EVN's improper tariffing results in $36 million loss

The Ministry of Public Security’s investigative body completed its inquiry into alleged misconduct at Vietnam Electricity (EVN), the Ministry of Industry and Trade, and several local authorities on September 15. It has recommended that former EVN chairman and ex-Deputy Minister of Industry and Trade Hoang Quoc Vuong, along with 11 other individuals, face prosecution for charges of "abuse of power" and "negligence causing severe consequences."

At the centre of the case is the Trung Nam - Thuan Nam Solar Power Plant, a key component of a broader infrastructure project including a 500kV substation and 220/500kV transmission lines. Developed by Trungnam Group, the project attracted a total investment of VND12 trillion ($480 million), encompassing a 450MW solar power plant, a substation, and over 17km of 500kV dual-circuit transmission lines, alongside four 220kV transmission lines.

According to the investigation, Vuong exploited his position to secure approval for the project’s inclusion in national planning. Additionally, he allegedly sought to implement a preferential feed-in tariff of 9.35 US cents per kWh, bypassing the prime minister's authority. This action enabled the Trung Nam - Thuan Nam plant to benefit from the advantageous pricing scheme.

Despite subsequent directives from the PM for strict adherence to established resolutions, Vuong failed to comply, resulting in losses exceeding VND900 billion ($36 million). The project’s investor, Trung Nam Thuan Nam Solar Power Co. Ltd, is a subsidiary of Trungnam Group, established in 2018. The company, chaired by Nguyen Tam Thinh, registered a capital of VND 2.4 trillion ($96.4 million).

Trung Nam Thuan Nam's latest financial disclosure was in 2022. That year, the company reported a post-tax profit of VND81 billion ($3.24 million), marking a sharp 80 per cent decline on-year. By the end of 2022, its equity stood at over VND2.4 trillion ($97 million), with a debt-to-equity ratio of 3.68, indicating liabilities of over VND8.9 trillion ($356 million), of which nearly VND5 trillion ($200 million) was bond debt. Total assets amounted to VND11.3 trillion ($452 million).

In April, Trung Nam sought government intervention for the project, after EVN halted mobilisation of a 172MW capacity in 2022, citing non-compliance with regulations governing eligibility for feed-in tariffs. The suspended capacity includes 86MW on a 108-hectare plot that failed to meet legal requirements, including land-use approvals, environmental impact assessments, and fire safety certifications.

By October last year, the MoIT had approved the plant’s operations on the 108-hectare plot, following compliance with environmental, fire safety, and land lease regulations.

In a recent letter to the PM, Trung Nam disclosed that approximately 687 million kWh generated between October 2020 and August 2022 - equivalent to VND 813.6 billion ($32.5 million) - has not been paid by EVN. The company has repeatedly requested interim payments at 40 per cent of the transitional solar tariff, but no resolution has been reached.

Moreover, since last October, EVN has only made partial payments for electricity generated in Phuoc Minh commune. The remaining unpaid balance for the other areas exceeds VND274 billion (almost $11 million).

Responding to the issue, an EVN representative stated that the utility has incorporated the plant's output into the grid and made payments based on Trung Nam’s operating licence. EVN also acknowledged the excess capacity and committed to resolving the matter once formal regulations are established. The utility added that it is continuing to work with relevant authorities to address Trung Nam’s challenges.