VietNam Business

Tuesday, February 22, 2011

PetroVietnam mulls purchase of BP assets

HCMC - Vietnam Oil and Gas Group, or PetroVietnam, is considering buying BP’s stakes in their joint projects in the country.

Phung Dinh Thuc, director general of PetroVietnam, told the Daily via the phone on Tuesday about his company’s plan a day after BP’s announcement that it had reached agreement to sell its upstream businesses and associated interests in Venezuela and Vietnam to its Russian joint venture for a total of US$1.8 billion.

TNK-BP, Russia’s third largest oil company, is owned equally by BP and AAR Consortium grouping Alfa Group, Access Industries and Renova.

“On Wednesday they informed us directly of the agreement. They said TNK-BP has been up to now their only partner chosen to make direct negotiations, and suggest the Russian company as purchaser,” Thuc said.

“BP has not let us know about the price of its stakes, but it’s certainly equivalent to the price offered by TNK-BP. If the price is reasonable for us, we will make a decision to buy the assets,” the director general added.

BP wanted to sell its assets in its Vietnam-based projects in a bid to make divestments of US$30 billion by the end of 2011 to pay for damages in the Gulf of Mexico oil spill.

However, PetroVietnam as a partner in such projects has some preferential rights, Thuc said, adding that within 60 days upon being informed of the agreement, the Vietnam group has the right to buy the stakes as well as to veto the deal.

Thuc explained the group could disapprove the deal if BP’s partner doesn’t have good technology and competence.

A representative of BP in Vietnam on Tuesday also confirmed the agreement, adding that BP needs regulatory approval from Vietnam’s Government to sell its assets in the country.

BP said the deal with its equal joint venture will help retain an economic interest in these assets and ensure the interests of BP’s shareholders.

BP’s stakes put up for sale include a 35% interest in offshore block 06.1, currently operated by BP, 370 kilometers offshore south-east Vietnam and containing the Lan Tay and Lan Do gas fields.

In addition, BP has a 32.67% interest in the 370 kilometer PetroVietnam-operated Nam Con Son pipeline that transports gas onshore from the Lan Tay and Rong Doi fields, and a 33.3% stake in the joint venture that owns and operates the 739MW Phu My 3 power plant in Ba Ria-Vung Tau Province.

TNK-BP has agreed to pay US$1.8 billion in cash for the assets. Under the agreement, TNK-BP will pay BP a total deposit of US$1 billion on October 29, with the balance due upon completion of the sale expected in the first half of next year.

The agreement is said not to affect BP’s other business activities in Vietnam, including a significant lubricants blending and marketing business.

Mekong Capital reduces stake in restaurant owner

HCMC – Fund manager Mekong Capital has announced that its Mekong Enterprise Fund II is in the process of selling part of its stake in Golden Gate Joint Stock Company, which runs the mushroom hotpot restaurant chain named Ashima, to a financial investor.

After the transaction, the fund will reduce its ownership in the company from 14.9% to 11.6%. The divestment results in a gross return multiple of 3.6 times and an internal rate of return of approximately 72.2% on the shares sold by the fund.

Chris Freund, managing partner of Mekong Capital said in a statement that the divestment was aimed to realize profits despite Golden Gate’s impressive growth.

“We are delighted with the performance of Golden Gate, which has grown from around five restaurants at the time we invested in April 2008 to around 30 now. We remain very excited about the long term future of the company, but as a lot of value had been created in a short period, we saw this as an opportunity to realize some of our profits while maintaining a stake in the company,” he said.

Golden Gate now operates six Ashima restaurants in HCMC and Hanoi. In 2009, the company launched a new product of conveyor hotpot express restaurant named Kichi Kichi to address the casual dining market segment.

By October 2010, Golden Gate had expanded the Kichi Kichi restaurant chain to 22 outlets in Hanoi, HCMC and Singapore.

The US$50-million Mekong Enterprise Fund II is a private equity fund focusing on equity investments in unlisted companies in Vietnam. The fund has completely disbursed its capital.

Unusual cash stocks pressuring Vietnam's dong: WB

An unusually large amount of money held outside Vietnam's official foreign exchange reserves is continuing to pressure the dong while most other regional currencies strengthen, the World Bank said Tuesday.

"While many currencies are experiencing appreciation of their exchange rate, in the case of Vietnam the reverse is true," the World Bank's lead economist in Vietnam, Deepak Mishra, told reporters.

Vietnam in August devalued the dong for the third time since late last year, saying it was trying to control the trade deficit.

The official exchange rate is at VND18,932 per US dollar, down from VND17,034 or more than 11 percent since late November when the series of devaluations began.

In contrast, regional exchange rates are 10-15 percent stronger than before the 2008 global financial crisis, the Bank said Tuesday in its latest East Asia and Pacific Economic Update.

It said East Asia's success in leading the global recovery has attracted a surge of capital that has inflated the currencies, spelling a risk to exports and future growth.

Vietnam's recovery has also been rapid, but uneven, the Bank said. It noted "the current account deficit remains high and households and firms appear to continue to stockpile foreign currency and gold, putting persistent pressure on the local currency."

Mishra, in a briefing for reporters, said Vietnam has enough foreign exchange to pay for its current account deficit but "the real issue" is the amount of foreign exchange held in such forms as savings that are not with the State Bank of Vietnam.

This figure amounts to about 12 percent of gross domestic product (GDP), he said, adding: "That's the reason why there's pressure on the exchange rate."

But he said it is not easy to say the dong is necessarily overvalued.

In its latest report, the Bank estimated Vietnam's full-year real GDP growth at 6.5 percent, inflation at 8.0 percent, and a current account deficit of US$9.3 billion.

Unusual cash stocks pressuring Vietnam's dong: WB