Petrolimex sell-off to come in 2018

Vietnam National Petroleum Group (Petrolimex) will see a 24.9% stake, held by the state, sold off in 2018 under the Decision No.1232/QD-TTg, signed by Deputy Prime Minister Vuong Dinh Hue on August 17. 

The divestment will reduce the state’s holdings in the firm to 53.7% from the current 78.6%.

“The government’s determined policy for boosting the equitisation of state-owned enterprises (SOEs) and state divestment is anticipated to increase the waves of M&A transactions involving foreign investors in a variety of sectors.  Those opportunities in the oil and gas sector and some other sectors are being assessed with genuine and strong interests,” Vo Ha Duyen, lawyer and partner at VILAF law firm, told VIR.

“SOE equitisation-related regulations give more flexibility concerning foreign ownership restrictions than Vietnam’s commitments to the World Trade Organization (WTO).  Therefore, equitisation can create opportunities for foreign investors to participate in certain sectors which would not otherwise be open to foreign investment such as distribution of petrol, lubricants, and pharmaceuticals,” she added.

In addition to the favourable market conditions, Petrolimex – in possession of sizeable assets and positive business results following its restructuring – will be a magnet to any multi-national corporation that wants to penetrate the Vietnamese petroleum market.

The petroleum giant currently holds almost 50% of the petroleum retail market, with over 50% of its products directly sold to consumers and around 20% directly sold to industrial customers.

This extensive distribution network and over 50 years of experience in petroleum trading has given the firm a market advantage.

As of December 31, 2016, Petrolimex’s total assets reached VND54.2 trillion (US$2.46 billion).

Its consolidated net revenue last year was VND123 trillion (US$5.59 billion), and pre-tax profits reached VND6.3 trillion (US$286.36 million), up 68% on-year.

Petrolimex previously made smaller divestments. In mid-2016, Japan’s JX Nippon Oil & Energy acquired an 8% stake in the Vietnamese firm, becoming its foreign strategic partner.

With the new divestment roadmap, the Japanese firm is likely to increase its stake in Petrolimex to tap into the profitable business.

JX Nippon’s stake has already produced results after one year of investment in Petrolimex. The foreign strategic investor received a cash dividend of VND333.7 billion (US$15 million) for 2016.

To date, Japanese oil giant Idemitsu Kosan Group and Kuwait Petroleum International (KPI), which received an investment certificate to form the joint-venture (JV) firm Idemitsu Petroleum Q8 Co., Ltd., are the first foreign participants to set up a wholly foreign-owned firm in the field. The JV will set up a domestic retail petrol station network.

In addition, PV Oil – Petrolimex’s main rival – is also appealing to foreign investors. Earlier this year, as many as 30 potential investors met with representatives from PV Oil to discuss acquiring stake in the firm.

PV Oil is seeking two or three strategic investors, and is slated to scrap its foreign ownership limit in the coming months.

According to this firm’s CEO Cao Hoai Duong, PV Oil can only offer 52% of its shares to overseas shareholders at this stage.