The Ministry of Finance chose the final day of PetroVietnam Fertiliser and Chemical Co's IPO last week to propose recovering VND1tril (US$65mil) in accrued earnings from the company.
The ministry claimed the earnings, accrued when PVFCCo was a State-owned entity during 2004-06, represented windfall profits earned when the State subsidised its energy costs.
The timing of the ministry proposal, made on the day set as the deadline for winning bidders in the IPO to either purchase the shares or withdraw their offers, has disturbed many who participated in the bidding.
Investor Nguyen Thi Thu worries that the market value of the shares she bought during the IPO will plummet if the ministry acts on its proposal.
"I bought 5,000 shares," she said, "but now I am wondering whether the collection of VND1tril ($62.5mil) from the company's profits will affect my shares."
A securities broker reported that on Friday, May 25, shares of PVFCCo stood at VND74,000 ($4.60) each, but the price was likely to react negatively as news of the ministry action spreads.
PVFCCo general director, Trinh Thanh Binh has tried to soothe the fears of investors, saying that the profits the company earned during 2004-06 as a State-owned company are not included in the company's VND3.8tril ($237.5mil) worth of charter capital.
Shares sold during the IPO represented 40% of this charter capital, so investors who bought shares during the IPO will not suffer any loss.
The profits belonged to PetroVietnam, the parent company of PVFCCo, Binh explained, and were not included in the financial reports issued when the company equitised.
Securities expert Huy Nam agreed saying that the accrued earnings were not part of PVFC's auction of shares and were not accrued to the benefit of the investors during the company's equitisation.
According to the Ministry of Finance, total profits of over VND2tril made during 2004-06 represented something of a windfall due to the low price of gas which the company enjoyed as a State-owned entity.
Prior to its IPO, the company bought thermal units at US$1.30 per one million British thermal unit (BTU), far lower than the price paid by other companies.
A member of PetroVietnam's management board, Phan Thi Hoa, affirmed that the company's input costs for gas would climb to $2.20-3.60 per one million BTU now that the company has equitised.
"The new price was approved by the Ministry of Industry and disclosed in the financial reports [prior to the IPO]," said Binh. "The investors do not therefore need worry about the profit potential of the company."
Meanwhile, according to the ministry, preferential costs of thermal input for State-owned enterprises would now be contrary to the nation's WTO commitments, making recovery of the windfall profits the correct action.
Deputy Minister of Planning and Investment Truong Van Doan disagreed, however, saying, "Whether to collect the profits or not should take into account PVFCCo's ability to ensure its profit potential in the future when input sources become more scare and fertiliser prices on the market become depressed."
Source: VNE
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