EVN struggles to cope with rising input costs

The news was announced by Hoang Quoc Vuong, EVN chairman, at a recent meeting between the prime minister and the Ministry of Industry and Trade .

According to Notice 2175/VPCP-KTTH, the prime minister approved the pricing scheme proposed by the Ministry of Finance (MoF). Accordingly the price of gas sold to EVN since April 1 this year is equal to 70 per cent of the market price plus the transportation and distribution cost.

Resultantly, the price of gas sold to EVN rose from $5.19/million BTUs to $5.74/million BTUs on April 1, then $6.56/million BTUs on July 1, and finally $7.38/million BTUs on October 1. It is expected to reach the market price of $8.2/million BTUs starting January 1, 2015. Spending on gas by power plants, according to the 2014 plan on power output, is thus estimated to rise by VND3.2 trillion ($150.2 million).

“EVN has yet to pay the additional amount,” said Nguyen Quoc Khanh, deputy general director of PetroVietnam at a press conference on October 8, “though PetroVietnam has already confirmed the new prices with EVN.”

Meanwhile, the price of coal for power production has similarly been raised twice so far this year. According to the MoF’s Document 1085/BTC-QLG, dated December 31, 2013, the price was raised by between 1.2 and 14.7 per cent, depending on the type of coal. The increase has caused EVN’s spending on coal to rise by VND1.83 trillion ($86 million) from the earlier estimated amount.

Later, on July 21, the MoF’s Document 9961/BTC-QLG allowed the price to rise by between 4 and 7.4 per cent, effective on July 22. This has caused EVN’s spending on coal in the final months of 2014 to rise by an additional VND569 billion ($26.7 million).

Besides rising prices of coal and gas, power production also suffers from a rise in the water consumption tax, from 2 to 4 per cent of the selling price since February 1. The increase will cause the production cost of hydropower plants under EVN to jump VND1.5 trillion ($70.4 million).

Increasing gas prices will cause the price of power to rise by VND22 (0.1 US cents)/kWh from the current price of VND1,508.85 (7.08 US cents)/kWh.

At a press conference on October 9, the MoF said the power price adjustment has to follow Decision 69/2013/QD-TTg. According to current regulations, the price of electricity for the 2013-2015 period is set at between VND1,437 (6.74 US cents)/kWh and VND1,835 (8.6 US cents)/kWh.