Heavyweight enters race for Dung Quat Refinery

Vietnam National Petroleum Group (Petrolimex) plans to buy the entire stake Binh Son Refinery and Petrochemical Co., Ltd. (BSR) – the operator of Vietnam’s first oil refinery Dung Quat will put on sale at its initial public offering (IPO) to become a strategic partner of the refinery.

Dung Quat Refinery signs transfer deal with Petrolimex

It was announced by Petrolimex chairman Bui Ngoc Bao at the signing ceremony of a co-operation agreement between Petrolimex and BSR on August 10. However, the specific stakes to be sold at the IPO have yet to be disclosed.

According to the deal, Petrolimex will buy BSR’s shares after it conducts the equitisation and completes its IPO. Besides, Petrolimex confirms giving top priority to the sales of petrol, LPG, and other petrochemical products of Dung Quat Refinery.

Bao stated that Petrolimex plans to put up 20 per cent of its stakes for sale to mobilise capital for the BSR acquisition.

When asked about BSR’s preparations for its IPO, Tran Ngoc Nguyen, general director of BSR, said that the IPO is expected to take place in the fourth quarter of this year.

The company’s stock offering will be divided into two steps. In particular, at the end of 2017, BSR will sell its stocks to its staff and conduct its IPO. Next, BSR will sell stakes to strategic shareholders within 12 months of its IPO.

“As BSR is a big enterprise, in 2017, we plan to sell 5-6 per cent of the state-owned stake,” Nguyen said and added that the stake offered to BSR’s staff is smaller than 1 per cent.

Seeking appropriate strategic shareholders with strong financial ability and experience in the petrochemical sector is considered an important mission to BSR, especially as it is implementing the project on Dung Quat’s upgrade and expansion. It is expected that Dung Quat’s annual refining capacity will rise from 6.5 to 8.5 million tonnes of crude oil.

Currently, BSR has made an offering to 15 foreign investment funds which are said to hold great potential to become BSR’s strategic shareholders. Besides, there are many petrochemical enterprises from South Korea, Venezuela, and Russia that have expressed interest in BSR. However, up till now, BSR has not picked strategic shareholders yet.

Along with plans of equisation and IPO, BSR also intends to enhance and expand the operation of Dung Quat Refinery. Notably, the expansion is expected to be completed in 2020 with a total investment capital sum of $1.82 billion, 30 per cent of which will come from equity and 70 per cent covered from loans. 

Upon completion, the expanded refinery’s capacity will increase by two million tonnes a year, to 8.5 million tonnes. It will be able to meet half of Vietnam’s fuel demand.

BSR reported positive business results in the first six months of this year. According to the released financial statement, in the first six months of 2017, BSR generated nearly VND38.7 trillion ($1.5 billion) of net revenue and more than VND3.8 trillion ($152 million) of after-tax profit, up 15 and 266 per cent, respectively, compared to the same period last year.

At the end of the second quarter of 2017, BSR’s cash and cash equivalents were more than VND15 trillion ($600 million), which accounted for 28 per cent of its total assets. The huge amount of cash and operating cash flows help BSR pay off matured debts and ensure its ability to pay off debts, as well as support its investment and business expansion plans.

Dung Quat is the first-ever oil refinery in Vietnam, opened in 2009, with the capacity of 6.5 million tonnes of crude oil annually. After coming into operation over nine years ago, the refinery has refined and sold more than 47.2 million tonnes of petroleum, meeting 40 per cent of the market demand.

By Ha Vy



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