Để đạt được mục tiêu tối đa hoá giá trị doanh nghiệp thì cấu trúc vốn của ngành điện niêm yết Việt Nam nên điều chỉnh như thế nào?

HOW THE CAPITAL STRUCTURE OF LISTED ELECTRICITY INDUSTRY SHOULD BE IMPROVED FOR REACHING MAXIMIZATION OF FIRMS’ VALUE? ĐỂ ĐẠT ĐƯỢC MỤC TIÊU TỐI ĐA HOÁ GIÁ TRỊ DOANH NGHIỆP THÌ CẤU TRÚC VỐN CỦA NGÀNH ĐIỆN NIÊM YẾT VIỆT NAM NÊN ĐIỀU CHỈNH NHƯ THẾ NÀO? Assoc., Prof.Dr. Truong Thi Thuy - Dr. Hoang Trung Duc Academy of Finance Truongthithuy@hvtc.edu.vn ; Hoangtrungduc@hvtc.edu.vn Abstract The decision of capital structure plays significant role in the maximization of firms value due to its’ influence on financial risks, return on equity, cost of capital. Vietnam listed industry, the sector with a strategic position for the nation’s development has been faced with some of is- sues consisting of financial leverage ineffective, risks of exchange rate with foreign loans, lack of diversification in capital mobilization, no optimal capital structure constructed. From the men- tioned reasons, the authors from Academy of Finance, Ha Noi choose the article “How should the capital structure of listed electricity industry be improved for reaching maximization of firms’ value?” for the purpose of finding solutions to complete capital structure of listed electricity in- dustry and construct optimal capital structure to maximize firms value. Keyword: Academy of Finance, Capital structure, Listed electricity industry. Tóm tắt Quyết định về cấu trúc vốn đóng vai trò quan trọng trong việc tối đa hóa giá trị doanh nghiệp do ảnh hưởng của nó đến rủi ro tài chính, tỷ suất sinh lợi trên vốn chủ sở hữu, chi phí sử dụng vốn. Ngành niêm yết Việt Nam, ngành có vị trí chiến lược đối với sự phát triển của đất nước đang gặp phải một số vấn đề như đòn bẩy tài chính kém hiệu quả, rủi ro tỷ giá với vốn vay nước ngoài, huy động vốn thiếu đa dạng, cơ cấu vốn chưa tối ưu. Từ những nguyên nhân đã nêu, nhóm tác giả Học viện Tài chính Hà Nội chọn bài viết “Cải thiện cơ cấu vốn ngành điện niêm yết như thế nào để đạt tối đa hóa giá trị doanh nghiệp?” nhằm tìm ra giải pháp hoàn thiện cơ cấu vốn của ngành điện niêm yết và xây dựng cơ cấu vốn tối ưu nhằm tối đa hóa giá trị doanh nghiệp. Từ khóa: Học viện Tài chính, Cơ cấu vốn, Niêm yết ngành điện. The differnet pointviews of capital structure and the authors attitude Currently, in scientific research projects, there are still different views on the capital struc- ture and those difference refer to whether or not short-term debt should be an integral part of the capital structure. 1005 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 According to Ing. Petr Jiricek, Mgr. Zdenka Dostalova: “The capital structure of enter- prises is distinguished from the financial structure of businesses. The main difference is that the capital structure is concerned only with long-term capital, while the financial structure is con- cerned with both short-term capital and long-term capital. ” According to Tran Thi Thanh Tu (2006):” The capital structure is a proportional relation- ship between long-term debt and equity.” According to Ing. Petr Jiricek, Mgr. Zdenka Dostalovam, Tran Thanh Tu: short-term debts refer to temporary nature, not long- term nature, should not affect the right management and su- pervision of financial activities’ business. In addition, short term debts have not been influenced significantly by inside and outside firms’ factors, mainly used to meet the needs of working capital and with low cost of capital, short-term debts don’t meet the target of setting strategy of capital mobilization for the maximization of firms’ value. According to Klayman (1994), Stephen A. Ross, Randolph W. Chesterfield, Bradford D. Jordan (2008): “The capital structure is the combination of liabilities and equity that an enterprise uses to finance the assets with the aim of maximizing enterprise value ” According to Doan Huong Quynh (2010): “ The capital structure is the proportion of cap- ital sources in the total value of capital resources which enterprises mobilize for the businesses’ activities and capital structure is assessed by debt ratio, equity ratio ” According to the pointviews of Klayman, Stephen A.Ross and Doan Huong Quynh: Viet- nam capital market has been gradually improved, short-term debt still has been played an impor- tant role in business activities: short-term debt are supplemented regularly to meet the needs of regular working capital, payment of principal and interest of long-term debts. Therefore, short- term debts contain similar characteristics to long-term debts and have the purpose of capital mo- bilization plans’ construction. From the mentioned research, the authors give owns attitude on capital structure: “The capital structure of business refer to the correlation ratio between short-term debts, long term debt and equity that enterprises mobilize for the use of production with the aim of maximization of firms’ value” Features of listed electricity industry in term of businesses’ activities: - Vietnam’s listed electricity industry is considered as one of the attractive industries with high growth prospects, attracting large domestic and foreign investment .The listed electricity industry has a high transparency index . - Large structure of investment in long-term assets from total capital of listed electricity industry. The input factors of listed electricity industry depend largely on natural conditions with an increasingly difficult trend - The output products of listed electricity industry are of strategic materials directly affect- 1006 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 ing the socio-economic development and national securities. The production process of electrical products is highly concentrated. The current situation of capital structure of listed electricity industry Figure 1 shows that the debt tends to decrease , the equity tends to increase gradually during the research period. The debt decreased from 23,342,650 million VND in 2012 to 7,977,720 million VND in 2014, maintaining a stable level of 18,082,910 million VND during 2014-2016 and sharply decreasing to 10,014,094 million VND in 2017. The quity increased from 17,289,350 million VND in 2012 to 22,224,119 million VND in 2014 and remained stable at an average of 22,712,456 million VND during the period 2014-2017. The debt ratio decreased from 57.54% in 2012 to 44.72% in 2014, remained stable at 44.40% in the period of 2014 - 2016 and decreased to 30.40% in 2017. (Source: Authors’ synthesized from financial statements of listed electricity industry) Figure 1: Capital structure of the listed electricity industry The current situation of debt structure of listed electricity industry The Figure 2 shows that total debt is tending to decrease, short-term debt is stable and the decline of long-term debt is mainly due to the decline of total debt, the average long-term debt during period 2012-2017 is accounted for 86.62% of the total debt. The long-term debts have been decreased sharply in the period of 2012-2014 (decreased from 20,176,758 million VND to VND 15,505,200 million VND), remained stable in the period of 2014-2016 (15,558,995 million VND), plummeted to 10,014,094 million VND in 2017. 1007 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 (Source: Authors’ synthesized from financial statements of listed electricity industry ) Figure 2: The current situation of debt structure of listed electricity industry The current situation of equity structure of listed electricity industry Figure 3 shows the stable size of paid-in capital, slightly increasing from 13,957,318 mil- lion VND in 2012 to 14,985,619 million VND in 2017; retained earnings have been risen sharply in the period 2012-2014 from 3,099,269 million VND to 7,711,803 million VND, stabilizing at the average level of 7,953,296 million VND in the period 2015-2017. (Source: Authors’ synthesized from financial statements of listed electricity industry ) Fiugre 3: The current situation of equity structure of listed electricity industry From above analysis, estimation and evaluation of the current situation of capital struc- ture, debt structure, equity structure of listed electricity industry, the authors have reached some important conclusions as follows: 1008 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 Firstly, the debt of listed electricity industry has been decreasing, the equity tends to in- crease sharply. This will help listed electricity industry minimize the risk of insolvency, thereby reducing bankruptcy costs, reducing large costs and increasing financial flexibility in the future; but reducing the debt has caused the following disadvantages: reduction of the “tax savings” for businesses, reducing the pressure for the board to operate more efficiently , minimizing the am- plification of return on equity. Secondly, long-term debts from foreign sources have a very low-interest rate, accounting for a large proportion of the debt will reduce the cost of capital . Long - term debts of listed elec- tricity industry have largely from concessional loans which have been guaranteed by Vietnam Government (approximately 0.04%/ year to 4% / year) will have benefit of reducing the WACC of enterprieses. Thirdly, long term debt of listed electricity industry lacks diversity. Long-tern debts of listed electricity industry mainly came fromdebt from commercial banks, debt from foreign sources which will cause risks for businesses if creditors claim to recover capital early for eco- nomic - political reasons, and do not create motivation for enterprises to self-help. However, long term debt of the electricity industry enterprises listed exchange rate risk affecting the operational efficiency of enterprises. Fourthly, retained earnings tend to increase, helping to increase the level of financial in- dependence. The theory of pecking-order in capital structure mentioned that the retained earnings convey a very positive signal to investors in the stock market about the financial situation and production capacity. How to construct optimal capital structure for the purpose of maximization of firm value? Introduction of Cost-of-Capital Approach to construct optimal capital structure The cost-of-capital (COC) approach helps with construction of optimal capital structure and contains 3 main steps: First, Estimation of the cost of debt in each debt ratio, the cost of debt in each debt ratio is constructed based on the credit rating system. Second, Estimation of the cost of equity in each debt ratio, the cost of equity in each debt ration is constructed by the estimation of beta when fully funded by equity (βU);then, this task is followed by the estimation of the beta when debt was used (βL). The application of CAPM model for the estimation of cost of equity at each debt ration is performed. Third, Estimation of the average cost of capital used for each debt ration for the determi- nation of the optimal debt ratio. This formula is used for the estimation of average cost of capital used in each debt ration. Hence, the optimal debt ratio is the minimal average cost of capital Application of COC for constructing optimal capital structure of Nhon Trach 2 Petroleum Joint Stock Company – (NT2) Determination of elements/factors in the model: - Determination of Risk-free rate (Rf): Risk-free rate is determined by rate of 10-year Gov- ernment bond issued by National Treasury in 2017. Risk-free interest rate is 5.38% per year. 1009 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 - Determination of Equity Risk Preminum (ERP): Equity Risk Premium is determined by the differential parts between the rate of return of the market portfolio and the risk-free market. ERP is the basic foundation for the decision of the cost of equity and weighted average cost of capital. ERP reflects the degree to which risk is offset by the fact that investments in equity assets have a higher level of risk than investment in non-riskier assets such as government bonds. If the level of risk compensation is not large enough to meet the expectations of investors, investment decisions will not be made. The author collects data on the risk premium from Prof. Aswath Damodaran’s calculations. The results show that the ERP of Vietnam in 2017 is 10.27%. - Determining the capital structure of Nhon Trach Thermal Power Joint Stock Company at market price: The structure of capital at market price reflects the level and proportion of each source of capital (debt, equity) according to market value. For the determinantion of the capital structure at market prices, the market value of debt is determined based on book value and market value of equity determined by the number of shares held. at the end of 2017 multiplied by the closing price of that stock at the end of 2017. Table 1.1: Capital structure of NT2 by market value in 2017 (Source: Author’s estimatios from financial statements of JSCs) - Determination of enterprise income tax rate: The enterprise income tax rate applicable to NT2 is 20%. - Determine the beta coefficient of the stock NT2: The beta coefficient of the stock NT2 collected by the author (source) is 0.47. Beta without financial leverage is determined by the fol- lowing formula: βU = βL / {[1+(1-Tc)]*D/E} = 0,47/{[1+(1-20%)]*52,77%} = 0,33 Determine the cost of equity using the different capital structures - Leverage factor leverage (βL): determined by the following formula: βL = βU * [1+(1- Tc)*D/E] - Cost of equity (Re): determined according to the following formula under CAPM asset pricing model: Re = Rf + βL* (Rm-Rf) = Rf + βL*ERP 1010 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 Capital structure The volume of stock in circulation Closing price of NT2 at the end of the year (VND) Market Value (Trillion dong) Propotion Short-term Debt 1.066.152 Long-term Debt 2.631.620 Total Debt (D) 4.763.924 34,55% Equity (E) 287.876.000 31,39 9.026.428 65,45% Total Capital 13.790.352 D/E 0,5277 52,77% Table 1.2: Cost of Equity atthe level of capital structure (Source: Author’s estimatios from financial statements of JSCs) Determine the cost of debt at different levels of capital structure To determine the cost of debt use at different levels of capital structure, the author collected data on rankings to determine the bankruptcy risk premium of Professor Aswath Damodaran. The rating is based on the solvency of non-financial corporations with a market capitalization of more than $ 5 billion and less than $ 5 billion. Table 1.3 describes the bankruptcy risk rating of Prof. Aswath Damodaran. 1011 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 Debt ratio Total capital Debt Equity D/E βL Re 0% 13.790.352 - 13.790.352 0 0,33 9,51% 10% 13.790.352 1.379.035,2 12.411.316,8 0,11 0,36 9,88% 15% 13.790.352 2.068.552,8 11.721.799,2 0,18 0,38 10,11% 20% 13.790.352 2.758.070,4 11.032.281,6 0,25 0,40 10,35% 25% 13.790.352 3.447.588 10.342.764 0,33 0,42 10,62% 30% 13.790.352 4.137.105,6 9.653.246,4 0,43 0,44 10,95% 34,55% 13.790.352 4.764.566,6 9.025.785,4 0,527 0,47 11,28% 35% 13.790.352 4.826.623,2 8.963.728,8 0,53 0,47 11,29% 40% 13.790.352 5.516.140,8 8.274.211,2 0,66 0,50 11,72% 45% 13.790.352 6.205.658,4 7.584.693,6 0,81 0,36 9,85% 50% 13.790.352 6.895.176 6.895.176 1,00 0,59 12,86% 55% 13.790.352 7.584.693,6 6.205.658,4 1,22 0,65 13,60% 60% 13.790.352 8.274.211,2 5.516.140,8 1,5 0,73 14,54% 65% 13.790.352 8.963.728,8 4.826.623,2 1,85 0,82 15,71% 70% 13.790.352 9.653.246,6 4.137.105,4 2,33 0,95 17,32% 75% 13.790.352 10.342.764 3.447.588 3 1,12 19,57% 80% 13.790.352 11.032.281,6 2.758.070,4 4 1,39 22,92% 85% 13.790.352 11.721.799,2 2.068.552,8 5,66 1,82 28,49% 90% 13.790.352 12.411.316,8 1.379.035,2 9 2,71 39,69% 95% 13.790.352 13.100.834,4 689.517,6 19 5,35 73,21% 100% 13.790.352 13.790.352 - - - - Table 1.3: Bankruptcy Risk Rating Chart of Professor Aswath Damodaran Source: The authors of this rating system for Nhon Trach Thermal Power Joint Stock Company - NT2 will be suitable for market capitalization of less than US $ 5 billion. The solvency ratio is measured by taking pre-tax profit and interest divided by the amount of interest payable. Pretax profit and interest of NT2 in 2017 is 853,439 million dong; The average lending rate in Vietnam in 2017 is 6.25% [29]. The cost of using debt at different levels of capital structure is shown in the following table: Table 1.4: Cost of debt use at different levels of capital structure 1012 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 Debt ratio Total capital Debt Amount of loan interst Interst cov- erage ratio Credit rat- ing ERP Rf Rd Rdt 0% 13.790.352 - 10% 13.790.352 1.379.035,2 86.189,70 9.90 AA 0.70% 5,38% 6,08% 4,86% 15% 13.790.352 2.068.552,8 129.284,55 6.60 AA 1.00% 5,38% 6,38% 5,10% 20% 13.790.352 2.758.070,4 172.379,40 4.95 A- 1.20% 5,38% 6,58% 5,26% 25% 13.790.352 3.447.588 215.474,25 3.96 BB+ 2.75% 5,38% 8,13% 6,50% 30% 13.790.352 4.137.105,6 258.569,10 3.30 BB 3.25% 5,38% 8,63% 6,90% 34,55% 13.790.352 4.764.566,6 297.785,41 2.87 B+ 4.00% 5,38% 9,38% 7,50% 35% 13.790.352 4.826.623,2 301.663,95 2.83 B+ 4.00% 5,38% 9,38% 7,50% 40% 13.790.352 5.516.140,8 344.758,80 2.48 B 5.00% 5,38% 10,38% 8,30% 45% 13.790.352 6.205.658,4 387.853,65 2.20 B 5.00% 5,38% 10,38% 8,30% 50% 13.790.352 6.895.176 430.948,50 1.98 B- 6.00% 5,38% 11,38% 9,10% (Source: Author’s estimatios from financial statements of JSCs) - Determination of optimal capial structure WACC in particular capital structure was indicated in Table 1.5 in the following demonstration Table 1.5: Optimal capital strucutre of NT2 (Source: Author’s estimatios from financial statements of JSCs) 1013 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 55% 13.790.352 7.584.693,6 474.043,35 1.80 B- 6.00% 5,38% 11,38% 9,10% 60% 13.790.352 8.274.211,2 517.138,20 1.65 B- 6.00% 5,38% 11,38% 9,10% 65% 13.790.352 8.963.728,8 560.233,05 1.52 B- 6.00% 5,38% 11,38% 9,10% 70% 13.790.352 9.653.246,6 603.327,90 1.41 CCC 7% 5,38% 12,38% 9,90% 75% 13.790.352 10.342.764 646.422,75 1.32 CCC 7% 5,38% 12,38% 9,90% 80% 13.790.352 11.032.281,6 689.517,60 1.24 CCC 7% 5,38% 12,38% 9,90% 85% 13.790.352 11.721.799,2 732.612,45 1.16 CC 8% 5,38% 13,38% 10,70% 90% 13.790.352 12.411.316,8 775.707,30 1.10 CC 8% 5,38% 13,38% 10,70% 95% 13.790.352 13.100.834,4 818.802,15 1.04 CC 8% 5,38% 13,38% 10,70% 100% 13.790.352 13.790.352 861.897 0.99 CC 8% - Debt ratio Equity ratio Rdt Re WACC 0% 100% 9,51% 9,51% 10% 90% 4,86% 9,88% 9,38% 15% 85% 5,10% 10,11% 9,36% 20% 80% 5,26% 10,35% 9,33% 25% 75% 6,50% 10,62% 9,59% 30% 70% 6,90% 10,95% 9,74% 34,55% 65,45% 7,50% 11,28% 9,97% 35% 65% 7,50% 11,29% 9,96% 40% 60% 8,30% 11,72% 10,35% 45% 55% 8,30% 9,85% 9,15% 50% 50% 9,10% 12,86% 10,98% 55% 45% 9,10% 13,60% 11,13% 60% 40% 9,10% 14,54% 11,28% 65% 35% 9,10% 15,71% 11,41% 70% 30% 9,90% 17,32% 12,13% 75% 25% 9,90% 19,57% 12,32% 80% 20% 9,90% 22,92% 12,50% 85% 15% 10,70% 28,49% 13,37% 90% 10% 10,70% 39,69% 13,60% 95% 5% 10,70% 73,21% 13,83% 100% 0% - - The target capital structure is the level of capital structure that results in the lowest average cost of capital (WACC). 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