Senior Vice President at JX Nippon Oil & Energy Corp. (JXE) and a member of Petrolimex’s Management Board, Hitoshi Kato, speaks to Vietnam News Agency’s BNEWS about opportunities as well as risks of investing in Petrolimex shares.
The price of Petrolimex shares (code PLX) has had a fivefold increase over the base price and is expected to rise further. Photo petrolimex.com.vn
It has been almost one year since the JX Nippon Oil & Energy Corp. (JXE) – the largest oil company in Japan – established the JX Nippon Oil & Energy Vietnam (JXEV) and purchased an 8% stake totalling 103.5 million shares in the Vietnam National Petroleum Group (Petrolimex).
The price of Petrolimex shares (code PLX) has had a fivefold increase over the basic price and is forecast to rise further when the share is officially listed on the Ho Chi Minh City Stock Exchange (HoSE) in mid-April this year.
On this occasion, Vietnam News Agency’s BNEWS reporter interviews JXE Senior Vice President and member of Petrolimex’s Management Board at about opportunities and risks of investing in the share.
BNEWS: Would you like to talk generally about JX Nippon Oil & Energy Vietnam? What are core business fields? What are the similarities and differences between your company and Petrolimex?
Mr. Hitoshi Kato: JX Nippon Oil & Energy Vietnam(JXEV) was established in May 2016 as wholly owned subsidiary of JX Nippon Oil & Energy(JXE). JXEV holds 8 percentage share of Petrolimex.
The main business of JXEV are (a) Monitoring PLX as a shareholder representing JXE’s interest, (b) Conducting management consulting to Petrolimex as a strategic partner (c) Exploring new business in Vietnam and so on.
Comparing JXE and Petrolimex, the similarity is that both companies have major market share in domestic petroleum products distribution and have a responsibility for stable supply of energy in both countries.
On the other hand, the difference is the degree of the development in each market, the coverage of the supply chain.
In Vietnam, the wave of motorization is about to come whereas the market is already matured in Japan.
JXE and its group companies cover all supply chain of petroleum product from oil exploration, refining and distribution whereas Petrolimex covers only distribution.
JXE believes that those similarities and differences will bring good insights for our collaboration between JXE and Petrolimex.
BNEWS: JX Nippon Oil & Energy Vietnam is owning around 103.5 million Petrolimex’ shares, accounting for 8 percent of its total. Why does JX Nippon Oil & Energy Vietnam decide to become a strategic shareholder of Petrolimex?
Mr. Hitoshi Kato: As the petroleum market in Japan is going to shrink in the long run, JXE has been striving to capture the growth engines for the next generation. Expanding our core business in SEA is in line with our strategy.
Vietnam has a large population in SEA and rapid growth of economy is anticipated. JXE has been exploring the opportunity to take part in Vietnam market for several years.
In 2014, Dr. Bao, chairman of Petrolimex proposed to JXE to consider becoming a strategic partner of Petrolimex.
We spent about one year for due diligence, discussion and negotiation. Through the process, JXE and Petrolimex fostered mutual trust and finally agreed on JXE’s share subscription in Petrolimex.
Mr. Hitoshi Kato - Senior Vice President of JX Nippon Oil & Energy. Photo: JX Nippon Oil & Energy
BNEWS: Would you like to tell about the benefits of invest in PLX?
Mr. Hitoshi Kato: Through the collaboration with Petrolimex, JXE can take part in Vietnam market and contribute to Vietnam by introducing up to date and efficient energy distribution system in near future. This cannot be achieved if JXE invested in Vietnam without a big and strong partner like Petrolimex.
JXE intends to offer our know-hows and technologies fostered in Japan with appropriate application to Vietnam.
As a consequence, JXE as a strategic shareholder will enjoy the dividend from PLX or increase in share price after listing to the stock exchange.
New business JV with PLX is also included in our benefit.
BNEWS: Some experts in the stock market point out that there are some risks related in the investment in energy shares, including PLX such as the unpredictable price of oil in the world, the incompletely competition in the Vietnamese’s oil market due to its policies.
Specially, according to the Government Inspectorate's report released in early 2016, Petrolimex has spent trillion dong in out of its core businesses such as banking, insurance, real estate that has to withdrawn on the schedule. What do you think about these risks?
Mr. Hitoshi Kato: We heard from Petrolimex that Petrolimex is on the way to restructure its business in order to concentrate on its core business, namely petroleum related area.
JXE monitors the progress of Petrolimex’s restructuring plan through its participation in BOM from time to time.
We have acknowledged the Government Inspectorate’s report and received detailed explanation from Petrolimex. JXE thinks the risks are under control right now.
Talking about the inherit risks for oil business, we are accustomed to manage those risks. Petrolimex currently intends to strengthen the risk management function and if necessary JXE is willing to give advices.
Those inherit risks are manageable risks if appropriate measures are taken and JXE is comfortable with them.
The domestic market price control by the government in Vietnam can be a risk for the supplier. However, under current regulation which is called Decree 83, transparent and market oriented pricing method is in practice.
JXE believes that the government is moving forward to market oriented economy with no doubt.
BNEWS: They are said that JX Nippon Oil & Energy Vietnam intends to invest more in Petrolimex. Is this true? What’s about your company’s invested plan?
Mr. Hitoshi Kato: If Petrolimex offers more share to JXE, JXE will consider the subscription as a strategic shareholder.
The details will be discussed after JXE receives the proposal from Petrolimex. JXE will review Petrolimex's business plan and the use of proceed from new share and decide. No official decision on this issue has not been made.
BNEWS: Thank you very much!