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VietNamNews

Firms target strategic stakes in suppliers

Update: November, 21/2012 - 10:34

HA NOI (VNS)— There is no dearth of listed companies whose major shareholders are also exclusive providers of raw materials or distributors of their products.

It helps businesses to have stable operations during a crisis but, at the same time, it generates problems in corporate governance when the remaining shareholders are vulnerable.

The Electricity of Viet Nam (EVN) is the largest shareholder (30 per cent) of Vinh Son-Song Hinh Hydropower Co (coded VSH). EVN is also the only customer for its commercial electricity.

"We have yet to reach an agreement with EVN on the electricity price after long negotiations and have to delay the shareholders' meeting," said VSH chairman Nguyen Van Thanh.

Therefore, when making its financial statement during the first 11 months of last year, VSH had to assume an electricity selling price to EVN equalled 90 per cent of the price in 2009.

Meanwhile, PetroVietnam Low Pressure Gas Distribution (PGD) suffered a drop in third-quarter profit due to its major shareholder's domination.

PetroVietnam Gas Corporation-PV Gas (GAS) holds more than 50 per cent of PGD, being the exclusive provider of its gas. Therefore, the operation of PGD depends entirely on supplies from the parent company.

In late August, PV Gas increased the gas price for PGD from US$8.35 to $10.55 for a million British thermal units of gas (MMBTU). Most notably, the price was retroactive to April 1.

PGD's profit in the third quarter fell to VND159 billion ($7.5 million) from VND383 billion ($18.2 million) in the second quarter.

Similar cases can be found in building contractor Song Da Corporation and its subsidiaries; oil and gas giant PetroVietnam's companies; transportation and petroleum companies.

A stakeholder of VSH told Dau tu chung khoan (Securities Investment) newspaper that the dominant role of EVN affected the operation of many other electricity companies such as Pha Lai Thermal Power (PPC), Ba Ria Thermal Power (BTP) and Thac Mo Hydropower (TMP). Meanwhile, with the gas price going up 26 per cent, PV Gas enjoyed a significant profit from PGD. — VNS

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