Taekwang Power Holdings Co., Ltd, a subsidiary of Korea’s Taekwang Group, is stepping the first steps into the power sector of Vietnam by developing a 2.2 billion USD coal-fired thermal
COMPANY BACKGROUND
General Information
Company Name: Taekwang Power Holdings Co., Ltd
Country of establishment: Hong Kong
Company type: Limited liability company
Scope of business: Power business and power plant project development
Registered address: Tower II, Admiralty Centre, 18 Harcourt Road,
Admiralty, Hong Kong Registered capital: 20 million USD
Korea office: 18 th Floor, Kukdong Building, 173 Toegyero,
Vietnam Representative Office: Room 1101, HCO Building, 44B Ly Thuong Kiet
Street, Hoan Kiem District, Hanoi, Vietnam Contact Information: Tel: 02-6742-0700
Fax: 02-2274-6724 Local Contact Information: Tel: 84-43-9393-798
Company Background
Taekwang Power Holdings is a subsidiary of Taekwang Group (Republic of Korea) It was founded in 2008 as a new strategic arm of Taekwang Group to undertake development and operation of power projects
Taekwang Group is a conglomerate which has been expanding its business portfolio from shoe manufacturing to fine chemical industry, leisure industry, real estate, and
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3 power electricity With a view to become a global corporation, Taekwang Group is continuing to increase the investment in Asia including China, Vietnam, Indonesia and Malaysia
Taekwang Group started it business in 1971 and currently owns over 20 subsidiaries in
6 countries over Asia with more than 63,000 employees Taekwang Group’s total asset and total revenue reach approximately USD 3 billion in 2015
The scope of business of Taekwang Group can be elaborated as below:
Figure 1: Portfolio of Taekwang Group Footwear Manufacturing
Taekwang is one of the Nike’s four key Original Equipment Manufacturer suppliers, accounting for 11% of the total production of Nike running shoes worldwide Besides, it is also the leading fiber and man-made leather producer used for automobile, living industry material, sports shoes, industrial resources and materials
Taekwang produces fine chemicals and operates the largest Nitric Acid production facility in Asia
Taekwang is now operating two golf courses in Korea and one golf course in Nhon Trach District, Dong Nai, Vietnam
Taekwang made a strategic movement of business diversification toward power business Taekwang established Taekwang Power Holdings Company Ltd and acquired an experienced operation and management (O&M) company in Korea for its ambitious plan.
Scope of business of the Company
Realizing the strong growth of power plant investment over the next decades, Taekwang Group established Taekwang Power Holdings with an attempt to participate in power plant development, initially in Vietnam Starting from the Nam Dinh Power
Plant Project (the “Project”), Taekwang is now adding another chapter to its history to become a global independent power plant (IPP) development company
Taekwang Power Holdings is planning to expand to variety of fuel mix in power plant development including both green-field and brown-field projects targeting Southeast Asian power market including Vietnam, Indonesia, Philippines, and Myanmar
Taekwang Power Holdings was awarded by Vietnam Government to develop the Nam Dinh Power Plant Project under the Build-Operate-Transfer mechanism and it has been making great efforts to develop the Project since 2009
After several years entering the Vietnam market and realizing the potential of power business in Vietnam, Taekwang Group decided to expand Taekwang Power Holdings to pursue and seek for other business opportunities in power sector The next target of the Company after successful development of Nam Dinh Power Plant Project will be renewable energy projects.
Basic Financial Data of the Company
Regarding financial data, as this company is established to develop the project so since the establishment date, it has not yet the revenue but only expenses Based on audited financial reports of the Company in the previous 3 years, Loss for the year 2013 is 3,464,912 USD, loss for the year 2014 is 5,029,527 USD and loss for the year 2015 is 5,352,672 USD
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When the company develops successfully the power plant project and the power plant is put into commercial operation (expected commercial operation date in 2022), the company will earn revenues from the sales of electric power to Vietnam Electricity Corporation (EVN).
General Information on the Project
The Company is established to develop the Nam Dinh Power Plant Project so it is also vital to understand thoroughly about the Project
Investors : - Taekwang Power Holdings Co., Ltd
- ACWA Power from Saudi Arabia Investment Type : BOT (Build-Operate-Transfer)
Commercial Operation Period : 25 years after COD
Total investment capital : 2.2 billion USD
Primary Fuel : Anthracite (Domestic Coal)
Location : Nam Dinh Province (90km from Hanoi)
Figure 2: Air view of Nam Dinh Power Plant Project
Structure of the Project
The project structure including can be visually summarized to facilitate understanding as follows:
Figure 3: Structure of Nam Dinh BOT Power Plant Project
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The Nam Dinh Power Plant Project is a BOT (Build - Operate - Transfer) project BOT scheme is a form of leasing, where the government allows a private company (project developer or sponsor) to finance, design, and construct an infrastructure facility (most common cases are road, bridge, power plant construction, etc.) In return, the project developer is permitted to collect earnings generated from the facility operation (in this case, electricity tariff) and operate the facility for a predetermined period (so called the concession period), which is 25 years as agreed between the investors and Vietnam government
During the concession period, the sponsor owns and operates the facility, which would enable the sponsor recover all his costs and earn a reasonable profit The revenues generated from the operation of the facility are intended to cover operating costs, maintenance costs, repayment of debt principal, financing costs (including interest of the debts and related fees), and a certain rate of return for the shareholders of the project company or sponsor Therefore, the length of concession period would subject to agreement between the sponsor and the host government so as to fulfill two main objectives: to pay off the sponsor’s debts and to yield a reasonable profit for the sponsor
When the concession period ends, the facility will be transferred to the host government This scheme enables the host government to develop capital intensive projects with finance outside the state budget allocation, while the risks are transferred to the private entities
A BOT project structure is very complex, as can be seen in the above illustration chart
It comprises multiple inter-dependent agreements involving various parties and participants Financing for the project with Total Investment Capital of 2.2 billion USD comes from the owner’s equity (25%) and commercial loans from Lenders (75%) Loans from lenders are provided based on the Loan agreement between sponsors and lenders Lenders’ credit assessment is based on the revenue generating capacity of the project, rather than the assets of the private companies and without involvement of the host government
The sponsor is two private companies binding in a Joint Development Agreement:
Taekwang Power Holdings and ACWA Power After getting the required permits and certificates from Vietnam Government, these two companies will together establish a
8 company to run the project - BOT Company Two sponsors will become the shareholders of the BOT Company under the Shareholder Agreement and top management positions of BOT Company will be exchanged in intervals between personnel from two sponsors
The BOT Company will enter into BOT Contract and Government Guarantee Undertakings with Vietnam Side Counterparties, i.e Ministry of Industry and Trade on behalf of Vietnam Government, Power Purchase Agreement with Electricity of
Vietnam, Coal Supply Agreement with Coal Supplier of Vietnam (Vinacomin), and Land Lease Agreement with the local authority (Nam Dinh Province People’s
Committee) in Nam Dinh Province where the project site is located
On the other hand, the BOT Company will enter into the EPC Contract with EPC
Contractor for the design, procurement and construction of the power plant and O&M Contract with an O&M Company (which could be the subsidiary of either sponsor)
Notwithstanding this BOT project has such a complex and tight contractual framework, it is still associated with a lot of risks and uncertainties Therefore, the critical factor for successful development of the Project is the effective and proper allocation and management of risks among the project counterparties, especially the host government, sponsor and lenders.
Financing plan for the Project
Taekwang and its co-investor are adopting “project financing” method to finance the Nam Dinh Thermal Power Plant BOT Project a What is Project Finance?
Project Finance can be characterized in various ways and there is no universally adopted definition, thus, we can refer to the definition by The International Project Finance Association (IPFA) as follows:
“Project finance 1 is the financing of long-term infrastructure or industrial projects and public services based on a non-recourse or limited recourse financial structure, where
1 Available at: http://ipfa.finance/project-finance-2/ [Accessed 6 July 2016, 9:08am]
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9 debt and equity are used to fund establishment and paid back from the cash flows generated by the project.”
Project finance is typical finance arrangement scheme to Public–Private Partnership
(PPP) projects including projects under BOT structure b Milestones of Project Financing c Repayment of debt
Debt is principally repaid using cash flows generated from operations of the power plant (e.g electricity tariff paid by Electricity of Vietnam) Such repayment is secured by the project’s assets or contracts, i.e the power purchasing agreement with Electricity of Vietnam, or the asset having been created (i.e the power plant and all related equipment) First priority on project cash flows is given to the main/senior lender(s) If lenders, after due diligence process, evaluated that the Project is riskier, they may require guarantees of the project sponsors The debtor is the Project Company (i.e BOT
Company in this Project case), which is legally independent from the sponsors
Therefore, lenders have limited recourse to the sponsors’ assets and the debt is not consolidated on the balance sheet of the sponsors This reduces the Project’s influence on the cost of the existing debt and debt capacity of the sponsors
A project financing is typically a highly leveraged transaction, in this project case, the debt/equity ratio is 75:25, which means sponsors can enjoy the advantage of lower initial equity injection, thereby making the project investment less risky
The above mentioned features are the advantages of the project finance model and basically explain why sponsors of this Project accept to spend a lot of time and expenses pursuing this financing structure
COMPANY STRUCTURE AND ORGANIZATION CHART
Organization Chart of the Company
Figure 4: Organization Chart of Taekwang Power Holdings Co.,Ltd
Description of the Company Organization Structure
The Company is a limited liability company incorporated under the laws of Hong Kong and domiciled in Hong Kong
The board of directors comprises two organizations (Huchems Fine Chemical
Corporation; Taekwang Industrial Company Limited) and two individuals: Mr Kim
David Heeteck and Ms Park So Hyun, who are Chairman of the Board and Executive
Managing Director of the Company, respectively)
The Board of directors shall decide the annual business plan and development strategy of the company, decide development investment projects of the company, and decide the company’s organizational structure The Board elects the chairperson of the Board
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11 of directors and decides the designation of, dismissal of, conclusion and termination of contracts with the directors and/or managers
The Chairman is elected by the Board of directors His functions are preparing the agenda and operation plan of the Board of directors, convening and chairing meetings of the Board, signing and carrying out or organize supervision of implementation of Resolutions of the Board
The Executive Managing Director administers the everyday business operation of the company and is responsible to the Board for the performance of the Company, decides the issues related to the company’s everyday business operation, organizes the implementation of the company’s business plans and investment plans, sign contracts on behalf of the company, submits annual financial statements to the Board
There are 6 departments shaving their dedicated functions, managed by the Managing Director: (i) Management & Planning Department; (ii) Investment & Project Finance Department; (iii) Project Execution Planning Department; (iv) Project Development Department; (v) Legal Team and (vi) Representative Office in Hanoi
Total employees in the company are 54 persons (48 are Korean and 6 are Vietnamese)
The biggest department is Management & Planning Department with 18 employees; this department is in charge of planning, accounting, human resource management, and general affair including reporting to management of the company and Mother Company on day-to-day running
Investment & Project Finance Department with 05 employees is in charge of project financing, handling all banking issues for the company and for the Nam Dinh Power Plant Project As most of the project investment cost comes from bank loans, this department plays an important role in the project course Specialists and experts in Investment & Project Finance department will assess the risks, analyze risks to the banks, demonstrate the bankability of the project and handle all communication and meetings between the investors and potential
12 lenders They are also in charge of seeking for other lenders all over the world to ensure the availability of fund for the project development
Project Development Department has 15 staff, and plays the specific function of developing the Nam Dinh Power Plant Project in terms of legal and commercial aspects as well as searching for other investment opportunities in Korea, Vietnam and in other countries The Nam Dinh Power Plant Project is a B-O-T Project so it involves a series of processes and procedures with the participation of Vietnam Government under the legislation and framework of Vietnam; consequently, developing this project requires a lot of time and efforts The Project Development Department has been working vigorously for nearly 8 years in this project
Project Execution and Planning Department has 5 employees; all of them are senior engineers with rich experiences in power plant construction and equipment The Project Execution team is in charge of managing all engineering issues during the pre-feasibility and feasibility study design, and further, coordinating potential contractors of the Project This team is quite small, as all engineering work is done by out-sourced consultants, both international consultants and Vietnamese consultants because the design for a thermal power plant is specialized and it requires to be done by a professional and certified engineering company Not being an engineering company but managing a project which requires a demanding engineering expertise puts the technical team in a difficult and hard position They need to understand everything, even beyond their major, in a professional way and strive to make everything technically consistent as there are always a lot of gaps between different consultants notwithstanding how well they can perform their work
Legal team has 2 members, both of them are lawyers and they are in charge of all legal issues related to the Company and to the Project
Last but not least is the Representative Office in Hanoi with 7 employees Hanoi Office is a liaison office with main function of supporting the functional departments in Korea as the Project development requires a lot of communication with Vietnam counterparties, Government authorities and State officials Therefore, as a matter of fact, Taekwang needs some local persons at the Hanoi Office to fulfill this kind of communication work including translation and interpretation In Hanoi Office, only the Chief Representative is Korean, the rest
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13 are Vietnamese, in which only one employer is Korean - Vietnamese translator and others communicate in English and perform specific function as directed by the respective company departments in head office in Korea
2.5 Intern’s Position in the Company
My position in the company is business development assistant I work directly under the Chief Representative in Hanoi and I would report to Chief Representative in Hanoi
My colleagues in Hanoi office have at least 5 years of experience working in foreign firms so all of them are very professional, punctual, dedicated to work and have good team working skills The working environment is very open and encouraging; the seniors are always patiently listening to my questions It is a valuable time for me to study and apply the theoretical knowledge of AMI MBA Course
THE MISSION: ASSIGNED TASKS AND GOALS
Tasks Assigned
During my internship in the company from June to September 2016, as described in the previous chapter, my internship position is Business Development Manager Assistant and the tasks assigned to the working team of Project Development Department is identifying, assessing the risks in project financing for Nam Dinh 1 BOT Power Plant Project and offering risk mitigation measures This mission aims at compiling a synthetic report on risk assessment and mitigation to be submitted to the Board of Directors for purpose of an important negotiation meeting between the Company and some potential lenders in Korea and Japan
The Manager of Project Development Department requests the working team to analyze all documents of the project since the beginning phase, to research as many materials as possible, to discuss with co-investors and other partners and relationships in banks and credit institutions to work out as many issues as possible We are supposed to have internal discussions everyday or every two days to exchange ideas and step-by-step finalize the report for submission to our management The working team for this mission consists of 5 members, with 3 members from the Korea office and 2 members from Hanoi office Two local members shall support the Korean members and together perform all activities of the group task as mentioned above via tele-conference channel
I report my work to both the Manager of Project Development Department and Chief Representative of Hanoi Office, and for convenient and accurate assessment of my performance, the Chief Representative of Hanoi Office will be the main supervisor
During my 4-month internship, my action plan to accomplish the task given is as follows:
June 1, 2016 to June 15, 2016: getting to know about the company and the Nam Dinh Project
June 16, 2016 to June 30, 2016: studying the financing arrangement structure of the Project
July 1, 2016 to August 31, 2016: develop my own risk assessment report, attend various meetings together with other team members to work out the
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15 outcome, participate as supporting role in some other missions with other teams to get more experience and to know more about the Project progress, supporting the company’s work by translation of correspondences, documents or interpretation in meetings
September 1, 2016 to September 30, 2016: team meetings to finalize the team’s report based on individuals’ products, have the team leader submit and present it to the management, and attend the negotiation meetings between the Company and some commercial international banks
For only 4 months, it is really hard work to have in-depth knowledge of a complicated Project like Nam Dinh BOT Thermal Power Project Despite the disadvantage of not having deeply-routed acquaintances with Project issues, I have the advantage of being a local people so my point of view and analysis are always valued and noted by other team members and the management.
Link between Subject Matter and Mission
The subject matter and my mission during internship are directly linked My outcome from the performing of the mission will be integrated into the Company’s report on Investor’s Risks in project financing for a Nam Dinh BOT Project in Vietnam.
Goals to Reach
During internship period, I need to attain the following goals:
Understanding the Company structure, culture, plans and targets
Understanding the Project: its characteristics, scale, structure and progress
Understanding the features of project financing
Understanding the lenders and the counterparties, partners and their expectations
Understanding the risks encountered by foreign investors when investing in Vietnam in general and in a BOT project in special
Envisaging the mitigation measures to comfort the lenders and co-investors
Contribution to the Company
With my knowledge and great effort, what I can bring to the Company can be summarized as below:
Creating the linkage and facilitating communication between the Company and Vietnamese counterparties and partners
Explaining the Vietnamese culture, way of thinking and working method to Koreans, from the point of view of a local person
Collecting data and information about similar precedent projects in Vietnam
Providing ideas, comments and contributions in accomplishing the mission assigned to the Business Development Team Namely, contributing to identify Investor’s Risks and envisage mitigation solutions in project financing for Nam Dinh BOT Project in Vietnam.
Theoretical Knowledge Put into Practice
Thanks to the valuable knowledge acquired during the Master AMI course, I can confidently participate in the Company’s operations and activities as well as successfully and efficiently complete my assigned task All the course subjects bring me background knowledge a substantial impact on my task performance; however, I will list out some subjects that have the most effect on my internship work
5.1 Fundamentals of Finance and Accounting and International Accounting
When I first join this MBA course, I do not have the financial background and my work is not related to the accounting or finance at all These subjects have helped me to build confidence in reading and understanding financial data and information of a company and/or a project, to enhance my ability to put question and get involved in discussion regarding financial issues
This subject poses the most important impact in my internship mission as it is closely related with the task that I am given It gives me the basic knowledge on risk management and mitigation measures The professor also teaches us the way to figure out and envisage risks by very interesting case studies With the acquired knowledge, I
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17 could identify and classify the foreign investor’s risks in the BOT projects in Vietnam, and suggest measures to mitigate them
The subject provides me with a deep understanding of financial management issues in a global environment, especially cross-border investment and financing decisions The subject has helped me to understand financial tools that incorporate key international considerations into fundamental financial decisions To be more specific, I can use the knowledge to look into and understand financial analysis performed by the Investment and Project Finance department, which helps to work out the financial risks and mitigation measures,
International Business Communication brings a lot of practical knowledge that I can apply everyday when I come to office, such as how to communicate effectively in an international environment, how to behave in a professional way in businesses, how to adapt to corporate culture when joining a foreign company, how to solve the cross- cultural communication problems, etc The knowledge and skills that I gained from this subject are very useful when I work in a Korean corporation
As the BOT Project that we are working on consists of multiple contract documents so this subject very useful to me when I study or have negotiation meetings with counterparties From this subject, I learned how to identify an issue in a contractual context, how to solve it, how to argue over this issue when facing the counterparties in a professional way In the future, when we move the next period of implementing the BOT contract and the other contracts, this subject will be more effective to my work
In the Project I am working for, there are a complex mix of cultures: Asia, Europe, Arabs, therefore, this subject helps me to understand how to solve problems and how to negotiate in an international and intercultural context, to know how to develop a business relationship across cultures, to understand how to work with individuals and
18 groups with diverse backgrounds, and to become familiar with problem-solving or negotiation approaches from other cultures
This subject gives me a lot of knowledge about macro-economy and globalization, global market and Vietnam market, trade policies, and tariff barriers which have great impact on the investment decisions to be made by foreign investors when they choose to invest in Vietnam
The subject provides me fundamental tools to scan macro environment and micro environment pictures to predict threats and opportunities for an overseas project It also brings me many beneficial understanding of the strategic steps a company needs to expedite before it enters into a new investment project, especially analysis tools such as PESTL, SWOT, Porter’s Five Forces
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DEVELOPMENT
Key risk considerations in Nam Dinh Project
Macro environment implies volatility which might be Threat or Opportunity to a project To identify advantages and disadvantages of the investment environment for Nam Dinh Power Plant BOT project, PESTL analysis is carried out to look into Political, Economic, Social, Technological, and Legal factors of the macro- environment
Vietnam has been securing socio-political stability thanks to the stable political regime with a sole governing party Political stability is one of the indispensable elements which help Vietnam to persevere economic development policy Besides, the Vietnam is having a lot of reform in its legislation system related to business and investment, aiming at creating a fair, transparent and attractive business environment for foreign investors Moreover, Vietnam recently issued some specific investment incentives for foreign investors, such as incentives in corporate income tax, import tax and land rental, land usage in some special fields
Last year, the government has revised the Law on Investment, and Decree No 15/ND-
CP dated 14/2/2015 and Circular 38/2015/TT-BCT dated 30/10/2015 guiding the
Decree No 15/ND-CP have created the frame work for investment in form Public Private Partners, including BOT projects In terms of the process of implementation of PPP projects, the Decree is approaching the policy of infrastructure development of the World Economic Forum in 2012, 2013, 2014 This innovation will attract strong foreign investment; funds from international financial markets joining infrastructure projects Besides, Decree 15 more clearly defines policies of incentives, investment guarantee, including loan guarantees and obligations of investors, mortgage of assets and project trading rights, ensuring the foreign currency balance, and facilitating the investors to properly and fully collect revenues, as well as clearly defined responsibilities and financial management of the host government Thus, new investment legal framework has created a fair, transparent, and consistent mechanism on risk sharing, thus, creating more favorable conditions and incentives for private investors
However, Vietnam has some disadvantages related to political and legal aspects which make foreign enterprises cautious in investment:
The first and biggest disadvantage is the legal system of Vietnam which is still not complete, lack of guidance and coherence, featured by heavy and time consuming administrative procedures in most business transactions All of these will increase the cost of businesses because time is also valuable asset of the businesses Procedures for BOT Project are very complex, with the participation of many ministries and authorities, which discourages many foreign investors entering the market
Other significant obstacles for foreign businesses when accessing Vietnam market are the process of investment licensing, land-related procedures, licensing for foreign personnel working in Vietnam which consume a lot of time because of unclear, constantly changing and heavily administrative regulations, which bring foreign investors many difficulties when entering the first step into Vietnam For this Project, land issue will be a very big concern as the Project site occupies a huge are of land (more than 300 hectares), and most of the land is rice fields, which is the livehood of a huge number of residents in the area
Regarding price policy, Vietnamese government is reluctant to follow market pricing freedom, especially the energy sector, the price adjustment needed to get
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21 approval This method of price control causes investors a lot of concern when they expect to establish price on the basis of the cost and competition This creates uncertainty for investors
The last disadvantage to be mentioned is corruption even though it is not sufficiently acknowledged by Vietnam government in their official reports Transparency International ranked Vietnam among nations where corruption is perceived as “serious”, even more serious than China and Indonesia (In 2016, Vietnam scores 31/100, ranking 112/168 globally 2 ) The serious level of corruption in Vietnam, difficulty in solution could be explained by the weakness of institutions, weak enforcement of the Anti-Corruption Law, indecisiveness in state’s direction, the retrograde of many state officials and the absence of effective mechanisms to encourage the people’s participation
Vietnam is known to be one of the most dynamic economies Economic growth between 1991 and 2010 averaged 7.5% each year and, despite the many difficulties the country faced between 2011 and 2013, GDP growth still rose by 5.6% 2014 and 2015 witnessed the quick recovery of Vietnam GDP, GDP growth rose by 5.98% in 2014 and 6.68% in 2015 2015 is the year in which GDP hit its peak over 30 years with value of 193.60 billion US dollars 3 Economic growth will be accompanied by greater demand of electricity, especially when Vietnam is trying to become an industrialized country, therefore, economic growth is a good signal for investor investing in power plants in Vietnam in the next 10 years
Foreign Direct Investment in Vietnam averaged 3684.84 USD Million from 2001 until
2016 According to data from the Foreign Investment Authority (Ministry of Planning and Investment), as of June 2016 there were 1,145 new FDI projects which are granted
2 Available at: https://www.transparency.org/country/#VNM [Accessed 30 July 2016, 9:04am]
3 Available at: https://www.gso.gov.vn/default.aspx?tabidb1&ItemID507 [Accessed 30 July 2016, 10:30am]
22 with investment certificates with a total registered capital of 7.497 billion USD, increasing by 95.3% over the same period in 2015 4
Vietnam is opening its market - being a member of the WTO and a party to multiple free trade agreements with partners both within and outside the region Recently, the signing of the Trans-Pacific Strategic Economic Partnership Agreement (TPP), Viet Nam - Eurasian Economic Union Free Trade Agreement (VCUFTA) and joining the ASEAN Economic Community make Vietnam one of the countries with most favorable position benefiting from international trade activities
According to statistics published by the Asian Development Bank (ADB), the foreign exchange reserve of Vietnam in early 2016 reached the record high of $38 billion From
2012 to the present, the foreign exchange reserve of Vietnam has continued to increase
In comparison with other countries in the ASEAN, the foreign exchange reserve of Vietnam ranks sixth out of 11 countries (as of end of 2015) Due to this fact, the financial risk in foreign currency conversion can be less troublesome to foreign investors
Despite the significant economic growth Vietnam has achieved, Vietnam is facing a lot of challenges such as devaluation of local currency, inflation and trade deficit And depending on FDI economic growth leads to the fact that Vietnam is very vulnerable to external impacts and international economic crisis The project, earning revenues in VND and paying back loans in USD, will be impacted seriously if the inflation of Vietnam fails to be controlled in safe restrains
In terms of infrastructure, roads, ports, airports, and industrial infrastructure such as electricity, gas, water have yet to meet the demand Notwithstanding the impressive economic growth this year, in reality, the infrastructure in Vietnam is not complete and is still in the process of upgrading and development Infrastructure is poor has led to some difficulties in the process of doing business, such as freight and transportation The infrastructure in some big cities such as Hanoi, Ho Chi Minh City and Da Nang have been significantly improved and modernized, while the development of
4 Available at: http://fia.mpi.gov.vn/chuyenmuc/172/So-lieu-FDI-hang-thang [Accessed at 8 August
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23 infrastructure in rural areas are still far behind Infrastructure of power sector is not the exceptional case, which will to the risks to developer of power plant project as they will have their power plant to be connected to one network and an incident in the network will adversely impact the single node of the network
Vietnam has a remarkable comparative advantage in terms of labor force, 60% of its population are within working age With the young population and rising number of qualified labor, Vietnam economy has a lot of resources to boost
Living standards of Vietnamese people is more and more improved, urbanization process is quickly apparent all over Vietnam This will create greater demand for power, which is an advantage for investment in power sector
Although the labor force in Vietnam is large, foreign enterprises have difficulty in recruiting the skilled, qualified labor and engineers due to limited quantities
CONCLUSION
Achievements of the internship
In spite of some weaknesses due to the lack of in-depth knowledge in finance, my findings and analysis are well recognized by my supervisor and colleagues I am very happy that my work can contribute, even a small portion, to the group’s final report to submit to the company management and lenders
I have gained a lot of achievements in the internship period, and the biggest achievement of all is that I can apply my theoretical knowledge of AMI course to practice and I can learn a lot of professional skills and knowledge from foreign staff and experts in the Company
Besides, my main achievements could be summarized as follows:
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Have a brief understanding of the company background, company structure and financial situation;
Have a thorough understanding of the project development structure in BOT model and specifically, the Nam Dinh BOT Project;
Getting to know about the project financing and related financial issues;
Scan through investment environment in Vietnam and power industry of Vietnam and underlying problems of the power sector by using PESTL, SWOT and Porter’s Five Forces tools;
Figure out and understand the risks associated with every single activity of the investors and try to search for mitigation measures;
Being familiar with international working style;
Improve communication and teamwork efficiency;
Take the chances to talk and consult with many experts in finance, banking, and business development
Enhance written and spoken English.
How Goals Are Reached
Looking back at the achievements I have made, it can be said that my goals set up at the beginning of the internship period has been met, which can be considered as a reward for all my efforts during 4 month of hard work with all my strength
Another main factor that helps me to fulfill the goals is that all of my team are very helpful and thoughtful They are always willing to answer all my questions, sometimes silly ones, even they try to find the most simple way to explain the issues to me as I do not have the strong background of financial or business studies My supervisor guides me in a correct way so that I gradually understand a lot of difficult subjects and problems
Last but not least, the knowledge I acquired from the MBA course is the bridge leading me to the vast practical knowledge, especially in finance and project management
Shortcomings of the internship
Due to the limited time of the internship and limitations in my professional knowledge, there are some shortcomings that I need to overcome:
More analysis should be done in terms of finance I only concentrate on the analysis of the environment in which the foreign investors are investing using PESTLE, Porter’s Five Forces and SWOT I lack in-depth knowledge in financial aspects, especially how to use financial tools to analyze the project financial factors (NPV, IRR, BEP, etc.) and evaluate financial risks to the Project That is why my report just touches the surface of the issues, I need more time and more studies to analyze all issues to their cores and bones
Several mitigation measures are not so practical and just learning from books and papers, because it is difficult to learn from other precedent project cases There are not so many examples in Vietnam that I can follow, only 3 similar projects but they were implemented a long time ago while the policies are changing all the time
My written English is not so professional in terms of financial and business English I need to improve more by reading more materials and keep writing my own reports and products
I have some problems at the first time when working with the Koreans, as they are very conservative and the company working order is top-down, it means when the boss says something, you must accept and follow, nearly unconditionally You must show very high respect to the boss in all activities That company culture has brought me some difficulties and I have been scolded several times for being so enthusiastic or aggressive during discussions I need to neutralize my feelings when working in a Korean team.
Suggestions for the Company
After a lot of studies regarding the risks in developing the Nam Dinh Project, I can generate some suggestions or recommendations for the Company, as listed hereunder:
The Company has developed this project for 8 years but the results are very limited and progress in too slow One reason is the management does not understand the way to do business in Vietnam The Company should employ
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37 more key personnel who are Vietnamese as at present, there are many outstanding Vietnamese persons who can handle key positions in international companies while understanding well about Vietnam policies, Vietnam culture, tips and tricks when doing business in Vietnam With the stronger voice and advises from local managers, the top management could deploy more proper decisions and actions to accelerate the project The local managers can help the company to expand the relationships, especially with central government, local governments, domestic banks, etc
The Company should establish stronger team spirit between different departments and inside each department For finding the best solutions to mitigate the risks, Business Development department should cooperate more intensively with the Project Finance department and Project Execution department Now, all departments work on their own tasks and sometimes their tasks overlap each other It will be a waste of time and effort if they hesitate to share their results or fail to communicate frequently and efficiently with each other
The Company should conduct further analysis to risks after completion of the Project as the operation practice in Vietnam is not as smooth as it is in other countries The Company should send more staff to learn experiences in operating power plants in Vietnam It is very good to envisage the risks in post- completion stage of the project
The Company should expand the business opportunity search towards the renewable energy sector to make best use of the available human resources The Company staff is now working on only one project, which sometimes makes them bored and discouraged due to slow progress, so switching to another project will help to boost their mind.
Conclusion
Once again, I would like to express my gratitude to my supervisor, all colleagues, and experts in the Company and send my great thanks to my academic supervisor – Dr Le
Thanh Binh, all the professors and lecturers of the AMI MBA course Thanks to the knowledge brought by them and their valuable support and guidance, I have finished my four-month internship with a lot of gains
I do believe that the final risk assessment report which is the aggregate of many individuals’ efforts will be beneficial to the Company and we are all ready to head towards successful negotiations with lenders for the ultimate target of project finance: successful financial closing and commencement of construction work to bring the project from papers to reality
Thư viện ĐH Thăng Long
1 Beenhakker, H.L, 1997 Risk Management in Project Finance and Implementation, Connecticut
2 Crouhy, Galai, and Mark R, 2005 Essentials of Risk Management, McGraw-
4 https://www.gso.gov.vn
5 http://fia.mpi.gov.vn
1 Jangale, S.A & Suryawanshi, A.A, 2014 Risk Assessment in BOT Project Financing, International Journal of Engineering Research & Technology Vol
2 Bokharey, S.K; Vallyutham, K.K; Potty, N.S; and Bakar, N.A; 2010 Risks and Mitigation Measures in Build- Operate-Transfer Projects, International Journal of Civil, Environmental, Structural, Construction and Architectural Engineering Vol 4, No.3, pp 81-87
3 Rabechini, R.Jr & Carvalho, M.M, 2013 Understanding the Impact of Project Risk Management on Project Performance: an Empirical Study, Journal of Technology Management and Innovation Volume 8, Special Issue, pp 64-78
Table 1 SWOT Matrix 24 Table 2 Key financial risk considerations 26
Thư viện ĐH Thăng Long
Figure 1: Portfolio of Taekwang Group 3
Figure 2: Air view of Nam Dinh Power Plant Project 5
Figure 3: Structure of Nam Dinh BOT Power Plant Project 6
Figure 4: Organization Chart of Taekwang Power Holdings Co.,Ltd 10