaries, insurance, headquarters rental, warranty rental, etc.).

Therefore, the Ministry of Industry and Trade agrees with A0's proposal to advance money from EVN to ensure the stable, continuous and effective operation of NSMO after its establishment.

The Ministry of Industry and Trade also requested the Ministry of Planning and Investment to appraise and supplement the plan for using the houses, land, and headquarters of NSMO upon establishment (including a specific plan for handling the rights of use, specific obligations, and handover plan for these houses and land).

A0 'leaves' EVN, may bring 2 million USD debts to the Ministry of Industry and Trade . A0 'leaves' EVN, will transform into the 100% state-owned National Electricity System and Market Operation Company Limited (NSMO), providing dispatching services and operating electricity market transactions. Leaving EVN, A0 may bring 2 million USD debts.

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