The Auditing of EVN: The State Audit of State-owned corporations and economic groups

The State Audit of Vietnam started the auditing of the Electricity of Viet Nam (EVN) on June 23. The auditing will last three months, aiming at assessing the reports of the group&rsquo affiliates and united financial reports of the group and evaluating not only the group&rsquos compliance with the law but also how effectively they utilised their investments and assets. For a long time, though EVN has often cried out for capital shortage, the group still poured investments in other sectors. For example, EVN has decided to buy electricity from outside despite abundant power sources in the country. Whether or not auditing results clarify the organisations&rsquo investment strategies, capital mobilisation for development under the groups&rsquo orientation as well as specify the percentage of the amount of capital they have invested in other sectors.

 

 

EVN is crying out for capital shortage and said it needs more than VND11.8 trillion to carry out power projects. Of the capital, VND6.75 trillion comes from domestic credits, VND1.1 trillion from foreign loans VND4 trillion from bonds.

 

According to EVN, it had to delay constructions of 14 hydro-electric and thermo-electric projects in the first six months of this year five power projects which are in lack of capital are Huoi Quang, Ban Chat, Open Uong Bi 2, Quang Ninh Thermoelectric Plant 2 and Vinh Tan 2 some 220-500kV power grid projects are also in the same situation.

 

EVN still meets with serious difficulties as its urgent solutions could not help the group deal with the serious capital shortage. In addition, EVN&rsquos equity is on the downtr. At present, EVN equity stands at VND8.16 trillion compared to the initial equity of nearly VND11.93 trillion).

 

Though EVN is in serious shortage of capital, it has mobilised capital to invest in other sectors, including real estate, hotels, restaurants, civil airline and sea tourism. Moreover, EVN is ambitious to expand activities in finance sector when it invested VND2 trillion in An Binh Bank to become a strategic shareholder of the bank.

 

Of the total capital that EVN has invested in other sectors, some projects are questionable. The questionable projects include the capital mobilisation from EVN member companies to set up Lang Co Joint Stock Company which specializes in real estate, travel, hotels, civil airline, restaurants, sea tourism and etc. (building a Resort worth USD250 million or VND4.5 trillion).

 

The investments that EVN had poured into stock market, insurance and real estate have not been announced. To ease public wonders, EVN has announced that the total capital that EVN had invested in other sectors only accounts for 3.4 per cent. If the ratio is right, the capital reaches nearly VND1.7 trillion.

 

The capital EVN had invested in other sectors is equal to two thirds of the total capital that the group needs. It is a paradox.

 

 

After implementing the auditing on EVN, the State Audit of Vietnam will implement the auditing on the Vietnam Coal and Mineral Industries Group (TKV) and Vietnam National Shipping Lines (Vinalines). Auditing results can help the Government and authorities evaluate the effectiveness of these enterprises&rsquo investments which can then enable the drafting of sui policies to curb inflation and business restructure. However, the tr that State-owned corporations and economic groups expand activities to other sectors has become more popular.

 

For example, Vietnam National Coal-Mineral Industries Group (Vinacomin) has exted activities to boxit exploitation, aluminum production, and motor sector. Petro Vietnam has also penetrated into electricity sector, when it poured investment into construction of natural gas-to-power plant. Meanwhile, Vinashin and Petro Vietnam are planning to penetrate into sea transport industry, which had been the sole industry of Vinalines. 

 

However, economists blame the groups and corporations for failing to assess risks involved in allocating too much capital to other sectors and not enough in their core business.

 

EVN is a typical example when the group&rsquos EVN Telecom was sued by VNPT for the supply of E-phone and E-com services one year ago. EVN was also sued by PetroVietnam for cancelling of a power contract with Ca Mau Power Plant to buy electricity from China.

 

The results of the auditing of EVN will help clarify effectiveness of State-owned corporations and economic groups&rsquo management, investment strategies, capital mobilisation from which s a fair playground for all businesses. A question that whether the State should only let EVN manage electric transmission and production, not let the group mobilises capital to invest in other sectors has been raised?