Power plan short circuits

The inter-ministerial task force, comprising representatives from the Ministries of Finance and Industry, reached a consensus last week to raise the new average electric price to VND852 ($0.053) per kWh, an 8.8 per cent increase over the current level.
However, that new level, which needs to be approved by the Prime Minister, remains 6 per cent lower than EVN’s proposed price at VND898 ($0.056) per kWh.
Experts from the task force said EVN’s proposed price wasn’t feasible and if applied, it could have a big effect on the local economy as the current per capital income is only $640 per year.
Yet Dao Van Hung, EVN’s general director, said if the Prime Minister approves the price set by the task force, EVN would face a severe shortage of capital for investment.
He said EVN will lack a huge amount, about VND250 trillion ($16 billion) for investment projects in the next five years, it means the enterprise will need more than $3 billion each year on average. Such a large capital amount is needed to construct more than 20 electric plants nationwide from now until 2010.
However, an official from the Ministry of Industry said the public and several enterprises have protested EVN’s proposed new price, which is 14.8 per cent higher than the current price.
Hoang Van Tong, deputy general director of the Thai Nguyen Steel and Cast Iron Company, said his enterprise pays about VND30 billion ($1.97 million) for electricity per month.
“So if the electricity price increase of 15 per cent is applied, then the company will have to pay an additional VND4.5 billion ($300,000),” he said.
“Then the factory may have to face closure due to the fact that the more it operates, the more losses it suffers.”
Government officials worry that the high electric price increase will bog local enterprises with deeper difficulties, as the local economy is on the threshold of integrating into the World Trade Organization.
Hung said that with the electric price increase lower than expected, EVN will have to seek more capital from other sources, in particular from the issue of corporate bonds to mobilise capital from abroad and from the domestic market.
“The first-ever issue of EVN’s corporate bonds, capitalising $500 million, will be issued abroad by the end of the second quarter this year,” he said.
The enterprise recently succeeded in mobilising VND400 billion ($26 million) from issuing corporate bonds in local currency on the domestic market.
However, Hung said, as the price increase is lower than expected, several investors, especially foreign ones, may be discouraged from investing in the electricity plants because the price is too low now to guarantee a profit.
“Presently there are just two foreign-invested power generation plants, namely Phu My 2-2 and Phu My 3, while the country is facing a possible shortage of electricity in the next few years,” he said.
In a related move, the government issued document 1096 dated March 2 last week, requiring the State Bank of Vietnam, Development Assistance Fund, and other concerned ministries to ensure a balance of enough capital for the development of electric plants in the next five-year period.
Hoang Trung Hai, the minister of Industry, said many incentives will be created to attract investors to the electricity industry.
He said the state would call for investment from local and foreign enterprises in the form of an independent power plant (IPP), build and transfer (BT), BOT, joint-venture (JV) and joint stock company (JSC).



No. 751/March 6-12, 2006