Giant EVN trying to negotiate for a delay to pay its debts

Published: 27/04/2011 05:00



PetroVietnam, the oil and gas group, and Vinacomin, the coal producer and
supplier, released the information about the sums of money the Electricity of
Vietnam (EVN) are owing to them, EVN has admitted to big debts, but said it
still cannot pay the debts right now.

Dinh Quang
Tri, Deputy General Director of EVN

to PetroVietnam and Vinacomin, the total sum of money EVN is owing to them is
about 6600 billion dong. Meanwhile, recently, Hiep Phuoc Power Company, one of
the electricity suppliers to EVN, has threatened to stop providing electricity,
if EVN does not pay the debt of 36 million dollars, or 756 billion dong.

Dinh Quang
Tri, Deputy General Director of EVN, admitted that the group is burdened with
huge debts. He said, debts in oil, gas, coal and electricity purchasing
contracts has totaled up to 8 trillion dong. Meanwhile, EVN incurred a loss of
8 trillion dong in 2010. The electricity retail price increase has only been
applied since April 1, therefore, it cannot pay debts right now.

Tri said on
Tien phong, that EVN has reached a consensus with Vinacomin and PetroVietnam
that EVN will prioritize paying debts in the electricity purchasing contracts
signed with foreign invested enterprises, such as BOT Phu My 2 and Phu My 3.
EVN will also prioritize paying debts in the contracts on purchasing fuels to
run power plants. As for other debts, EVN will pay later, with interests.

“We are in
such circumstances and I think other enterprises should agree with our plan. If
we had money, we would pay immediately,” Tri said.

VnExpress quoted a manager of Vinacomin as saying that to date, “EVN and
Vinacomin still have not agreed on any plan to settle the debts.”

The manager
said that though EVN is a big debtor, Vinacomin still has to continue providing
coal and electricity to EVN. According to his calculation, with the old
electricity pricing mechanism, EVN will surely incur losses. However, the
electricity price has increased by 15.28 percent since March; therefore, no one
can say that EVN would still be facing difficulties.

The manager
has stressed that EVN has to pay the debts in 2011. “EVN needs to pay debts
this year, because we are facing big difficulties ourselves. In order to ensure
normal operation, the subsidiaries, which lent to EVN, now have to borrow money
from banks and pay interest rates monthly,” he said.

Tri from
EVN complained that people do not have good understanding about electricity
production. The Hiep Phuoc Power Company, a foreign run power enterprise,
threatened to cut power immediately if it incurs losses. However, EVN, as a
state owned economic group, which has the responsibility of providing enough
power to the national economy, does not act like Hiep Phuoc. EVN still has to provide
power even when it incurs losses.

“Last year,
we had to run some power plants with oil in order to reduce the power cuts,” he

He went on
to say that EVN wants to speed up the process of marketing the electricity
prices, and that EVN does not want to hold power generation corporations
(GENCO) any more. EVN has sent a document to the Prime Minister, asking for the
permission to split GENCOs from EVN, so that EVN will only have one function of
buying electricity from GENCOs to distribute.

However, it
is clear that it is impossible to split GENCOs from EVN right now, because
power companies can only borrow capital when they still belong to EVN and use
EVN brand.

Therefore, a roadmap on splitting GENCOs from EVN has been suggested, under
which GENCOs will still belong to EVN for three years and will gradually
operate independently from EVN.

In reply to
the criticism that EVN has been using too much money to make investments in
non-power sectors, such as banking, real estate and telecom, Tri argued that
the total investment capital of EVN in other business fields is just about
three percent of EVN’s total capital, or three trillion dong. Meanwhile, a
government’s decree stipulates that enterprises are allowed to make investment
in other business fields with the capital of up to 30 percent of capital.

Minister of
Industry and Trade, Vu Huy Hoang, on April 19 instructed EVN to prioritize
paying debts to Hiep Phuoc Company as promised. Besides, the agencies and
departments need to soon organize a meeting where leaders of the Ministry of
Finance and MOIT will chair and listen to the financial reports of the

C. V

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