Power price shock in pipeline

The loss-making EVN has underlined the threat of further power cuts
if it fails to get a massive injection of capital

The state-run Electricity of Vietnam (EVN) recently announced it incurred an aggregate loss of VND23.5 trillion ($1.1 billion) in 2010, with $388 million coming from its electricity business and another $747 million stemming from exchange rate differences.

Deputy Minister of Industry and Trade Hoang Quoc Vuong said the group’s losses would be offset by future power price hikes. However, he failed to give an exact timetable for the electricity price rises.

The group’s losses were attributed to the lack of water at hydroelectric plants because of droughts which caused the EVN to depend upon its oil-fired plants and to procure power at a higher cost from other sources. Other reasons cited were the price of fuel, exchange rate fluctuations and slow progress in the construction of some power plants, according to EVN’s report.

Pham Le Thanh, general director of EVN, warned that if no drastic measures were taken to deal with the group’s financial imbalance, it would find it increasingly difficult to raise capital in future to secure sufficient power supplies.

Thanh raised the alarm again last week, saying Hanoi was threatened with a power shortfall of 15-20 per cent next year because of slow progress in the upgrades and development of a power transmission line systems and transformer stations.

However, despite its huge losses and reportedly capital shortage for invesment in power generation projects, EVN is now ranked third among state-owned economic groups and general corporations in terms of investment into non-core businesses.

EVN employees’ average monthly pay also reached VND7.3 million ($353) in 2009 compared to the country’s average wage of $137 as reported by the Ministry of Labour, War Invalids and Social Affairs (MoLISA).  

The MoLISA also reported that in 2009, Vietnam’s per capita income just stood at $67 per month., with the figure in the highest-income class topping at $164. EVN has invested in banking and real estate, among others but most of these investments have had a bitter aftertaste for the electricity behemoth.

EVN is, for example, a strategic shareholder in Ha Thanh Securities Company, a firm whose losses amounted to VND111 billion ($5.2 million) as of June 30.