PV: The Prime Minister has recently approved the Project on restructuring the power sector, as a result EVN will have to boost up your restructure activities. Can you tell me what actions EVN will take in order to put this Government’s instruction into reality?
Mr. Dinh Quang Tri: Vietnam power sector currently is composed of Vietnam Electricity, Vietnam National Oil and Gas Group (PVN), Vietnam National Coal and Mineral Industries Holding Corporation Ltd. (Vinacomin), Song Da Corporation, and other investors who are involved in developing the power system and in supplying electricity to the socio – economic development and the people’s lives. Among which, EVN is the state owned economic group who plays a fundamental role of electricity supply in the power sector.
With the view to realizing the Project, the Prime Minister has assigned the Ministry of Industry and Trade to supervise and direct relevant organizations, in which EVN will undertake responsibilities for performing a majority of works in rearranging and restructuring her member organizations.
At present, EVN holds 100% of the equity of three Power Generation Corporations (GENCOs) and large scale power plants which have critical significances in socio – economic development, national defense and security. At the same time, EVN holds 100% of the equity of National Power Transmission Corporation, five Power Corporations, controls power system and electricity market operation.
EVN has established a Comprehensive Project on rearranging and restructuring enterprises under EVN for the period 2016 – 2020. To this end, EVN shall:
- Equitize three Power Generation Corporations (GENCOs) between 2016 and 2018;
- Separate power distribution charges from electricity retailing costs of Power Corporations;
- Transform the National Load Dispatch Center (NLDC) into the Electricity Market and Power System Operation One Member Limited Liability Company, which will be financially independent from EVN.
EVN together with the Ministry of Industry and Trade have engaged in the processes of applying for or approving activities to realize the Project, for example involving large scale power plants with critical significance in terms of socio – economic development, natural defence and security in the competitive wholesale electricity market; developing electricity tariff schemes in line with development levels of the electricity market; developing regulation schemes among Power Corporations in the competitive wholesale electricity market; power distribution charge schemes, etc.
In addition, EVN shall streamline organization structures of Power Corpporations so that these corporations can fairly compete with other enterprises in the competitive retail electricity market which will start from 2021 and officially operate from 2023.
PV: Will equitization of GENCOs put pressure on financial arrangements for investment in and construction of power generation projects, sir?
Mr. Dinh Quang Tri:
At present, the financial situations of GENCOs are still fragile and their investment in power generation projects has faced a lot of difficulties. In order to successfully equitize these GENCOs and ensure that the GENCOs upon equitization will be accountable for executing new power generation projects defined in the National Power Development Plan (Decision No. 168/QĐ-TTg dated 7th February 2017), EVN has put forward to the Prime Minister a mechanism for realizing the equitization and improve the soundness of their financial situations before equitization.
Accordingly, the Government shall empower EVN to direct the GENCOs to sell a part or the whole of their shares in power generation joint stock companies, to secure the debt to equity ratio not exceeding three times as per the current legal regulations. Furthermore, the earnings gained via selling shares will enable EVN and GENCOs to increase their equity and chartered capital which then will be used as counterpart funds in new investment projects assigned by the Prime Minister.
In order to attract strategic investors, big investors to buy shares of GENCOs, EVN recommends that the Prime Minister should allow to sell more than 50% of the chartered capital of GENCOs in their IPOs. In cases that the offered shares are not sold out, EVN will continue to hold a majority of shares in GENCOs and will consider capital divestiture to reduce her shares to a level lower than the dominating one (Decision 168/QD-TTg). After being equitized, the GENCOs will continue their participation in the competitive wholesale electricity market.
PV: Which organizational structure will be applied to the five Power Corporation, in order to steadily separate power distribution charges and electricity retailing costs, sir?
Mr. Dinh Quang Tri: According to Decision 168/QD-TTg, during the period 2016 - 2020, all the five Power Corporations sustain their existing organizational structures as one member limited liability companies with 100% of the chartered capital owned by EVN; and carry out separation of their power distribution charges and electricity retailing costs.
According to Decision 58/2016/QĐ-TTg, the Government holds 100% of the chartered capital of power distribution area; electricity retailing area will be equitizied in line with the roadmap of establishing and developing electricity market.
At present, five Power Corporations have been controlling both power distribution and electricity retailing business. With the view to equitizing the electricity retailing business, an organizational separation will be needed in management of power distribution and electricity retailing.
According to the electricity market development roadmap (Decision No. 63/2013/QD-TTg issued by the Prime Minister), electricity retailing business will be separated from power distribution area upon operation of the competitive wholesale electricity market from the year 2021. At that time, electricity retailers will compete with each other and with other private joint stock companies in selling electricity to customers. As such, according to the milestone based electricity market development roadmap, the electricity retailing business will be separated and equitized after 2020.
In order to facilitate the equitization of electricity retailing business after 2020, between 2016 and 2020, together with separation of power distribution and electricity retailing, EVN will gradually study, rearrange and modify organization structures of bodies who are performing power distribution and electricity retailing functions of Power Corporations towards clearly separating organizational structures and functions during the competitive wholesale electricity market period.
Assuming that organizations in power distribution and electricity retailing business are being separated at the end of competitive wholesale electricity market, the electricity retailing business in cities and provinces under Power Corporations will be separated after 2020 for equitization; in which the Government will hold from 50% to 65% of the chartered capital in compliance with Decision No. 58/2016/QD-TTg.
PV: Thank you!