Power gridlock
09-MAY-2008 Intellasia | Thanhniennews
May 9, 2008 - 7:00:00 AM
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Electricity investors say they are trying to carve an opening in the industry from under a mountain of bureaucracy and red tape.
Only recently has the door to the electricity market been opened to others players to join state-run Electricity of Vietnam Co (EVN).
Although EVN still serves as the country's monopolised electricity producer, distributor and retailer, other companies are now allowed to invest in projects to generate electricity.
Yet, it is a long and arduous road to become a stakeholder in the industry.
Dinh La Thang, board chair of the biggest independent power provider (IPP) after EVN, the Vietnam Oil and Gas Group (PetroVietnam), said it normally takes his company two-years to negotiate sales of electricity with EVN.
Two-years mark a long period as the market may change a lot and force investors to adjust their original plans, Thang said.
With foreign investors, the time required to apply for licenses to build plants and then coordinate with EVN is even longer.
According to a United Nations report on Vietnam's investment policies released last November, the Phu My 2 Phase 2 power generating project, known as Phu My 2.2, in the southern province of Ba Ria Vung Tau took six-years to finalise.
The subsequent Phu My 3 project took a total of three-years.
The latest example of procedural delay happened last week when the Ministry of Industry and Trade (MoIT) the governmental unit responsible for electricity management decided to subject a 4,400 MW power generating project by ITA Group to further review.
The ministry said ITA Group is only a "drafter" and must wait to be licensed as an "investor" before being able to carry out operations.
But ITA Group, for all practical purposes, has already signed deals with foreign and domestic partners and is ready to kick-start its US$6.7 billion thermoelectricity project.
The bidding process is also unnecessarily complicated.
MoIT dictates that foreign investors interested in building power generators in Vietnam must bid for the rights.
On the other hand, with domestic investors, EVN can simply pick and choose which ever player it prefers.
If the chosen entity names an unaffordable price, EVN can then resort to the bidding process to find a more reasonable partner.
Experts say it is procedural problems that are postponing many of the country's IPP and build-operate-transfer (BOT) power plant projects not human resource, equipment shortage, or increasing input prices as MoIT and EVN claim.
The delays are so alarming that last month deputy prime minister Hoang Trung Hai had to instruct responsible authorities to speed up these projects 47 in all from now until 2015 as part of efforts to increase the country's electricity supply.
Vested interests
For electricity investors and analysts alike, the key to increase supply and reduce shortage is not simply procedural improvement.
Analysts say the country's fundamental electricity problem originates in the management's conflict of interest: MoIT owns EVN and is responsible for licensing investors, while EVN, the electricity monopoly, is entrusted with negotiating electricity prices with power plant investors.
EVN also controls the Energy Institute which draws up the electricity master plan for the entire country.
PetroVietnam's Chair Thang and Chair of the Vietnam Energy Association Tran Viet Ngai agreed that the overlapping responsibilities of the electricity monopoly and its parent administrative unit which span regulation, licensing, and retailing duties are deterring potential investors from entering the field.
Some suggest transferring EVN ownership to the State Capital Investment Corp so that MoIT can objectively review investors' applications.
The unit responsible for electricity planning at EVN should also be turned into an independent entity, otherwise, as experts warn, the country would find it hard to overcome its power shortage despite an increasing number of investors eager to supply electricity.
Abuzz arena
Generating electricity is progressively becoming an attractive field peopled with major IPP players ranging from private companies like ITA Group to state-owned corporations such as PetroVietnam, the Vietnam Coal and Mineral Industries Group, the Vietnam Machinery Erection Corporation, and the Vietnam Shipbuilding Industry Corporation.
Investments from these non-EVN entities will potentially help to ease the country's dire electricity shortage.
For instance, PetroVietnam's Ca Mau 1 and 2 projects, to be up and running in a few years, are expected to increase the country's total supply by 1,500 MW.
But from now until 2010, EVN will remain the nation's largest provider, with plans in the work to construct 23 new plants generating 33,000 MW, representing 60% of total capacity for the 2006-2010 period.
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