Retail power market eyes competitive future

Hanoi (VNA) - Prime Minister Nguyen Xuan Phuc in February issued Decision No 168/QD-TTg approving a five-year (2016-20) restructuring plan for the electricity sector. Dinh Quang Tri, deputy general director of Electricity of Vietnam (EVN), told the Vietnam News Agency that the plan envisages increased transparency and competition in the sector.

Q: What is the role of EVN in the plan? Which solutions will the group have to implement to achieve the plan’s set targets?

A: Vietnam’s electricity sector includes EVN and other State-owned economic groups and corporations like the Vietnam National Oil and Gas Group (PetroVietnam), Vietnam National Coal and Minerals Group (Vinacomin), the Da River Corporation as well as other investors.

EVN plays the key role in power production and supply.

The PM has assigned the Ministry of Industry and Trade (MoIT) the task of directing relevant agencies in implementing the plan. EVN will be responsible for restructuring businesses in the electricity sector.

EVN has 100 percent capital in three big power generation corporations and plants that play an extremely important role in the country’s socio-economic development and national security.

The group also owns 100 percent of the National Power Transmission Corporation, five other corporations that manage power distribution, trading and market operations.

Based on the five-year plan, we’ve come with a project to restructure businesses under EVN’s management. We have submitted the project to the MoIT and the PM for approval.

EVN has drawn up specific restructuring plans for its member companies with the aim of enhancing transparency in the costing of power generation, transmission, distribution and trading. It also seeks to promote healthy competition among units participating in the power market.

The group will equitise the Power Generation Corporation 3 (GENCO 3) this year and GENCO 1 and 2 in 2018.

We will also help power corporations separate power distribution costs and retail costs, towards increasing transparency in the pricing mechanism.

EVN will also transform the National Load Dispatch Centre (the System Operator) into a one-member limited company with an accounting mechanism independent of the group.

It will submit a plan for this to the MoIT and the PM in 2018 for approval.

We are working with the ministry in approving or submitting plans relating to big power plants that are extremely important for socio-economic development and national defence.

We are also working on regulatory mechanisms for power corporations in the wholesale market.
In addition, we will restructure power distribution companies to compete on an equal footing with other businesses in the retail market, starting in 2021 before officially launching (the competitive retail market) in 2023.

Q: What will be the role of GENCOs in attracting investment and directly participating in the competitive power wholesale market after their equitisation?

A: As the PM has approved, EVN will equitise the three GENCOs in two phases.

For the 2016-18 period, GENCOs will remain under EVN’s management, with the group holding at least 51 percent of their shares. In 2019-20, the group will consider reducing its controlling stake in the GENCOs. The GENCOs will cease to be EVN subsidiaries after two years of equitisation.

Currently, the GENCOs are having difficulties in investing in power projects. The group has submitted to the PM a restructuring plan for them, under which they can sell a part their equity in power generation companies to improve their financial capacity to ensure a debt to equity ratio of less than three as per the law.

This would help EVN and GENCOs ensure reciprocal capital for attracting investment into new power projects.

EVN has also suggested that the PM allows the GENCOs put up shares worth more than half of their charter capital in their IPOs. If their shares are not sold out, EVN would continue to hold controlling stakes in these corporations and divest later.

The GENCOs will continue to participate in tthe competitive wholesale power market after their equitisation.

Q: How will the five power corporations be structured as the power distribution and retail costs are separated?

A: According to Decision No 168, in the 2016-2020 period, all the five power corporations – the Northern Power Corporation, the Central Power Corporation, the Southern Power Corporation, Hanoi Power Corporation and HCM City Corporation – will remain one member limited companies in which EVN holds 100 percent of the charter capital.

During this period, EVN will also continue holding 100 percent of the charter capital in companies managing power grid distribution.

Firms engaged in retail trading of electricity will be equitised following the development of the power market.

As of now, the five corporations are managing both power distribution and retail trading.

According to the roadmap for developing the domestic power market, retail trading will be separated from management of power grid distribution starting from 2021.

After that retail trading units will compete to each other and other private companies to sell electricity to customers.-VNA