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EVN to increase power prices to offset losses
Vietnam Electricity (EVN) will make up for its losses resulting from electricity trading and exchange rate discrepancies by hiking power prices from now until 2015, said EVN deputy general director Dinh Quang Tri.
Speaking last Friday to further explain the issues related to the power business, Tri said EVN had borrowed US$7.4 billion loans to invest in power projects in 2010 and 2011. The loans guaranteed by the Government brought EVN a loss of VND26 trillion as of the year-end because of exchange rate volatility.
In addition, the State-run group suffered a total loss of VND11 trillion in the last two years as it had to buy electricity at high prices and mobilized power sources fueled by diesel and fuel oil due to drought and power shortfall.
Tri informed EVN had reported to the Prime Minister on its exchange rate loss in 2010 and 2011.
The Government has permitted EVN to factor the losses caused by the fall of the Vietnamese dong currency against the U.S. dollar into its account over four years starting 2012. “Otherwise, the Government could not get money to repay the loans it has guaranteed,” Tri noted.
He ascribed the losses on power trading and forex rate differences to objective factors. “They will certainly be covered by power prices,” he stated, adding it is indispensable.
Other groups and corporations like PVN or Vinaconex do not enjoy loss offset because they are operating in accordance with market prices, but EVN is not. “This is policy losses, consumers must bear,” he reiterated.
He added that from now to the year-end, even though forex rates remained stable, EVN would consider including a portion of its losses in power prices, meaning it would increase power prices. “The specific increase level has not been calculated.”
The Government’s regulations allow EVN to increase power prices every three months, but it has to seek permission of the Government and relevant ministries before any price hike, said Tri.
The EVN leader said that although weather conditions are favorable and cheap power sources are mobilized, EVN cannot cut prices because it has to cover its losses.
Regarding the investment in non-core business sectors, Tri informed EVN would have to divest VND1.1 trillion from stock, banking, real estate and insurance sectors.
Specifically, EVN’s VND757 billion stake in ABBank may be transferred to Geleximco, after its proposal to transfer the shareholding to HDBank was turned down by the central bank.
Tri said ABBank’s share values are now very low, roughly VND7,000-7,200 each, but the partner offers to buy at VND10,000 per share, higher than the current market prices. Nevertheless, the final decision will be made by the Prime Minister.
In the field of insurance, EVN thought it would gain huge profits when selling its 22.5% stake, worth VND125 billion, in Global Insurance Company (GIC). Tri said this business is doing well, and the German partner is seeking to buy more shares to increase its stake to over 20%.
“We are negotiating prices, with the proposed buying price being VND40,000 per share, versus the original price of VND10,000, so EVN would enjoy high profits,” said Tri.
The problem is the regulations of the Ministry of Finance do not allow foreign entities to hold more than 20% stakes. Therefore, EVN is seeking approval for this so that it could divest its capital.
Tri said EVN had invested a total of VND103 billion in real estate, via EVN Land Central and EVN Land Saigon. EVN Land Central will sell its entire land to repay shareholders, and EVN expects to earn huge profits.
Only the group’s capital contribution to An Binh Securities Company is difficult to divest due to drastic market decline, said Tri.
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