Disputes Remain in Equitisation of Power Industry

 

At the Seminar on “Consulting, Supporting and Implementing the Vietnam Electricity Sector Equitisation Project” recently held in Hanoi, Mr. Sharad Somani, Manager Global Infrastructure and Projects of KPMG, who represented consultants, supporters and implementers, said: the selection for equitisation of power plants is based on commercially competitive capacity, investment-continuing capacity and preset roadmap suitability.

 

Power distribution companies will play important roles in the future wholesale market. According to the latest plan about the equitisation of 13 selected power distributors, the equitisation ratification is based on commercial competitiveness ( sales of 1,500 GWH a year at a minimum), geographical closeness, customer composition, management capacity and management focus. As to investment capacity, proposed companies must be able to mobilise capital internally and to approach various sources of sponsorships.

 

With regard to commercial competitiveness, consultants put forward the size criteria of 300-600 MW. According to this norm, three power plants of Thac Mo (150 MW), Ninh Binh (100 MW) and Ba Ria (389 MW) out of five proposed plants (two others: Da Nhim-Ham Thuan-Da Mi and Uong Bi) have smaller sizes than expected. Mr. Sharad Somani, said: Thac Mo and Ninh Binh plants can be equitised after the proposed expansions are completed. Explaining the reason for post-investment equitisation, Mr. Dinh Quang Chi, deputy general director of EVN, said: the projects of raising output and expanding facilities before equitisation are aimed to increase attractiveness to investors.

 

As regards power purchase contract validity, consultants said: investors hoped for a contract with a validity of 15-20 years and it must not be a hurdle to the formation of a competitive wholesale market.

 

Mr. Sharad Somani also said that electricity distributors have two equitisation methods. First, they can be equitised basing on the existing conditions. Second, they can merge or divide. However, the preferred project for the equitisation of the three power plants and five distribution companies is all these companies reach 1,500 GWh benchmark, more or less, except for Ninh Binh and Da Nang.

 

According to Mr. Dinh Quang Chi, the target of equitisation is to mobilise various domestic capital sources for the electric sector but if the equitisation is only allowed for enterprises with output of 300-600 MW, only foreign investors will be able to invest. “It takes several thousand billion VND to build a power plant with a capacity of 100MW. So, how many Vietnamese enterprises have such capital resources to invest in?” Ms Tran Thi Truc Bach, Controlling Committee of the EVN Directors Board, wondered.

 

However, consultants asked for the reconsideration of pledged sponsorship sources for the expansion. It’s important to define latent contradictions between the Government’s strategy objectives and the commercial benefits of private enterprises. Thus, a complete legal framework for the equitisation roadmap is necessary. What’s more, it should be suitable for the growth target and stable market building set in the roadmap.