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EVN still has to conduct price negotiations for every project: MOIT
Ta Van Huong, Director of the Energy Department under the Ministry of Industry and Trade (MOIT), while talking about the power projects’ pricing, emphasizes that EVN still has to conduct price negotiations for every project.
It is very difficult to reach agreements in negotiating about the electricity sale prices of projects. While non-EVN investors want high prices to obtain optimum profit, EVN always try to force the prices down to the lowest acceptable levels. How can we attract investments in the power sector, while Vietnam still applies the one-buyer-only mechanism?
You may well know that there always exist the contradictions between the parties, the Electricity of Vietnam (EVN) and non-EVN investors in negotiating the power purchase agreements (PPA). Why don’t the MOIT apply the mechanism on selecting power project investors through bidding as stipulated in the Decision No. 30 on the management over independent power plants (IPP)?
It is not true that the MOIT does not apply the bidding mechanism to choose investors for power projects. The ministry, considering concrete situations, decides to organize bids to select investors. The Ministry of Planning and Investment has not promulgated regulations on the criteria for projects. However, I think that in the time to come, the selection of investors for projects, especially IPP projects, will be carried out in a stricter way to ensure that we can choose capable investors.
Investors said that it is not attractive to make investments in the power project, since the Government of Vietnam is still controlling the retail electricity price, though there has been clear roadmap about power price floating. Is this also the reason that makes investors unable to negotiate with EVN?
It is true that the Government still cannot float the electricity prices to leave the prices to be defined by the market supply and demand. It is still interfering the power pricing. If the Government floats the power price right now, it will not have the tools to serve social policies, like providing electricity to 70% of population in rural areas and implementing social security policies.
A competitive power market needs to meet two requirements. First, investors have to offer the lowest possible electricity prices to consumers. Second and more importantly, the market must ensure the power security.
However, I don’t agree with the viewpoint that it is not attractive to make investment in the power sector. You see, a lot of investors joined the bids for the BOT projects of Nghi Son 2 and Mong Duong 1.
The State is still ensuring the reasonable profit for investors, and commits to purchase the projects’ electricity for 20-25 years. Therefore, making investments proves to be the attractive choice.
However, the projects you have mentioned are the BOT (build-operation-transfer) projects, while in IPP projects, investors find it hard to find a common voice with EVN.
It is true that the negotiations between domestic power projects and EVN have been facing difficulties. In many cases, the normal order that PPA needs to be reached before the investors kicked off projects was broken. In these cases, investors kick off the projects first, and during the construction, the investors negotiate with EVN about the electricity price.
It is because the investors of the projects are all big domestic investors, who hope that if they cannot get a common voice with EVN, they will be able to forward the problem to the Government for settlement.
However, this way of investment must be stopped. Investors have to follow the laws in implementing projects. The investors, who still cannot reach agreements in negotiating for fuel supplies (coal and gas), and the PPA, must not kick off the projects.
Do you think that an electricity price frame to be promulgated by the MOIT will help settle the current problems between power investors and EVN?
The MOIT promulgated Decision 2014, setting temporary regulations on the price frame for power projects. The regulations are still being used by EVN for reference in negotiations.
However, these are just the bases for investors to calculate the investment cost, while the MOIT cannot fix firm prices for all power projects. The power projects, which have advantageous positions, long term and stable fuel supply sources, will certainly have better and be more attractive than the power plants in more difficult areas.
As the State is still controlling the electricity price, the MOIT approves different electricity prices for different power projects. The general principle in price negotiating is that the State accepts the reasonable profit for investors, not an overly high profit.
VietNamNet, LD
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