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Fuel price rises hit coal electricity producers
Electricity and coal producers are preparing to deal with a sharp increase in production costs as a result of the latest fuel price hike.
The increase in petroleum prices that took effect on March 7, of between VND600 and 2,100 per litre, will have significant impact on most industries, particularly power and coal production, industry insiders say.
Nguyen Van Bien, deputy director of the Viet Nam National Coal and Mineral Industries Group (Vinacomin), said the corporation's production costs would increase by VND390 billion (US$18.73 million) as diesel prices have increased by VND1,000 from VND20,400 to VND21,400 per litre.
It would create a big burden on the coal industry particularly in the production of coal for power generation, Bien said.
The latest adjustment in coal prices for electricity production, which was done in March 2011 with an increase of 5 per cent, had helped Vinacomin collect an additional VND200 billion from selling about 11 million tonnes of coal to the electricity industry.
However, the adjusted coal prices accounted for only between 51 and 55 per cent of coal production costs, he said.
In February this year, Vinacomin proposed raising the coal price for power production to a level equal to production costs, but it has yet to receive a response from concerned agencies.
According to a Vinacomin official, the production cost of coal has now reached VND1 million per tonne, while coal is now sold to electricity generators for just VND600,000 per tonne.
A report by the Dau Tu (Investment) newspaper says that except for hydroelectricity plants that are not affected by the fuel price hikes because they use water for running their turbines, all other kinds of electricity generation will suffer direct or indirect impacts of the fuel rate changes.
For instance, the Ca Mau 1 and Ca Mau 2 gas-fired thermal power plants, which have a combined annual capacity of 1,500 MW, will be heavily affected by the fuel price hikes as the gas price is based on world prices of furnace oil (FO).
The Electricity of Viet Nam estimates that power production costs in the remaining months of 2012 will increase by about VND300 billion.
This suggests a possibility of electricity price hikes in the near future, since the fuel price is one of three main factors in adjusting power prices. The Prime Minister's Decision No 24/QD-TTg dated April 15, 2011 says electricity selling prices would be adjusted according to market mechanisms.
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