The exchange rate has continuously increased in recent days, the USD/VND exchange rate has fluctuated continuously. The central rate has recorded a price increase of nearly 1% since June 13th. Commercial banks have increased around 1.2-1.4% the rate and peaked at 23,000 VND/USD.
In the overall view of economic circumstance, the fluctuation in exchange rate in the past period will affect the profit of many domestic enterprises directly as well as the PetroVietnam Power Corporation (PV Power). PV Power has demand for foreign currency to pay for investment debts meanwhile the revenue from selling electricity is mainly in VND. Therefore, PV Power will have the problem of exchange rate fluctuations.
However, the debt/equity ratio of PV Power's power plants was 44% of loans in the comparison with 56% of equity on June 30thwhich is highly appreciated by securities companies and supported PV Power is not affected negatively by exchange rate fluctuations as many other enterprises. Moreover, PV Power always unforeseen risks may occur.
During the last 6 months of 2018 (From July 1st, 2018 to Dec 31st,2018 PV Power will operate as a Joint Stock Company). Parent company’s profit before tax is estimated at VND 878 billion, after tax profit is estimated at VND 800 billion, including forex rate forecast by 2% increase and each incremental increase of 1%, the profit will be decreased by VND 88.4 billion.
According to MBS analysts, the State bank of Vietnam will slightly increase the VND/USD exchange rate by 1-1.5% in the last half of the year 2018 in order to balance two objectives of macro stability and export support.
Thus, the exchange rate will be increased by 1% compared to the exchange rate at the time of June 30th, 2018 was calculated in PV Power’s business plan. In case the exchange rate increased by 1.5% against the exchange rate at June 30th, 2018, the amount of about VND 44.2 billion due to exchange rate differences will less affect to PV Power’s profit.
Although PV Power started its operation as a Joint Stock Company on July 1st, 2018, the PV Power’s management was immediately stabilized with the procedures and regulations are promulgated as well as the model is streamlined and reduced cost to maximize profits and ensure the benefits to Shareholders.
