Vinh Son - Song Hinh Hydropower Plant: Slow debt collection, cash flow plan affected

The prolonged delay in debt collection has forced Vinh Son - Song Hinh Hydropower Joint Stock Company (code VSH) to extend dividend payments to shareholders and increase borrowing from the parent company to ensure cash flow in 2024.

The new Thuong Kon Tum Hydropower Project was put into operation in 2021 and is in the depreciation and interest payment phase. Photo: Le Toan

Repayment of loans for the Upper Kon Tum Hydropower Project

Vinh Son - Song Hinh Hydropower Joint Stock Company started construction of the Thuong Kon Tum Hydropower Project in 2009, but it was not until early 2021 that it was connected to the national grid and officially put into commercial operation from April 1, 2021.

It is known that according to the original plan, the Upper Kon Tum Hydropower Project consisted of 2 units, with a total installed capacity of 220 MW, a total investment of 5,744 billion VND (after increasing the investment capital to 9,428 billion VND) and was expected to be put into operation in 2014. However, due to disputes with the contractor, the project was delayed for a long time and was not officially put into operation until early 2021.

After operating the Thuong Kon Tum Hydropower Project, Vinh Son - Song Hinh Hydropower Joint Stock Company increased the total capacity of the Company by 220 MW, from 136 MW (2 projects) to 356 MW (3 projects).

To balance cash flow, at the end of 2023, Vinh Son - Song Hinh Hydropower Plant borrowed 350 billion VND in short-term loans from the parent company to pay off long-term bank debt.

Before the commercial operation of the Thuong Kon Tum Hydropower Project, Vinh Son - Song Hinh Hydropower did not have to record financial expenses due to capitalizing interest expenses into project investment capital during the implementation phase, and did not have to depreciate assets, so these two fixed costs were almost insignificant for the two old projects that had been operating for many years. However, after the commercial operation of the Thuong Kon Tum project, from 2021 to 2023, Vinh Son - Song Hinh Hydropower had to record interest expenses of VND 323.4 billion, VND 408.1 billion and VND 392.4 billion, respectively. Also in the period from 2021 to 2023, depreciation expenses were recorded at VND 470.1 billion, VND 591.7 billion and VND 587.3 billion, respectively.

In fact, since the addition of the Thuong Kon Tum Hydropower Project, Vinh Son - Song Hinh Hydropower recorded a profit increase of 105.7% in 2021, to VND 387.27 billion; in 2022, it continued to increase by 226.6%, to VND 1,264.84 billion. However, in 2023, the profit decreased by 21.4%, to VND 993.99 billion, and in 2024, the Company planned to decrease the profit by 49.2%, to VND 505.24 billion.

Explaining the declining business plan, Vinh Son - Song Hinh Hydropower forecast that the business situation will face many difficulties due to the EI Nino phenomenon that has lasted since 2023 and will continue to affect hydrology in the Central and Central Highlands regions in 2024, and at the same time, the electricity market operation policy in 2024 will change compared to the previous year, greatly affecting the revenue rate of participating in the electricity market of the plants.

Difficulty due to slow debt collection

In addition to the unfavorable weather in 2024, in terms of debt, at the end of 2023, Vinh Son - Song Hinh Hydropower recorded a 47.2% increase in receivables from the Electricity Trading Company (Vietnam Electricity Group - EVN) compared to the beginning of the year, equivalent to an increase of VND 375.7 billion, up to VND 1,171 billion, accounting for 12.3% of the Company's total assets (at the beginning of the year, it accounted for 8.2% of total assets).

Vinh Son - Song Hinh Hydropower Plant said that EVN's financial situation is facing difficulties, so the problem of collecting electricity bills is behind schedule. As of December 31, 2023, the Company has not yet paid the retained debt of 2022 of VND 221.16 billion and the debt of 2023 of VND 949.86 billion.

Due to the delay in collecting money from EVN, Vinh Son - Song Hinh Hydropower Plant had to change the time to pay 20% cash dividend, equivalent to paying a total of about VND 472.48 billion to shareholders from March 22, 2024 to October 3, 2024, which is 6 months later than the original plan.

“According to the accepted invoice regulations, EVN must pay within 60 days, and the payment period in 2023 has been extended to 90 days. In fact, the underlying cause is that EVN lacks cash flow for payment. When customers are in difficulty, the Company must sympathize. If EVN does not increase electricity prices, there will be no way to pay,” said Ms. Nguyen Thi Mai Thanh, Chairwoman of the Board of Directors of Refrigeration Electrical Engineering Joint Stock Company, the parent company of Vinh Son - Song Hinh Hydropower Plant, about EVN's delay in paying debts to hydropower plants in 2023.

It must also be added that the Thuong Kon Tum Hydropower Project only came into operation in 2021, so it is still in the asset depreciation phase, and at the same time, the outstanding loan balance is large, causing financial pressure.

Statistics from December 31, 2020 to December 31, 2023, the total debt of Vinh Son - Song Hinh Hydropower Plant has decreased by 35.2% compared to the beginning of the period, equivalent to a decrease of VND 2,028.6 billion, from VND 5,767.7 billion (equal to 173.2% of equity), to VND 3,739.1 billion (equal to 81.4% of equity). Of which, at the end of 2023, short-term debt was VND 196.5 billion and long-term debt was VND 3,542.6 billion.

To balance cash flow, at the end of 2023, Vinh Son - Song Hinh Hydropower Plant borrowed 350 billion VND in short-term from Refrigeration Electrical Engineering Joint Stock Company to pay off long-term debt of Ho Chi Minh City Development Joint Stock Commercial Bank - Thu Duc Branch.

It can be seen that the delay in collecting money from EVN has greatly affected the debt repayment plan and dividend distribution plan of Vinh Son - Song Hinh Hydropower Plant, forcing this unit to find new credit sources to restructure the previous loan in the context of unfavorable hydrological forecasts in 2024.

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