Mr. Franz Gerner
- What is your overall assessment for the development of Vietnam's electricity industry in the recent time?
Mr. Franz Gerner: Vietnam is one of the most successful energy markets amongst developing countries in the world.
In the past few decades, the access to electricity has increased from 50% to 99.6% in 1996 and 2018, respectively.
The energy sector has reduced its loss of transmission and distribution as well as commercial loss at the recovery rate of 99.8% and with the significant participation of the private sector in the power generation.
Vietnam is unceasing on its own development roadmap, in which each year its energy sector needs a fund capital of up to USD 8 billion to meet the demand for electricity growth. In addition, the increasing reliance on coal-fired thermal power to meet the future electric power demand exerts the enormous impacts on its environment, society and economy.
Therefore, the World Bank is giving a hand to the Government of Vietnam to enhance its access-to-electricity rate through furthering the private sector's participation and financial resources as well as converting the thermal power, as the most preferable one, to other sources such as natural gas and renewable energy sources.
- Recently, the WB has given assistance to the sustainable financial strategy of EVN. The World Bank's Global Energy Department has aided EVN in the credit rating process to be promoted to the Issuer Default Rating (IDR) at "BB" with "Outlook Stable" for the long-term loans in foreign currencies. What are the reasons for WB’s trust in EVN to support its sustainable financial strategy?
Vietnam's conventional financial model for energy infrastructure is mainly based on the public investment expedited by Vietnam Electricity (EVN) and its subsidiaries under the Government's guarantee and the domestic and international private sector’s participation in electricity production.
Vietnam's limited financial resources and graduation from IDA since 2017 have resulted in the gradual decrease in its accessibility to highly preferential loans, but the increasing needs for other financial resources in the energy sector. In addition to furthering the participation by the private sector, assisting EVN to access the commercial financial resources without the governmental support is other important commitment.
In June 2018, the Bank supported EVN, as the first-ever State-owned enterprise in Vietnam, in being granted Fitch Ratings of its credit profile, this is one step closer to issuing US dollar bonds and strengthening its capacity of financing accessibility.
With the support of the Bank, the National Power Transmission Corporation (EVNNPT) - the State's transmission entity has been granted the Fitch's Credit Rating since April 2019. EVNNPT now gains the Issuer Default Rating (IDR) at "BB" with "Stable Outlook" for the long-term foreign currencies and credit rating at ‘BB’ for unsecured debts with advance payment preference.
Currently, EVN and EVNNPT takes up the better positions to ensure their own long-term financial stability and to perform their functions of the safe, stable and uninterrupted power transmission to meet the needs of people and enterprises as well as the requirements for annual business investment.
Currently, other subsidiaries of EVN, including five power distribution companies, are aided by the World Bank in the similar credit rating plans. When Vietnam will seek to operate the competitive retail electricity market by 2021, gaining the positive credit ratings will be the key for these power distribution companies.
- How does WB assess the transparency of financial information, and business and production activities of EVN? Does the transparency meet the WB criteria?
EVN has provided the World Bank and other partners with its own annual financial statements prepared in accordance with the International Financial Reporting Standards, and audited by one of Big Four Accounting Firms before June 30 every year.
The quality of the statements is accepted by the World Bank.
EVN's capability to issue corporate bonds has been assessed by credit rating agencies, and these results have been announced. We also know that the Ministry of Finance, on the yearly basis, requires EVN to submit its financial statements prepared in accordance with Vietnamese Accounting Standards. The WB is working in a close cooperation with the Ministry of Finance in order for the large SOEs, such as EVN, to apply the International Financial Reporting Standards to improve their transparency of financial information.
- The competitive wholesale electricity market has been put into operation. As planned, by 2021, Vietnam will set up a competitive electricity retail market. How does the WB assess the importance of this plan in the development of Vietnam's electricity market?
The wholesale electricity market will be adequately operated by 2021, where large customers (such as large industrial customers as well as five Power Corporations) can sign contracts directly with the State-owned and private power generators to meet their own energy needs. Then, the Government will draw up the plan to introduce the competitive electricity retail market by 2023, where all power generators and distribution companies will compete to supply power to the industrial and commercial customers and households.
Although the competition expansion for all groups of customers may be beneficial, it is essential to identify the time for launching the competitive retail market. The World Bank recommends that the Government should take account of the international experience in term of costs and benefits of the competitive retail market as well as the timing of its operation.
Given the experience of Latin America, most of the countries halted their own competitive retail market when the power demand continues to increase sharply and new investments in the power generation and grid are no longer available due to the uncertainty of the operation of the competitive retail market.
- Thank you so much!