Last year the group produced and bought over 127.8 billion kWh of electricity, posting an 8.47 per cent year-on-year increase. Of which, its power output was 56.45 billion kWh.—VNA/VNS Photo

HA NOI (Biz Hub)— Deputy Prime Minister Hoang Trung Hai has requested Electricity of Viet Nam (EVN) to ensure power supplies for the country this year, while also improving its service.

In a speech delivered at the conference to review EVN's operations in 2013 and launch its programs for this year, held in Ha Noi on Saturday, Hai said the quality of electricity in some areas had not met demand, despite EVN providing enough power for Viet Nam.

He urged EVN to focus on restructuring and reviewing the management of investments, thus reducing costs.

‘The Government targeted to adjust electricity tariffs according to market mechanisms. This was the reason that EVN should continue to make its figures relating to power tariffs public and transparent through independent audits," he said.

The deputy PM said Viet Nam now ranked 31st in the world, and fourth in the Southeast Asia, in terms of electricity consumption, though the quality had yet to meet demand.

In addition, the group had been under pressure to arrange capital worth US$20 billion for building two nuclear power plants.

Dang Hoang An, EVN's deputy general director, said last year the group produced and bought over 127.8 billion kWh of electricity, posting an 8.47 per cent year-on-year increase. Of which, its power output was 56.45 billion kWh.

EVN's figures showed that more than 20.6 million customers signed power purchasing contracts with electricity companies last year. The percentage of households using power nationwide reached 98.32 per cent.

Further, last year power demand for industry and construction only slightly increased, by 9.35 per cent, while those for consumption among domestic households, commerce and service sectors rose by 8.66 per cent and 8.49 per cent, respectively.

However, An said EVN reported profits of VND172.4 trillion (US$8.2 billion), increasing 20 per cent last year due to power tariff increases in August and December.

He also said average power prices last year were estimated at VND1.498 per kWh, increasing VND134.5 per kWh against 2012.

EVN also completed a receiving power grid in remote and rural areas, thus directly selling electricity to people in rural areas. He also said EVN planned to produce and buy 140.5 billion kWh of electricity this year.

Its total investment this year was expected to reach VND123.6 trillion ($5.9 billion), representing a 17.3 per cent increase over the previous year. Of this, VND90.4 trillion would be invested into electricity production and power grids, while VND39.9 trillion would be used for paying loans and interest.

EVN would invest in five power generation plants, with total capacity of 1,656MW, including Vinh Tan 2 (2x600MW), Bung River 4 hydropower plant (2x78MW), Hai Phong 2 (300MW) and targeting to bring Mong Duong 1 thermal power plant (500MW) and Duyen Hai 1 thermal power plant (600MW) into operation by the end of this year.

EVN also asked the Government to allow it to increase power tariffs this year.

Answering the proposal, deputy PM Hai said the country's price for power was no longer considered cheap, in comparison with the Vietnamese people's income, though the price remained lower than production costs.

He said customers required services and competitive power prices.

EVN's general director Pham Le Thanh said the group would also continue to renew with its main target to reduce costs in the South.

Power sector starved of funds

The electricity sector is trying to overcome its chronic funds shortage, considered to be the biggest barrier to its sustainable development.

Power Master Plan VII, the country's electricity development strategy, envisages building 54 thermal power plants with a total capacity of 36,000MW by 2020 and 77,950MW by 2030 to meet demand that is rising by 15 per cent annually.

Several hydro electricity, wind power, and nuclear power plants and electricity transmission systems will also be built during the period.

The Viet Nam Energy Association estimates that the industry will need at least $123.8 billion to achieve the generation target set for 2030. Industry insiders said that power companies always have difficulty in increasing revenues since it is not easy for them to raise electricity prices as it has an inflationary effect.

Most power projects are undertaken by the EVN, with funding from its own revenues, domestic and foreign loans, and issuance of bonds.

But it is no easy task since fund mobilisation regulations are not clear.

EVN's general director, Duong Quang Thanh, said the Government has not created a capital mobilisation mechanism for the power sector, while official agencies do not make accurate forecasts about interest and exchange rates. Power projects often require huge investments and for long terms.

Bui Van Thach, deputy head of the Central Economic Committee, said at a recent seminar that the electricity market had been subsidised for too long and so electricity selling prices are 10 per cent lower than cost.

Solutions

According to Thach, selling electricity at market rates would enable the industry to overcome the funding problem.

But to do it, the industry must disclose production costs to persuade power users that producers must sell at a certain price to survive.

Thach also stressed the need for quickly creating a competitive electricity generation market and setting up an electricity retail market by 2020 to ensure fair returns for investors.

"Many foreign firms want to invest in power projects in Viet Nam, but hesitate because electricity prices are too low.

"If the price of electricity is increased close to production cost and market rates, power producers will find it easier to raise capital for their projects." — VNS