To reach a target of building new electric supplies with a total capacity of over 12,000 megawatts in 2010, the Government has taken measures to encourage the private sector, including foreign-invested enterprises to invest in the electricity industry.
Private investors encouraged
According to Minister of Industry Hoang Trung Hai, Vietnam will diversify investment in the electricity industry, calling for Vietnamese and foreign investors to join the Electricity Corporation of Vietnam to develop the industry. Accordingly, the State will monopolise electric transmission and regulation. It will call for investment from the private sector into development of electricity supplies and distribution with an increasing ratio, suitable with each concrete period of time. The industry will operate under the market mechanism with regulations of the State. At the same time, administrative reform will be promoted to accelerate compensation and site clearance, thus helping project owners accelerate their project implementation and join the stock market, issuing bonds in Vietnam and foreign countries to generate capital for electric power projects.
In the 2005-2015 period, the Government has announced a list of projects, encouraging economic sectors in Vietnam and foreign countries to invest in. These include 14 projects on developing electricity sources and networks with a total of around 10,000 megawatts for Vietnamese investors and seven projects on electricity generation with a total capacity of 11,000 megawatts for foreign investors in the BOT (build, operate and transfer) form. Regarding electricity distribution, electricity companies in 64 provinces and cities will be equitised in 2006 and 2007. Hai said that the State was calling for investment from local and foreign enterprises in the form of independent power plant (IPP), build and transfer (BT), BOT, joint venture (JV) and joint stock company (JSC).
Legal framework yet to be suitable
However, according to Tony Foster from the Vietnam Business Forum Infrastructure Work Group, due to a lack of clear legal framework on the role of the private sector in the energy industry, some emerging problems have completed the private sector’s investment in the Vietnam electricity industry. As a result, many projects developed by the private sector in the industry have failed because of a lack of agreement on prices. Wartsila is an example. It is still difficult to negotiate on prices even for successful projects. This has discouraged investors. Foster said the fact that foreign-invested enterprises had to apply for licences to invest in the electricity industry under to the Law on Electricity was a real burden for them.
Also, the regulations on equitisation do not encourage strategic investors to bring modern technologies to Vietnam. The existing regulations stipulate a low cap for a stake held by an investor. This has prevented the industry from receiving attention from major investors, let alone improvements in management the equitisation can bring to it.
The Law on Electricity envisages a roadmap for the local electricity industry. However, managers still worry because they are unclear how the development they have envisaged will impact on investors’ decision. Investors, in turn, need to make sure that their projects will be effective and will not be hampered by the industry’s restructuring.
More investors needed
According to the suggestion from the Vietnam Business Forum, the development of future projects should follow the successful foreign-invested projects, including Phu My 2-2 (a project was implemented with a bidding method) and Phu My 3 (a project was implemented with a negotiation method). The Government should supervise closely to uncover any wrong doing after considering carefully ideas of international donors, multilateral organisations and major investors.
To ensure that negotiations of projects are on a right way, prestigous advisers are needed to provide the standards on tax and competition in the region or for each concrete project. The method provides timely updates of information, ensuring transparency.
Foreign-invested enterprises should not have to apply for licences for their projects in the electricity industry after they have investment licences in Vietnam. Also, the regulations on equitisation should be amended to attract strategic investors by allowing to them hold certain interests from assets of equitised enterprises. Control stake should be sold during equitisation and the control of EVN should be reduced. Auctions of share prices should be implemented in line with the international practice to attract major investors. To create an effective electricity market, it is necessary to attract more investors to boost competition.
Lan Anh
Vietnamese
