Renewable energy companies report lower earnings, burdened with bond debts

Ia Pet Đắk Đoa 1 Wind Power Plant. Lower business results of renewable energy businesses stem from many reasons, including large amounts of bond debts. Photo iapetwind.com

HÀ NỘI — Renewable energy companies have recorded declining earnings results, partly due to burdens on corporate bond payment.

Xuân Thiện Group is one of the major investors in the energy sector, with two clusters of solar power projects in Ninh Thuận and Đắk Lắk. In addition to solar power, this group also invests in hydropower, with 20 projects with a total capacity of 400MW developed to date.

According to Nguyễn Văn Thiện, Chairman of Xuân Thiện Group, the group has more than 80 member companies in the country and abroad, with a total charter capital of more than VNĐ100 trillion, specialising in investing in energy production, high-tech agriculture, construction materials, banking and finance and a number of other service industries. Currently, the group's member companies own many power plants and produce construction materials, with annual revenue of VNĐ20 trillion.

In Đắk Lắk, Xuân Thiện Group invested in Xuân Thiện Ea Súp solar power plant cluster, with a total investment of more than VNĐ50 trillion, design capacity of 2,000 MWac (equivalent to 2,800 MWp). Phase 1 of this project includes four factories: Ea Súp 1, Ea Súp 2, Ea Súp 3 and Ea Súp 5, with a total investment capital of VNĐ16.5 trillion, completed in 2020. Phase 2 includes 10 factories. The factories are under construction, with total investment capital of VNĐ33.5 trillion.

This project cluster is built on a total area of about 4,180 hectares of land and is considered one of the solar power projects with the largest capacity in Southeast Asia.

Recently, a number of companies under Xuân Thiện Group have announced financial information according to regulations on private offering and trading of corporate bonds. In particular, Ea Súp 1 Joint Stock Company showed a decrease in profits and an increase in the debt to equity ratio.

In 2021, Ea Súp 1 profit after tax reached VNĐ42.6 billion. In 2022, it only recorded a profit of 10.6 billion VNĐ, down 75.1 per cent compared to the previous year. In the first half of 2023, the Company reported profit after tax of VNĐ15.5 billion, down 27.9 per cent over the same period last year.

Ea Súp 1's 2023 semi-annual financial report showed that the company's equity at the end of June 2023 was VNĐ823.8 billion, a slight increase compared to VNĐ819.2 billion in the same period last year. However, the debt to equity ratio also increased from 1.91 times to 2.25 times, corresponding to liabilities of more than VNĐ1.85 trillion.

Ea Súp 3 Joint Stock Company reported a profit of VNĐ31.4 billion in 2021, but in 2022 it lost nearly VNĐ3 billion. In the first half of this year, it lost VNĐ7.5 billion. As of June 30, 2023, Ea Súp 3's equity reached VNĐ5.55 trillion, the debt to equity ratio was 0.35 times, equivalent to a liability of more than VNĐ1.9 trillion.

Similarly, Ea Súp 5 Joint Stock Company recorded an after-tax loss of VNĐ24.8 trillion in the first half of this year, while in the same period last year, it recorded an after-tax profit of VNĐ33.5 billion. As of June 30, 2023, the company's equity reached VNĐ1.07 trillion, the debt to equity ratio was 3.14 times, corresponding to the amount of debt payable of about VNĐ3.35 trillion.

In 2021, the company's profit after tax was VNĐ551.2 million, a sharp decrease compared to the figure of VNĐ33.9 billion recorded in 2020. As of December 31, 2021, the company had VNĐ3.4 billion in liabilities, the size of equity was VNĐ1.09 trillion, equivalent to a debt-to-equity ratio of 3.15 times, a sharp increase compared to 2.19 times at the end of 2020.

Like many other businesses, Xuân Thiện Group has mobilised large capital through the bond channel to invest in solar power projects.

According to the Hà Nội Stock Exchange (HNX), in August 2020, Ea Súp 1 issued 11 lots of bonds with terms ranging from 2 years to 12 years, with a total value of VNĐ1.63 trillion.

Also in August 2020, Ea Súp 3 issued 11 lots of bonds with terms ranging from 2 years to 12 years, with a total value of VNĐ1.63 trillion.

Ea Súp 5 issued 11 lots of bonds in June 2020, with a total value of VNĐ2.39 trillion.

Ia Pet Đắk Đoa Wind Power Plant Number One Joint Stock Company (Ia Pet Đắk Đoa WPP No1) and Ia Pet Đắk Đoa Wind Power Number Two Joint Stock Company (Ia Pet Đắk Đoa WPP No2), respectively, are the investors of the Ia Pet Đắk Đoa 1 Wind Power Plant and Ia Pet Đắk Đoa 2 Wind Power Plant. These are two projects whose planning was approved in June 2020 and are the two largest wind power plants built in Gia Lai Province.

According to the latest financial situation announcement of Ia Pet Đắk Đoa WPP No1, the company's equity as of June 30, 2023 reached VNĐ518.3 billion, down 18.4 per cent over the same period last year. Liabilities were estimated at VNĐ3.3 trillion, 6.45 times higher than equity. Outstanding bond debt was VNĐ416.7 billion, down 10 per cent over the same period last year.

In the first half of 2023, the company reported a loss of VNĐ71 billion, a sharp decrease compared to the loss of VNĐ160.4 billion recorded in the same period last year. However, this result was down sharply compared to the profit of VNĐ7 billion in 2021.

The situation at Ia Pet Đắk Đoa WPP No2 is similar. The company reported a loss of VNĐ75 billion in the first half of this year, a loss of VNĐ154.4 billion in the same period last year. At the end of the second quarter of 2023, the company's equity was VNĐ466 billion, down 20.7 per cent over the same period last year. The company had VNĐ3.26 trillion in liabilities, 6.99 times more than equity.

In the first half of this year, outstanding bond debt of Ia Pet Đắk Đoa WPP No2 decreased from VNĐ448 billion to VNĐ403.2 billion. However, due to losses and decreased equity, the company's outstanding debt to equity ratio increased from 0.76 times at the end of the second quarter of last year to 0.86 times at the end of the second quarter of this year.

According to ACBS Securities Company, the poor business results of renewable energy businesses stem from many reasons, including businesses using financial leverage by mobilising large amounts of capital through bond issuance. Many businesses have a debt-to-equity ratio of more than four times. In the context of high interest rates, businesses have to use many resources to pay bond interest.