Vietnam: Exchange rate fluctuations may push up power prices

Vietnam: Exchange rate fluctuations may push up power prices

Dinh Quang Tri, deputy general director of EVN, said because the global
price of oil and gas has decreased, the company was able to make up for VND5
trillion ($224.2 million) of this loss. Also, EVN optimised its production,
saving another VND3.5 trillion ($157 million). Therefore, the company's
losses from exchange rate fluctuations amount to about VND1.3 trillion ($58
million).

The company does not have the finances to satisfy its capital demand to
invest and domestic banks do not have enough money either, so the company
has to borrow from official development aid (ODA) and from foreign financial
institutions.

Moreover, according to Nguyen Anh Tuan, director of Electricity Regulatory
Authority of Vietnam, there are power plants in Vietnam built in the
build-operate-transfer format where EVN has to buy the power they produce
using either USD or VND calculated at the exchange rate on the day of
transaction. It also has to buy power from China.

"The three main currencies affecting EVN's ability to pay its debts are the
USD, the Japanese Yen, and the Chinese Yuan. In 2015, the average USD/VND
rate was VND21,948 per USD, up VND726 compared to 2014's average rate, an
increase of 3.42 per cent," said Tuan.

Regarding whether the exchange rate is going to affect the price of power in
2017, Tuan said that the retail power price will be calculated based on the
cost of production, which itself is based on fuel expenses, the price at
which it buys power from the plants, the sources of power, and the exchange
rate, as well as 2015 production costs. "If the 2017 cost of production is 7
per cent higher than it was in 2015, only then can EVN adjust the retail
price."

Dinh Quang Tri said each year EVN needs between $5 billion and $6 billion to
invest in its projects. "Given its current financial situation, EVN needss
the government to guarantee its loans," he said. "EVN is striving to make
sure all member companies can issue their own bonds without needing
government guarantee."

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com