High interest rates hit energy development

Energy groups have expressed their concerns regarding excessive loan interest rates and capital shortages that have made it hard to survive, a recent seminar heard.

During the Ha Noi seminar last week, organised by the Viet Nam Energy Association (VEA) in order to find ways of speeding up energy projects, participants bemoaned current high lending interest rates, ranging from 19 to 21 per cent, which inhibit them from accessing bank loans for production and investment purposes.

Vu Manh Hung, deputy general director of the Viet Nam National Coal and Mineral Industries Holding Corporation Limited (Vinacomin), said that a new coal mine required an investment of around VND8 trillion (US$400 million) or $200 to $240 per tonne of coal. According to the new Law on Minerals, which takes effect from the beginning of next month, Vinacomin will have to organise around 30 per cent of the total investment needed in order to open a new mine.

The new law was set to place investors such as Vinacomin in a difficult position, Hung said.

Viet Nam was currently planning to develop coal-using thermo-electricity plants during the next few years that would require around 40 million tonnes of coal by 2015, Hung explained, citing that Vinacomin would only be able to import around 6 million tonnes of coal.

He added that consequently, Vinacomin would have to expand its domestic coal production capabilities in order to fulfil the demand for coal. Where the corporation would find enough capital in order for it to succeed in its plans remains a problem.

At the seminar, representatives from construction companies involved in developing power plants, complained about debt collection from power projects that they had helped construct.

Le Van Khuong, deputy general director of Song Da Holdings, said that his group was currently facing capital shortages as an investor, being in debt as a constructor.

He added that, while Song Da Holdings had completed part of the VND1.2 trillion Lai Chau Hydroelectric Plant in northern Lai Chau Province, plant investor Electricity of Viet Nam (EVN), had only paid his group VND200 billion.

“With an interest rate of over 20 per cent, Song Da Holdings deferred from borrowing from banks in order for it to complete its work,” Khuong said, calling on EVN to pay Song Da properly for the work that it had done.

In response, a representative from EVN, Luu The Bieu, explained that, up until now, EVN had arranged VND3.6 trillion for site clearance and equipment procurement.

Bieu added that EVN was also struggling, citing that total investments for the Dong Nai 4 Electricity Project had been adjusted from VND4.5 trillion to VND6 trillion due to inflation and lending interest rates.

With lending interest rates at 21 per cent, EVN had found it hard to borrow loans from banks in order to offset additional capital.

According to Bieu, EVN had asked the Government to allow it to issue corporate bonds worth $1billion abroad, the process of which is still under Ministry of Finance consideration.

According to experts, the electricity sector has not been attracting investors due to low product prices.

Energy groups have called on the Government to roll out solutions in order to help them cope with the current situation, asking for official development assistance, the subsidising of interest rates and to guarantee their bond issuance abroad.

The Group additionally requested that the Government allow coal and electricity prices to be sold following a competitive market mechanism. —VNS

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Posted by VBN on Jun 21 2011. Filed under Energy. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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