EVN Plans Electricity Trading Joint-stock Company

Preparation for competitive electricity generating marketDao Van Hung, President of board of director of EVN, said that Vietnam is prepared to pilot the competitive electricity generating market. As the result, it is essential to establish the electricity generating trading joint- stock company under EVN in charge of buying electricity bulk from all of electricity factories of EVN, which take part in the electricity market. According to Resolution 26/2006/QQÄ- TT of the Prime Minister, the pilot competitive electricity generating market, in fact, is one where the only company is responsible for buying electricity bulk on market. EVN now has made direct contracts with the electricity generating companies under EVN and the others Independent Power Producers (IPP). The negotiations with IPP are always persistent because of no solution found to reconcile benefits between two sides. The main reason is that there has not been a fixed price list so the negotiation in buying electricity often makes the investors dissatisfied. Besides, the activities of buying electricity lack of transparency and guaranty for consumer’s interests.

 

In an interview with Business Forum about the foundation of the electricity trading joint-stock company, Hung uncovered that electricity price will be set based on the market principles, which will ensure for interests of both sellers and buyers. Through that, the investors can see the long-term benefits for their investment. After adjusting the price list of electricity retailing against the inputs and the public interest price of the Government, the electricity trading price will be counted at the fixed price.

 

The stocks of the electricity trading joint-stock company will be listed on the stock exchanged and issued to the public. According to Hung, the operation of competitive electricity generating market is likely to the stock market, meaning that the electricity generating companies will constantly offer the price and choose the electricity package with the most competitive price. At the moment, this method is applied in many countries in the world, for instance, in Ireland, the electricity generating companies, after 5 minutes, will offer price once and in England, 15 minutes for once. Vietnamese competitive electricity generating market will aim at once price offer per hour.

 

Annually, electricity sector requires a huge investment while its interest rate is very low. During the last years, the earnings from this sector are not considerable, just from 1- 2 percent per year. EVN is facing with much more difficulty in attracting investment in the next time when the investors themselves have to balance their profits based on the long-term efficiency. Therefore, the electricity generating joint-stock company is founded to ease the burden of declining investment into EVN.

 

Whether electricity monopoly exists?When the electricity generating joint-stock company is established, the role of EVN is equivalent to other electricity generating companies on the market. In theory, there will be separation in production, conductivity, and distribution, through which the long-standing monopoly in electricity industry will be eliminated.

 

However, it is doubted that the monopoly now will be removed to the electricity generating joint-stock company because this is the only company authorised in this area. In the suggestion collecting conference for project of establishing the electricity generating joint-stock company in Hanoi, Le Van Chung, President of Board of Director of Vietnam Cement Company, said that unless there is obvious mechanism, the establishment of the electricity generating joint-stock company accidentally makes industrial monopoly company monopoly. What the investors need to know are their profits and dividends from this project. Others added that hundreds of electricity generating companies but only an electricity buying company is still monopoly. Moreover, a joint-stock company is naturally under the pressure of profit and dividend from stockholders while electricity is a special good which has great impact on production and life of people. Therefore, the increasing electricity bulk-buying price will result in the increase of electricity retailing price, which once again press upon people and enterprises.

 

Dao Van Hung, President of Board of Director of EVN, responded that the electricity trading joint-stock company will limit the monopoly through buying electricity from the electricity generating company offering lowest price. Likewise, the companies with high offer price will have to reduce their quantities or stop generating electricity. Other founders of the electricity trading joint-stock company acting as buyers, sellers and even customers themselves balance the benefits.

 

However, whether many founders of the electricity trading joint-stock company, such as Vietnam Petrol Group, Vietnam Coal Group and Vietnam Machinery Installation Company as the role of either electricity traders or consumers will cause conflicts in benefit? Doan Van Kien, General Director of Vietnam National Coal and Mineral Industries Group (Vinacomin) explained that on the electricity market, Vinacomin now is not only the investor of six generating companies and the main shareholders of the electricity trading joint-stock company but also the consumer of billion KWh per year. From his point of view, more obvious the allocation of liabilities, revenue, profit between electricity generating companies and electricity trading companies are, more transparent the electricity market is. Although the establishment of electricity trading joint-stock company has not addressed fully the problems on the Vietnamese electricity market, this will lay the ground for the electricity generating market in the future. Once EVN no longer rules over the electricity market, there will be a balance among business profits, electricity supply and demand of market development.

The electricity trading joint-stock company is established by eight groups under state-owned union with VND 1,000 billion charter capital. Exclusive of 51 percent charter capital hold by EVN, 49 percent remaining is hold by Vietnam Petrol Group, Vietnam National Coal and Mineral Industries Group, Song Da Company, Vietnam Post and Telecommunications Group, Vietnam Cement Company and Vietnam Steel Company. After established (expected in 2007), the company will buy electricity from 34 factories and sell electricity for 11 electricity distributing companies. The electricity output is expected 61, 71 billion KWh in 2007, 76.47 KWh in 2008, 87.63 KWh in 2009 and 99.97 KWh in 2010.
Huong Ly