VINACHEM

With the current high interest rate of 19-21%, energy groups of Vietnam are facing lot of difficulties in accessing capital, especially in the context that banks are ignoring capital provision to the electricity industry due to debt problems.
Last weekend, Vietnam Energy Association organized a conference to discuss common measures to hasten energy projects. The title came from debt problems of groups, which caused many barriers for smaller sized energy enterprises in accessing loans.

Vu Manh Hung, Deputy General Director of Vinacomin stressed, “The group expects to open a deep coal mine in coming time but we also do not know how to meet enough 30% of total investment capital according to Law on Minerals that will take effect from July 1”.

Investment for a new coal mine has increased strongly to almost $200-240 per tone, total need of capital for a project is around $400 million or 8 trillion dong, he estimated. With the regulation requiring equity of 30% of investment estimate, this will be the huge capital amount that Vinacomin as well as other investors will find it very difficult.

In the forthcoming time, Vietnam plans to develop coal-fed thermo power industry. Concerning only 13 old thermal electricity projects of Power Planning 6 that the Electricity of Vietnam (EVN) “refused” and returned to the government in the end of 2008, they will need up to 40 million tons of coal by 2015 if wanting to ensure the right progress. As planned, all projects will eat imported coal while after 2015, Vinacomin will be able to import only 6 million tons. Vinacomin now has a big headache how to increase domestic coal output to meet the demand amid serious capital shortage.

Therefore, coal output is on danger of not meeting demand of electricity demand.

With the similar problem, Song Da Group as both investor and contractor is stuck because of “chain debt”.

Le Van Khuong, Deputy General Director of Song Da Group said that our difficulty was multiplied due to capital shortage in doing investment and payment delays of partners.

He said, “We, as contractor, are building Lai Chau hydropower plant with total workload value of 1.2 trillion dong, but so far the investor EVN has advanced only 200 billion dong. We did not have any money as starting work on Lai Chau hydropower plant. A lot of support works for the starting should have been carried out. We also are suffering similar problems in other projects as a contractor”.

Luu The Bieu, representative of EVN explained that to date EVN has signed to borrow only 3.6 trillion dong for resettlement of Lai Chau hydropower project. But actually the loan is not necessary immediately. The urgent issue is need of capital for construction installation, but EVN has not been able to arrange capital yet.

EVN also is struggling with shocks of forex rate, and higher interest rates. In Dong Nai 4 power project capitalized at 4.5 trillion dong, despite the group accessed loans of commercial banks. But for price slide and resettlement policy, total cost for the project was pushed to 1.5 trillion dong. EVN does not know how to manage the increased capital as the interest rate has risen to 21% per annum, Bieu complained.

Paying 200 billion dong to Song Da Corp for Lai Chau work was the group’s efforts, he confirmed.

EVN asked the government’s approval to issue $1 billion of international bonds to manage capital. Yet, the government sent the application to Ministry of Finance for consideration. Till now the ministry has not released any guidance.

Two of 13 electricity projects that EVN rejected have not seen any investor.

Most representatives of energy groups in the conference proposed the government to soon issue a mechanism to deal with the aforementioned difficulties such as prioritizing ODA capital for electricity projects, supporting interest rates, guaranteeing foreign loans, increasing coal and electricity prices based on market. – Vietbiz24