Naive narrative: I find this event interesting as it’s the first time I could see the relevance of non-transparency in the local stock market (although the ethics module in CFA mentions it all the time)

What’s going on?

The incident of Unit 1 of Vung Ang 1 Power Plant under POW (PVPower – HOSE ticker of PetroVietnam) in September 2021 has had a great impact on POW’s production and thus financial results. However, investors were completely kept in the dark of this major event; “complete and timely information” was not announced.

What does this mean?

• Vung Ang 1 Thermal Power Plant in Ha Tinh has 2 units with a total capacity of 1,200 MW. In 9M 2021, the plant achieved nearly 5b kWh in power output and VND 7,731b in revenue. This constituted a considerable proportion in POW’s revenue and profit structure.
• In September, unit 1 encountered a problem that led to the consequential drop in output for the following months. However, POW did not disclose this critical information to shareholders.

• In newsletters reporting 9M and Oct-Nov results, POW only updated some sketchy lines like “The Company is evaluating the incidence and urgently proposing, deploying effective plans to overcome and urgently put Unit 1 into operation”.

• This incident caused POW to make loss in Oct and Nov, but investors were not aware of this critical information:
  • In Oct 2021, Vung Anh 1 Power Plant achieved only 47.3m kWh in output and VND 82.6b in revenue, equivalent to 11% and 13% of its monthly plan.
  • In Nov 2021, this plant achieved 204.3m kWh in output and VND 333b in revenue an output of 204.3 million kWh and a revenue of VND 333 billion, equivalent to 34% and 40% of its monthly plan.
• Even in the bulletin posted on POW’s website about the meeting with investment experts, securities companies’ analysts, and fund management companies on Dec 22, 2021, POW didn’t mention this information, and positively stated that “in 2021, POW expects to exceed the profit target by 45% and 26% in the consolidated and single-entity report”. Many securities groups cited and re-posted this quote to encourage retail investors to continue buying POW at its peak price at the time.

Ironically, POW’s stock price increased sharply during the Sep – Dec period, from approximately VND 12,000 to VND 19,000/share (on Dec 22), the highest since POW’s IPO.

https://s.cafef.vn/Lich-su-giao-dich-POW-1.chn

Why should I care?

The bigger picture: It’s….huge

• On the same meeting on Dec 22, POW’s representative said that the company’s 2021 PBT is estimated at nearly VND 2,200b, a 24% decrease yoy. Correspondingly, in 4Q 2021, POW will have a pre-tax loss of VND 124b due to maintenance and repairing costs Vung Ang power plant. This is the first time POW has had a losing quarter since its IPO.
• Research by Tin Nhanh Chung Khoan shows that this incidence of Unit 1 is major, and it would even take up to a year to settle from the problem.
• Following the negative revelation, POW stock was heavily dumped at floor price, closing at VND 17,250/share on Dec 24.

Zooming out

• Circular No. 96/2020/TT-BTC guiding the disclosure of information on the stock market stipulates that “enterprises must disclose information when events that greatly affect their production and business activities occur. When disclosing information, a public company must clearly state the event that occurred, the cause, and remedial solutions (if any).”
• At the same time, POW is in the VN30 basket, so investors could have bought the stock without doubt about its transparency and corporate governance.
• Questions are then raised: Did POW’s management hide serious information about its operational situation? Whether or not there is asymmetry of information between securities companies, investment fund management companies and investors in the market when such material information was presented at the meeting on December 22 without being concurrently published on POW’s website? Why was the information at the meeting inconsistent with what was posted by POW on the Corporation’s website?

Content source: Doan Nguyen (2021) PVPower (POW) lập lờ thông tin, nhà đầu tư lãnh đủ?. Tin nhanh chung khoan. Available at: https://tinnhanhchungkhoan.vn/pvpower-pow-lap-lo-thong-tin-nha-dau-tu-lanh-du-post288010.html [Accessed on Dec 28, 2021]