Thursday, 27 January 2011
Vietnam: EVN makes bold promises
With many of its largest projects considerably delayed and an unusually dry rainy season in the north that will mean hydroelectric plants must operate well below capacity again, EVN is having to look north to China to fill the gap. Deputy CEO Duong Quang Thanh put it simply in interviews: “We will negotiate with China to increase our purchase of power as much as possible for the year.”
EVN has thus been forced to continue with its international bond issue and has asked the government to provide a guarantee of US$667 million. International investors have been reluctant to lend to Vietnam's economic groups, even performing and profitable ones such as PetroVietnam and Vinacomin, and they seem less than keen to put money into underperforming EVN.
EVN has continually failed to invest strategically in Vietnam's electricity generation and though some of this reluctance is due to the market pricing structure and a reliance on hydropower over other forms, its investment choices have also been questionable.
Over the last five years EVN has increasingly focused on non-core business elements, including a large telecom company, banking, real estate, and finance. While expanding into these areas the group handed back 13 coal-fired power stations it had been given the responsibility to build under the energy master plan.
EVN may be happy to take even a higher than normal yield in the international market as interest rates at home are now reaching 14 per cent for deposits and over 17–18 per cent for loans. The Vietnamese government may be seriously considering increasing the caps it maintains on electricity pricing to make the generation market more attractive to foreign and domestic investors alike. Until this happens it is unlikely that EVN will be able to attract adequate investment.
For more news and expert analysis about Vietnam, please see Vietnam Focus.
© 2010 Menas Associates