Power plants struggle with increasing costs and low revenues
The more they produce, the greater their loss.
This is the paradox experienced by companies that have invested in small and medium hydropower plants in the Central Highlands province of Dak Lak.
A Tin tuc (The News) bulletin report said the current distribution system based on State subsidy mechanisms have actually pushed most of these companies to the edge of bankruptcy.
Dak Lak is a province that has many hydropower plants but only one buyer – Electricity of Vietnam (EVN), which sets purchase prices at very low levels while the plants have to pay high interest rates on bank loans.
For instance, the Hoa Long Joint Stock Company borrowed 21 billion dong (US$1.03 million) to invest in the Ea M’Doal 3 Electric Plant with a designed capacity of 1.8 MW.
The plant was put into operation in 2008 and fetched an annual turnover of 3 billion dong – 4 billion dong.
Company chair Phan Muu Binh said interest on the bank loan has since jumped from 11.75 percent per year to 20%.
Meanwhile, EVN had set its long-term purchase price (20-29 years) at 400 – 607 dong per kWh before 2008.
Since 2008, the cost of generating electricity has increased considerably, including the interest rates on loans, but the national power utility has kept the purchase price unchanged, Binh said.
The plant’s annual revenues were not enough to pay interest, water resource tax and wages for employees, he added.
In the dry season, the plant operates for just 10 hours a day with output at 20-30 percent of the rainy season.
“We invest in the power plant under the market mechanism, but sell electricity to EVN under the State subsidy mechanism,” Binh complained.
The Hoang Nguyen Joint Stock Company has invested 500 billion dong (US$23.8 million) in three hydropower plants: Quang Tien, Dak Ru, and Ea Kar with a total capacity of 15 MW, the report said.
350 billion dong ($16.6 million) of the investment was sourced from a loan with an annual interest rate of 10%.
The company expected to take back its investment in 10 years.
With soaring bank interest rates and EVN’s price freeze, annual revenues of 45 billion dong have not been enough to pay even the interest on loans that has gone up to 70 billion dong.
In July 2008, the Ministry of Industry and Trade issued Decision No 18 to adjust electricity purchase contracts between small and medium hydropower plants and EVN. The decision increased the average electricity price to 650 – 700 dong per kWh.
The decision also said that during the four months of the rain season, hydropower plants that have been put into operation after 2008 could sell 85 percent of their capacity at 460 dong per kWh, and the remaining 15 percent could be sold at 230 dong per kWh.
However, the companies have complained that revenues earned during the rainy season are not high enough to offset losses incurred during the remaining eight months of the dry season.
Recently, the Dak Lak People’s Committee proposed to the government and the Ministry of Industry and Trade that small and medium hydropower plants in the province are allowed to renew their contracts with EVN.
It said the plants should be able to sell power at 80 percent of average price under Decision No 18 during rainy and dry seasons.
Water resources tax could be 2 percent of the electricity price and banks should offer preferential interest rates to companies so that they can break even.
Dak Lak has nine small hydropower plants with a total capacity of 58 MW that are operational. The plants, built at a cost of 1.160 trillion dong ($55.2 million), generate more than 290 million kWh each year.
Category: Business