Negotiations over payment agreement for LNG power stuck in deadlock

EVN has been in negotiations with PV Power — the investor of the Nhon Trach 3 and 4 LNG power plants, and Siemens – the investor of the Hiep Phuoc power plant, but they have yet to reach a compromise on the purchase ratio of power.

The investors want EVN to buy between 72 per cent and 90 per cent of the power capacity of these plants, but EVN is refusing to budge past 65 per cent to avoid creating pressure on selling prices.

The investors are also asking for the power purchase ratio to remain constant for the duration of the PPA following a proposal made by creditors to ensure they have stable cash flow to repay their loans. In addition, LNG suppliers are asking for a high fuel purchase ratio to ensure stability in quantity and price. This stability would help them to develop international maritime transport, especially given that Vietnam is a small market for international LNG suppliers.

However, according to EVN, the proposals made by investors are unfeasible because of the risk of power price hikes.

The cost of importing LNG to Vietnam is high, currently between $12-14 per million BTU. As a result, selling prices using imported LNG are from VND2,400-2,800 per kWh, which is much higher than power produced by coal-fired plants.

Approving a high purchase price for the contract's duration would cause financial risks for EVN if the demand for LNG power drops.

In addition, a higher price for LNG power would be unfair on power plants that use other fuels and have no long-term power purchase commitments with EVN.

According to Vietnam's Power Development Plan VIII, power produced using domestic gas and imported LNG will reach 37,000MW by 2030, or 25 per cent of the country's total production. Of this, 24,000MW will come from imported LNG-to-power, or 15 per cent.

EVN explained that with high electricity generation costs, large fluctuations, and long-term output commitments, EVN's purchasing costs will be affected, strongly impacting the retail selling price.

Hence, EVN has proposed a power purchase commitment of 65 per cent.

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