Electricity shortage hitting economy

Amid the constantly prolonged electricity shortage situation causing serious damages to the country’s economy, ironically, a series of businesses that invested in building small and medium hydropower plants are falling into the bankruptcy tragedy.

Electricity of Vietnam (EVN) can not afford to actively invest in the electricity network although it committed to buy all the electricity of all projects when these projects are put into operation. Not only many small and medium-sized hydropower plants in Gia Lai and Kon Tum cried for help due to the lack of transmission, recently, Department of Industry and Trade of Lam Dong province also had to report to the Ministry of Industry and Trade about the need to solve problems of small and medium sized hydropower plants in the province.

Electricity sales below cost

According to the statistics during 2009-2011, EVN’s electricity selling price has been approved by the prime minister to increase by 31 percent (8.92 percent in 2009, 6.8 percent in 2010 and 15.28 percent in 2011) while EVN’s electricity buying price from small and medium hydropower plants remained unchanged for a long time. All hydropower plants operating before 2010 are required to sign agreement to sell electricity for EVN at the price of around 400-700 dong per kWh with the constraints of remaining the fixed price during 25 years regardless the bank loan rate, inflation and other relevant expenditures that are surging constantly.

Many projects’ owners are persevering in struggling to sell electricity according to the rush-hour division benchmark in accordance with the Decision No 18/2008 issued by the Ministry of Industry and Trade. However, only some plants that started operation in 2010 are applying this price benchmark. But, this way is not absolutely optimal. Because during the raining season, the total volume of water in reservoirs is high, however, the electricity price is low at only 460-481 dong per kWh while in the dry season and the volume of water in reservoirs is limited, the electricity price at the rush-hour reaches only 2,345 dong/kWh but it is controlled for only five hours per day and the price is only 563 dong/kWh. There will be not rush-hour on Sunday.

Too high bank loan rate

Currently, in the central highland province of Dak Lak there have been nine small and medium sized hydropower plants starting operations with a total investment of about 1.16 trillion dong and total capacity of 58MW. Of which, eight ones signed contract to sell electricity to EVN priced at 400-607 dong/kWh, the fixed price for 20-29 year period, only one plant namely Ea Mdoan 2 plant operating from early 2011 sold electricity to EVN in accordance with the Decision No 18, Dak Lak department of industry and trade reported.

Minister of industry and trade, Vu Huy Hoang also confirmed Vietnam’s electricity price during past years has been still lower than the cost price, giving the unbalance in finance for electricity producers.

Krong Hin hydropower plant, the Vietnam’s first private hydropower project, the sole plant in Dak Lak province has not posted loss yet so far thanks to the total cost estimate of 102 billion dong but the enterprise borrowed only over 48 billion dong. Furthermore, all expenditures for design, consultancy, construction, procurement and installation of equipments and operation management were saved absolutely and all these work were done by the project’s director himself.

Hoang Anh Tuan, Hoang Nguyen Co Ltd’s director, the investor of three small and medium hydropower projects in Dak Lak and Dak Nong provinces with a total capacity of 15.5MW, said that: “I entered the hydropower investment sector because I have heard that the government plans to subsidise the loan rate for hydropower plants. However, when asking to borrow capital, the Development Investment Fund confirmed the government cut this subsidy. I had to borrow capital at commercial banks although the loan ratio was only 55 percent of the project’ value with 200 billion dong on total investment of 360 billion dong, however, due to the electricity selling price was forced at too low amid too high loan rate, so the two hydropower plants operating from 2008 so far have put a huge debt block on the company”. As estimated, each year, the capital volume from electricity sales will pay about 19 billion dong of the interest and 12 billion dong of the original. But, with the current lending rate of up to 19 percent per year, we will have to pay the interest of up to 39 billion dong each year, leading to a heavy loss. – SGTT

Tags: Vietnam electricity, Vietnam energy, Vietnam power shortage