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Investing in power projects: easier said than done
The Electricity of Vietnam (EVN) said it is lacking capital to develop power plants, while calling on other enterprises to make investment in power projects. Meanwhile, enterprises say they are hesitant to inject money in power projects due to the barriers set by EVN.
Dang Thi Hoang Yen, Chairwoman of the Tan Tao Group, which is developing a power project, said that investors always have to fulfill very complicated administrative procedures. Besides the complicated procedures related to land allocation, which take six months to one year for each step, private enterprises always have problems with the regulations stipulated by EVN.
Yen related that a lot of projects still have to ask for permission from relevant ministries, though they are approved before by the Prime Minister himself. She said that enterprises miss a lot of opportunities due to the complicated procedures. In many cases, projects appear to have great potential at the beginning. However, by the time investors are able to kick off the projects, the opportunities have passed, or the capability of investors has diminished.
A recent UNCTAD report pointed out that in renovation years, Vietnam attracted a lot of FDI projects in production, but received very few projects in the power sector. UNCTAD believes that foreign investors will only inject money in power plants if they can get profit big enough to cover the risks they have to face.
The risks, according to UNCTAD, include many specific factors, which relate closely to EVN. Currently, independent power plants (IPP) can sell electricity to EVN only under short-term contracts.
EVN needs 6 years to decide prices
According to Tran Viet Ngai, Chairman of the Vietnam Energy Association, to date 47 IPP and BOT (build-operate-transfer) projects have been registered in Vietnam. To date, 17 IPP and two BOT projects have been operational, while other projects still … have to wait.
Ngai said that investors still have to follow the bidding mechanism with numerous procedures which take them several years.
One of the main reasons that make investors hesitate to inject money in power plants is that they are not sure if they can sell electricity. For this is something decided by the apparent whim of EVN.
Dinh La Thang, Chairman of the Vietnam National Oil and Gas Group (PetroVietnam), said that it once took the group two years to negotiate the electricity price for a project. Meanwhile, the time needed for price negotiation was six years for a foreign-invested project.
The UNCTAD report showed that some foreign investors are interested in power projects in Vietnam, but no considerable project has been kicked off. At this moment, no investor dares to commit to more than one project at the same time.
EVN subsidiaries should be removed from EVN
UNCTAD has made six suggestions to settle the current problems and develop the power market. The first thing is that it is necessary to separate the production, transfer and distribution divisions in EVN. It has also suggested splitting EVN and detaching the only purchasing unit from EVN.
In order to heighten the independence of the institutions, UNCTAD has also suggested transferring the ownership of state-owned enterprises from the Ministry of Industry and Trade to the State Capital Investment Corporation. It is also advisable to heighten the independence and capability of the National Load Dispatch Centre. Finally, UNCTAD recommends the detachment of the Energy Institute, which programmes the power industry development for Vietnam, from EVN.
According to UNCTAD, if Vietnam has a suitable mechanism, investment in the power sector could reach $1bil each year after 2010, which would allow Vietnam to have 1,000MW a year.
VNN
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