Steel industry gobbling up power: EVN

The Electricity of Viet Nam Corp (EVN) has submitted to Prime Minister Nguyen Tan Dung a proposal that would require big steel projects build their own power plants.

The proposal follows an investment boom over the last decade in steel production projects that require a lot of electricity.

According to the EVN, the steel plants and refineries are operating with power supplied by EVN at the price of VND909.28 (US$0.047) /kWh, much lower than the $0.067/kWh in Indonesia, $0.081/kWh in Thailand and $0.14/kWh in Singapore.

The cheaper power prices make Viet Nam more attractive for investors in the steel industry.

Viet Nam has now 65 steel production projects with a minimum capacity of 100,000 tonnes of steel per year. These include 32 lisenced by provincial authorities that are yet to be approved by the central Government.

Central government approval is required for projects with registered capital of VND1.5 trillion (US$77 million) or more.

The Tuoi Tre (Youth) newspaper has reported that although many plants operate at 50 per cent of their capacity, they consume some 3,500 million kWh per year.

A manager of the Hai Phong Electricity Co which has six steel refineries in the city, said it consumed four million kWh of the total seven million kWh supplied by the national grid to Hai Phong every day.

“The suspension of one of these steel refineries for one day can help us save some 400,000 kWh, enough to meet the daily needs of a district with 120,000 people,” said the manager who declined to be named. According to the Ministry of Industry and Trade (MIT), 15 of the 32 steel projects yet to be approved by the Government are using outdated technology which consumes up to 500 – 600 kWh per tonne of steel billet, compared with the 350-400 kWh per tonne that Japanese technology uses.

The ministry has therefore asked the Government not to license steel projects using outdated technology.

The investment boom in Viet Nam’s steel industry has not only violated the master development plan for the sector approved by the Prime Minister, but also caused an imbalance in the power sector.

To power these steel projects, EVN said, they need to invest over VND35 trillion (US$1.82 billion) to build new power plants and other facilities.

The chairman of Viet Nam Steel Association, Pham Chi Cuong, agreed with EVN’s proposal, said steel complexes all over the world tend to have their own power plants.

He said provicial authorities must ask investors to include power plants for their steel refineries before their projects are lisenced.

Cuong said that since 2006, Ba Ria – Vung Tau province has adjusted power supply plans seven times due to newly-licensed steel projects with a total capacity of 20 million tonnes per year.

As a result, the 1.2 million tonne/year Posco plant in the province suffered power cuts of seven to eight days per month during the dry season.

Resort projects halted

The Hoang Anh – Gia Lai (HAGL) Group, which has invested in four big hotels and resorts in the central coastal and Central Highlands provinces, has said it would withdraw from these tourism projects because they have become less profitable.

The group, which is headquartered in the Central Highlands province of Gia Lai, has announced a plan to re-structure its investment with priority given to five major sectors: rubber, minerals, real estate, hydro-power plants and wood and stone processing, the newswire VnExpress reported.

Tourism projects, especially hotels and resorts, which have been recognised by the group’s management as less profitable, will not be included in the group’s future development plans.

Nguyen Van Su, General Director of HAGL, said the group has not invested in tourism projects over the last three years, after making huge investments in four hotels and resorts in Quy Nhon, Da Nang, Da Lat and Gia Lai.

HAGL also plans to withdraw from the project to develop a 4-star resort in Da Lat by transfering its ownership in this project to another investor.

Su said the group has also sold its resort in Quy Nhon but is still running the hotels in Da Nang and Pleiku.

These hotels will also be sold when convenient, he added.

Doan Nguyen Duc, president of the group, was quoted by VnExpress as saying that HAGL is not so good in doing business in tourism industry.

“We have invested in some projects in this sector but they gave little or no profit at all. That’s why I have decided to quit,” said Duc.

As of now, the group has no intention to expand activities to other business sectors, he added.

Duc said he is pinning his hopes on rubber production, hydro-power plants and mineral exploitation.

New carrier heats up

The arrival of the new domestic carrier Air Mekong is expected to offer passengers on domestic routes more choices while stirring up competition in the domestic market.

Air Mekong, Viet Nam’s third private air carrier, is scheduled to launch its maiden flight on October 10 and tickets for its flights will go on sale in mid-September.

With its fleet of four 90-seat Canadian Bombardier CRJ 900 aircraft, the new carrier has the advantage of landing in small airports with runways that are less than 2,000 metres long.

Truong Thanh Vu, Air Mekong Commercial Director, said the airline is currently waiting for the Air Operator’s Certificate (AOC) from the Civil Aviation Authority of Viet Nam (CAAV).

Air Mekong will provide passenger and cargo services on routes from Ha Noi and HCM City to Da Nang, Nha Trang, Da Lat, Phu Quoc, Con Dao, Ban Me Thuot, Hai Phong and Vinh.

Vo Huy Cuong, head of the CAAV’s Air Transport Department, said the aircraft leasing contract signed between Air Mekong and the US company Skywest Leasing, offers the former another advantage over other local air carriers in Viet Nam.

Cuong explained that Indochina Airlines’ ‘wet’ leasing contract includes the leasing of pilots, cabin crew and maintenence staff as well.

Therefore, prices of Air Mekong’s domestic flights will be “competitive” compared with Viet Nam Airlines’, according to Tuoi Tre newspaper.

Around 26.2 million passengers and 445,800 tonnes of cargo were transported by air in Viet Nam in 2009, four times the 2000 figures.

To date, CAAV has granted licences to nine operational airlines: Viet Nam Airlines, Jetstar Pacific Airlines, Vasco, Viet Air, Indochina Airlines, Mekong Air, VietJet Air, Blue Sky Air and Trai Thien Air.

Viet Nam Airlines holds more than 80 per cent of the domestic market, particularly dominating routes from HCM City to Phu Quoc and Da Nang. — VNS

Tags: Vietnam energy, Vietnam steel industry