Though Vietnam is moving ahead towards implementing renewable energy plans, the latest reports say that the renewable energy firms in the country have recorded declining earnings results. The reason is the burdens on corporate bond payments.
As per the local reports, one of the firms is Xuan Thien Group, one of the major investors in the energy sector, with two clusters of solar power projects in Ninh Thuan and Dak Lak. Besides solar power, the group also invests in hydropower, with 20 projects with a total capacity of 400 MW developed to date.
The reports quoted Nguyen Van Thien, Chairman of Xuan Thien Group saying, “The group has more than 80 member companies in the country and abroad, with a total charter capital of more than VND100 trillion, specialising in investing in energy production, high-tech agriculture, construction materials, banking and finance and a number of other service industries. Currently, the group’s member companies own many power plants and produce construction materials, with annual revenue of VND20 trillion.”
In Dak Lak, Xuan Thien Group invested in Xuan Thien Ea Sup solar power plant cluster, with a total investment of more than VNĐ50 trillion, design capacity of 2,000 MWac (equivalent to 2,800 MWp). Phase 1 of this project includes four factories viz.Ea Sup 1, Ea Sup 2, Ea Sup 3 and Ea Sup 5, with a total investment capital of VND16.5 trillion, completed in 2020. Phase 2 includes 10 factories. The factories are under construction, with total investment capital of VND33.5 trillion.
This project cluster is built on a total area of about 4,180 hectares of land and is considered one of the solar power projects with the largest capacity in Southeast Asia. Like many other businesses, Xuân Thiện Group has mobilised large capital through the bond channel to invest in solar power projects.
Recently, it was reported that a number of companies under Xuân Thiện Group have announced financial information according to regulations on private offering and trading of corporate bonds. “ In particular, Ea Súp 1 Joint Stock Company showed a decrease in profits and an increase in the debt to equity ratio,” said the reports.
Similarly, other firms viz. Ia Pet Dak Doa Wind Power Plant Number One Joint Stock Company (Ia Pet Dak Doa WPP No1) and Ia Pet Dak Doa Wind Power Number Two Joint Stock Company (Ia Pet Dak Doa WPP No2), respectively, are the investors of the Ia Pet Dak Doa 1 Wind Power Plant and Ia Pet Dắk Doa 2 Wind Power Plant. These are two projects whose planning was approved in June 2020 and are the two largest wind power plants built in Gia Lai Province.
According to the latest financial situation announcement of Ia Pet Dak Doa WPP No1, the company’s equity as of June 30, 2023 reached VNĐ518.3 billion, down 18.4 per cent over the same period last year. Liabilities were estimated at VND3.3 trillion, 6.45 times higher than equity. Outstanding bond debt was VND416.7 billion, down 10 per cent over the same period last year.
The situation at Ia Pet Dak Doa WPP No2 is similar. The company reported a loss of VND75 billion in the first half of this year, a loss of VND154.4 billion in the same period last year. At the end of the second quarter of 2023, the company’s equity was VND466 billion, down 20.7 per cent over the same period last year. The company had VND3.26 trillion in liabilities, 6.99 times more than equity.
According to ACBS Securities Company, the poor business results of renewable energy businesses stem from many reasons, including businesses using financial leverage by mobilising large amounts of capital through bond issuance. Many businesses have a debt-to-equity ratio of more than four times. In the context of high interest rates, businesses have to use many resources to pay bond interest.