EVN plans to issue $1billion worth of international bonds

Published: 10/01/2011 05:00



VietNamNet Bridge – Duong Quang Thanh, Deputy General Director of the Electricity of Vietnam (EVN) has urged the government to instruct relevant ministries to support EVN to complete legal procedures soon, so that EVN can issue one billion dollars worth of international bonds.

According to Thanh, the plan to issue $1 billion worth of international bonds has not been approved by the Ministry of Finance.

“We have worked out an arrangement with some commercial banks that are saying they can get involved in the capital arrangement if the deal is approved by the Ministry of Finance,” Thanh said

EVN believes that the government needs to instruct relevant ministries to support EVN to complete the necessary legal procedures to issue $1 billion worth of international bonds. Since the required capital for power projects will be very big in the time to come, EVN has also proposed that the government prioritize allocation of ODA (official development assistance) capital to power and energy projects. The State Bank of Vietnam has been urged to allow commercial banks to provide loans worth more than 15 percent of the banks’ own capital.

Thanh admitted that he worries that it would be not favorable for Vietnamese enterprises to issue international bonds especially when Standard & Poor’s has lowered the credit ratings of some Vietnamese economic groups. However, Thanh said that EVN will consider situations and circumstances to decide the moments for bond issuance.

“In the immediate time, the plan on issuing international bonds needs to be ratified by the Ministry of Finance,” Thanh said.

Minister of Industry and Trade Vu Huy Hoang said that the financial problems of EVN are also a part of the government’s responsibility. “The proposals will be considered by the ministry and reported to the government,” Hoang said.

Prior to that, the Vietnam Coal and Mineral Industries Group (Vinacomin) and PetroVietnam also announced plans to issue international bonds in 2010. Each of the economic groups planned to raise $500 million or $1 billion from international bond issuance. However, they have decided to delay their plans until a more suitable time.

EVN has always complained that it seriously lacks capital to build power plants and has been urging the government to allow it to raise the electricity retail price.

Nguyen Huu A, Director of Can Tho Thermopower Plant, said that in 2011, two power plants, O Mon and Can Tho will have to provide two billion KWH of electricity. With the oil and exchange rate on the rise, the company will need two trillion dong in capital to maintain operations. However, to date, the company still cannot arrange capital. In 2010, Can Tho power plant incurred the loss of three trillion dong.

General Director of the Northern Electricity Corporation Nguyen Phuc Vinh said that the 10 provinces in the north now have to purchase electricity from China at 1400 dong per KWH, but it can sell the electricity to power distribution units at 750 dong per KWH, or just equal to ½ of the cost price.

Meanwhile, Nguyen Manh Hung, General Director of the Electricity Transmission Corporation, complained that while it is very costly to build a transmission system, the transmission fee in Vietnam is at the lowest level in the region. The transmission fee in other regional countries is .01USD per KWH, while in Vietnam, the fee is  $0.32. Hung said his corporation has to invest in a transmission system with 98 percent of clients being farmer households and it has incurred the loss of trillions dong.

“Now the corporation does not have any more capital to make further investment. Meanwhile, we cannot borrow money from commercial banks, because we do not have reciprocal capital,” Hung said.

Thanh from EVN has warned that electricity shortage will continue to be a problem in 2011, because the group will have to produce electricity and purchase electricity at high prices, but have to sell electricity at low prices.

It is expected that in 2011-2015, EVN will need 150 trillion dong, while the total debts incurred have reached 46 trillion dong. Also due to lack of capital, EVN is meeting difficulties in mobilizing the high-cost electricity from DO and FO oil run sources to ensure the electricity supply for 2011. EVN said it needs about 54 trillion dong to produce electricity from oil, but commercial banks do not want to lend.

According to EVN, the only solution to remedy the electricity shortage is to adjust the electricity retail price, which EVN believes is below production cost. However, raising the electricity price is always difficult, because it faces the opposition from people who believe that EVN is trying to unreasonably raise prices.

Pham Huyen

Provide by Vietnam Travel

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