EVN’s power pricing rationale questioned

Power price negotiations between Vinh Son-Song Hinh Hydropower Company  (VHS) and power firm (EVN) have been prolonged for three years.  

Currently, VHS’s selling price to EVN is VND349 ($0.016) per kWh, only for 62 per cent of the price in 2009 of VND563 ($0.027).

Compared to 2009’s  price when VHS and EVN began to negotiate an electricity price, the temporarily calculated price also accounted for 62 per cent in 2012, over 70 per cent in 2011 and 90 per cent in 2010.

Previously, during 2005-2008, the selling price to EVN was VND563 per kWh, according to VHS equitisation plan.

The reason for EVN’s offering a lower price was that from 2010 till now, the electricity output of two plants of VSH rose up by 20 per cent against previous years. Therefore, the price adjustment was to ensure benefit for both sides, EVN said.

A representative of a large investment fund, a VHS shareholder, said the power price getting lower than the average price in 2009 was nonsensical especially after the Ministry of Trade and Industry (MoIT) issued Decree 41/2010/TT-BCT on the method to define power prices.

Pursuant to the decree, Article 10 regulates that specific price is discussed by two parties in the negotiation process of power purchase contracts, including fixed average price and the changed price in the base year.

Currently, VHS business results for three previous years and the plan in 2013 were based on the temporary calculations.

“If EVN kept its commitment to buy electricity with the initial price, the refunded money for electricity prices during three years would add millions of dollar,” said the representative.

Speaking at VHS shareholders meeting in late May, a shareholder said that it was not reasonable as EVN had raised retail electricity prices many times, but did not increase input power prices.

If the power price was calculated according to the calculation formula in Decree 41, VHS power price would be up to VND650 per kWh, the shareholder said.

The impasse affected the power generation company’s  business and production situation as it could not issue corporate bonds worth VND1.1 trillion ($52.9 million) to mobilise capital.

VSH also could not sign contracts to borrow capital to serve Upper Kon Tum Hydropower project with total investment of VND5,744 billion ($276 million). The project has been delayed from late 2013 due to capital shortage.