Renewable energy firms rush to issue bonds

Saturday, Oct 03, 2020 08:24

Panels at the Tra Vinh Solar Power Plant. Trungnam Group has mobilised up to VND4.5 trillion from bonds so far this year, with an interest rate of 10.5 per cent per year. — Photo courtesy Trung Nam Group

Renewable energy companies were becoming more active in the corporate bond market, according to brokerages.

Statistics from the Ha Noi Stock Exchange (HNX), the national trade promotion office of Finland Finnpro and Techcombank Securities Co showed that among the VND171 trillion (US$7.4 billion) of corporate bonds issued in the first half of this year, renewable energy companies accounted for 4 per cent.

The average interest rate of energy bonds was 10.3 per cent per year, only second after the real estate sector which stood at 10.6 per cent per year.

The successful issuance rate in that period reached 92 per cent, with an average term of 7.2 years.

Trungnam Group has mobilised up to VND4.5 trillion from bonds so far this year, with an interest rate of 10.5 per cent per year. Hong Phong 2 Energy JSC has also mobilised VND1.6 trillion from 6-year bonds with an interest rate of 10 per cent per year. Ea Sup 5 JSC collected VND1.14 trillion with an interest rate of 11.3 per cent per year and terms of 18 months to 9 years.

In August, My Son 1 Solar Power Co Ltd successfully issued VND300 billion of three-year bonds with an interest rate of 10 per cent per year.

Clean energy projects such as solar power and wind power are being promoted by the Government, with attractive electricity purchasing prices of 7.09 - 9.35 cents per kWh, tax exemptions for 4 years, and a reduction of 50 per cent of tax payable for the next 9 years.

With the advantages of stable operations, low operating and maintenance costs, and high economic efficiency, bonds issued by clean energy companies have lower risks than other issuers in the fields of real estate and construction, while offering interest rates that are attractive to investors.

Clean energy bonds have a relatively long maturity, averaging 7.2 years, and most of them are issued privately, meaning they are sold to no more than 100 investors in the first year under current regulations.

However, from the second year onwards, these bonds can be traded by more than 100 investors, so there is no difference in buying or selling clean energy bonds compared to other bonds like real estate, which usually have a maturity of about 2-3 years.

Buyers of corporate bonds are often banks. Previously, banks focused on real estate bonds but clean energy is becoming increasingly more attractive.

Although clean energy bonds tended to be low-risk, not all bonds were equal, according to investment banking directors at several major securities firms.

In addition to the interest rate, investors should also carefully check other factors and terms to avoid risks, they said.

Investors should check whether the energy project's expected size, capacity, revenue and cash flow were sufficient to ensure the project's debt obligations to avoid the issuer defaulting.

If a project does not go into operation, it is necessary to note its legal status, such as its investment approval, electrical activity and land allocation licences.

Investors should also seek advice from reputable and experienced consultants and financial experts.

From 2018 to June 2019, more than 330 solar power projects were submitted to the Government for approval. Of which, 121 projects were added to the national and provincial power plans, with a total power generation capacity of 6,100MW by 2020 and 7,200MW by 2030.

There are 221 projects awaiting approval, with registered capacity of more than 14,330MW.

Large solar power plants are concentrated in six provinces in the South Central region, the Central Highlands and the Southern region, including Khanh Hoa, Phu Yen, Ninh Thuan, Binh Thuan, Gia Lai and An Giang.

Ninh Thuan Province alone has 31 projects licensed for investment with a total capacity of 1,816MW and total registered capital of over VND5 trillion. Seven projects with a total capacity of 852MW have been officially put into operation. — VNS

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