Power price negotiations reach impasse

The deals centre on the Nhon Trach 1 (NT1) and Nhon Trach 2 (NT2) gas-fueled thermal power plants developed by the country’s oil and gas giant.

To have a basis for power payment, in late 2009 Electric Power Trading Company (EPTC), under EVN and PetroVietnam Power Corporation (PVP) signed a power purchase agreement  in which power prices were temporarily set based on parameters approved by competent state bodies similar to the Ca Mau 1 and 2 thermal power projects.

A PetroVietnam representative said it and EVN still disagreed on a number of issues related to the NT1’s power selling prices.

The issues centred on the deal’s duration, the project’s the internal rate of return, repair and maintenance costs.

Accordingly, EVN proposed a 30 year deal while the seller wanted 25 years. Similarly, the buyer asked to apply an internal rate of return of 7.5 per cent similar to that at the Ca Mau 1 and 2 power projects but the seller wanted 10 per cent.

Besides, the buyer wanted NT1 to source fuel from Block 11.2 while the seller said the fuel source must be based on actual gas purchase contracts.

Regarding NT2, exhaustive negotiations between PetroVietnam and EVN also failed to reach a  power price.

Talks remained stuck on several issues, such as the electricity generator wanted internal rate of return of 11.27 per cent and currency in use was US dollars while the purchaser proposed 7.5 per cent.

Purchaser at both NT1 and NT2 projects proposed the operational and maintenance cost at 4.5 per cent of total investment capital which is applicable for combined cycled thermal power plants. However, the power generator wanted the figure to be based on the actual costs.

The Ministry of Industry and Trade (MoIT) has been asked to act as an arbitrator.

The MoIT had asked both PetroVietnam and EVN to temporarily halt negotiations until the ministry finalised power generation price regulations as a basis for calculating power selling prices by the end of this year.

The 450 megawatt NT1 is built with a total investment of around VND6.5 trillion  ($333 million). The plant contributed 5.4 billion kWh of electricity as of October 1, 2010.

The 720MW NT2 with an investment capital of $700 million is now under construction. Its first turbine is expected to start generating power from March 2011, two months earlier than scheduled.