Trung Nam Group concerned amid suspended solar payments

May 01, 2024 | 15:58
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Trung Nam Group, a top investment firm in the energy industry, has expressed serious concerns over the financial difficulties caused by payment suspensions for its solar power plants.
Trung Nam Group concerned amid suspended solar payments

The group fears these issues could precipitate a severe incident, potentially collapsing the 500kV transmission system, which is critical to national energy security.

In a petition to the prime minister, Trung Nam, known for its extensive involvement in hydroelectric and renewable energy projects, highlighted legal entanglements affecting several of its power projects.

A case in point is the Trung Nam - Thuan Nam solar power project in Ninh Thuan province, which includes the investment in a substation and both 500kV and 220kV transmission lines connected to the national grid, developed by Trung Nam's subsidiary.

This project, specifically its 172MW capacity, faced suspension by Vietnam Electricity (EVN), which cited non-compliance with the feed-in tariff regulations. Specifically, 86MW of this capacity was developed on approximately 108 hectares of land not properly sanctioned or assessed for environmental impacts, nor approved for fire safety.

According to local media Vnexpress, Trung Nam disclosed that from October 2020 to August 2022, the plant generated about 687 million kWh, corresponding to the 172MW capacity, which has not been compensated by EVN. This outstanding amount is approximately $34 million, calculated based on the transitional tariff framework for solar power plants.

The group has repeatedly requested temporary payments at 40 per cent of the transitional tariff rate to alleviate its financial strain, but these appeals have remained unresolved.

Trung Nam acknowledged that the project spans three communes - Phuoc Minh, Nhi Ha, and Phuoc Ninh in Thuan Nam district - but the power operation licence only covers Phuoc Minh. Since October 2023, EVN has only paid for the electricity generated from the area within Phuoc Minh, leaving an unpaid balance of about $11.4 million for the remaining areas.

The investor warns that this prolonged revenue shortfall could undermine its ability to fund operations and maintenance of the crucial 500kV Thuan Nam transmission system.

Almost four years into operation, the continuous running of this high-capacity system could lead to equipment failures. Besides transmitting power from the Trung Nam project, this line is also essential for offloading capacity from other regional projects, including the 1,432MW Van Phong 1 thermal power plant.

Trung Nam stressed, "High-capacity equipment is at risk of malfunction and needs replacement."

The group added that the lack of funds for purchasing spare parts and replacing faulty equipment could result in a transmission system collapse, leading to significant economic damages, including liabilities to the build-operate-transfer investor of Van Phong, according to local media.

To prevent a critical incident, the company has urged the government to direct EVN to settle the outstanding electricity revenue, which would support the investor financially and ensure sufficient funds to maintain the 500kV Thuan Nam transmission system.

In response, EVN stated that it has been mobilising the capacity of the solar power plant according to Trung Nam's licence and making payments for the recorded output while awaiting specific regulations for the excess capacity.

"For the legally compliant part, EVN has made full payments. For the transitional part, payments are being made according to the temporary tariff approved by the Ministry of Industry and Trade," according to EVN.

"We are actively collaborating with relevant authorities to address Trung Nam's difficulties. As a state-owned enterprise, EVN operates strictly within legal regulations and cannot make unilateral decisions," EVN's statement continued.

Regarding the 500kV substation and transmission lines, EVN clarified that these assets are still owned by Trung Nam. Although Trung Nam had proposed a zero-dong transfer to EVN, legal procedures are pending, and guidance is being followed as per Decree 02/2024 on the transfer of public electric facilities to the state-owned electricity supplier.

EVN mentioned that Trung Nam has the right to charge transmission fees to partners for maintenance purposes, "When the assets are managed and operated by Trung Nam, they must take responsibility. EVN cannot intervene," adding that Trung Nam needs to fulfil its legal obligations before appealing to the prime minister for help.

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