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EVN works to reduce losses

Update: January, 04/2014 - 10:15

Facing capital shortages, Electricity Viet Nam (EVN) has asked national coal group Vinacomin and PetroVietnam to invest in power plants, EVN deputy general director Dinh Quang Tri tells Vnexpress.

In 2011, EVN claimed it had suffered VND38 trillion (US$1.8 billion) in incremental losses. However, in 2013 the corporation was able to reduce losses by nearly one-half. How could you reduce your losses so quickly?

There were various reasons leading to our corporation's heavy losses in 2011, including the loss of VND2 trillion ($571.4 million) in business operation and VND26 trillion ($1.2 billion) in the differentiation of the exchange rate.

In 2013, our electric output increased remarkably due to two main factors: the commission of the Son La Hydro Power Plant and a lot of rain falling during the year. As a result, we were able to compensate for the loss of the previous years.

Also, in 2012 the electric tariff increased VND40 per kwh compared to the previous year. Meanwhile, the price of coal we bought to produce electricity increased between 20-40 per cent, depending on the type of coal. That means the electricity tariff produced by thermo-power plants had gone up, as well.

A key factor that helps EVN cut down the electric tariff is the low production cost of thermal power plants, at VND503 per kwh.

In 2013, EVN gross revenues reached VND172 trillion ($8.1 billion), and the expected profit is about VND120 billion ($5.7 million).

What are your comments on the conclusion made by Government inspectors that EVN has included the cost of building some villas and swimming pools into the electric tariff?

Prime Minister Nguyen Tan Dung has reached the final conclusion about such a report, and has instructed the Ministry of Finance to consider and write a guiding document for EVN to implement.

The Can Tho thermal power plant built a swimming pool and a tennis court. That recreational area was inaugurated in May 2013. So the construction cost has not been included into the electric tariff. To solve this problem, EVN has instructed the Can Tho Thermo Power Plant to use its social welfare money to pay for the cost of the swimming pool and tennis court.

The PM has assigned the Ministry of Finance (MoF) and the Ministry of Industry and Trade (MoIT) to work closely with the Ministry of Construction to draft a guiding document asking all State-owned enterprises not to include the operational cost of the workers' dormitories into the electric tariff.

In reality, MoF has already instructed SOEs on how to implement the corporate income tax.

In industrial parks for foreign investors, the Vietnamese Government has already provided land to build houses for their workers and the construction costs of these houses are included in corporate income taxes.

More recently, the PM has again asked MoF and MoIT to set specific criteria costs for building workers' accommodations. Pretty soon, the two ministries have to sit together and come up with an agreement on the cost for building the workers' houses.

The document must be available within two months.

In several meetings, EVN has asked the PM for a special mechanism, as it finds itself in a very difficult position to access loans. How do you respond to that information?

At present, both the mother company and its affiliates have basically had sufficient money to invest in new projects.

Yet, some corporations, particularly three power generators, find themselves in a very difficult situation to access new loans since their current debt ratio is already triple their ownership capital. For one of them, the debt ratio is 5-6 times over their ownership capital.

To solve this problem, EVN has to, on behalf of them, borrow the money and then re-lend to them so that they can begin new projects.

This is a tough decision. But we have to do it, as the demand for electricity is increasing. It is forecast that in 2014, EVN has to invest VND123 trillion ($5.8 billion) in new projects.

At present, the debt/capital ownership of the mother company is 1.8-2 times.

However, if EVN will borrow the money and lend it back to their affiliate companies, our debt/capital ownership ratio will increase rapidly. If things continue to develop this way, in two or three years time such a ratio will surpass its ceiling.

How far has EVN withdrawn capital from its non-core business?

In 2013, we had already withdrawn some VND252 billion ($12 million) from the An Binh bank and VND26 billion from the Global Insurance Corporation.

In 2014, we'll continue to withdraw our share from the An Binh bank and real estate companies, including the Sai Gon Real Estate company. We have submitted our plan to MoIT. In the first quarter of 2014, we will continue to withdraw our shares from these companies. — VNS


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