Active in Balancing Capital

High inflation and interest rates resulted to a substantial rise in input costs. According to Vinacomin’s preliminary report on business operations in the first nine months of 2011, royalties, export duties and other costs increased to VND5,600 - 5,700 billion. Soaring prices of input materials like petroleum, iron and steel have pushed up coal production costs significantly. Input costs are estimated to climb 9 - 10 percent this year.

Meanwhile, domestic coal prices rose by just VND270,000 on average per tonne, generating revenues of some VND1,700 billion and coal export prices are projected to be raised by VND290,000 per tonne. Rebalanced input costs are forecast to rise by approximately VND2,300 for each tonne produced.

 

Another difficulty facing Vinacomin is a vast amount of investment capital and a long time of investment required for a new mine. It takes from 4 to 5 years, even 6 to 7 years, to start commercial production and takes some more years of operation to reach designed capacity. Ha Lam coalmine project was approved in 2007 with a total investment capital of VND2,200 billion but the value has been revised up to VND8,700 billion at present. Underway Khe Cham II - III project is estimated to take up VND14 - 15 trillion. Nui Beo coal project may have its investment capital revised up in the coming time.

 

Despite these difficulties, as a most important energy supplier in the country, Vinacomin always strives to complete all plans and objectives assigned by the Government. At present, Vinacomin has not been able to take back a huge amount of money indebted to the Electricity of Vietnam but the group still supplies enough coal for its power plants. According to the latest data, EVN is indebted thousands of billions of Vietnamese dong to Vinacomin but the latter still plans to deliver 11 million tonnes of coal for power generation. Even, Vinacomin also agreed to add 500,000 tonnes for EVN’s new power plants this year. The coal supply to other customers is very smooth.

 

This year, the group will produce approximately 47 million tonnes of run coal and sell 42.5 million tonnes to the market. The demand for coal is estimated to increase in the coming years. Thus, to meet the coal demand, Vinacomin must invest more for production expansion. And, the more investment, the more difficulty Vinacomin will face if it is unable to balance inputs and outputs.