Power shortages deter investors
Large foreign players hurt by Vietnam's power shortages have offered the country some words of wisdom to improve the country's power market.
HCM City-based Nordic Business Association (NordCham) said several new Nordic companies had increased their present investments and new companies had been established recently.
"However, many of NordCham's companies face problems with lack of energy because of power cuts and shortages which have slowed economic output, especially in southern Ba Ria-Vung Tau province, which is home to many Nordic companies," said NordCham's chair Sigmund Stromme.
"Several weeks ago, a big European garment and textile company came to Vietnam in search of investment opportunities. However, they left Vietnam for another regional country, saying that Vietnam's high power-related costs were unattractive to keep them stay," said the head of Vietnam Business Forum's (VBF) Infrastructure Working Group Tony Foster.
Vietnam's power consumption was projected to rise rapidly - at a rate at least double that of gross domestic product, or at 12 per cent per annum minimum.
The construction of new power plants in Vietnam is not keeping pace with increasing demand, resulting in a shortfall in power supply, especially at times of peak demand. The situation is particularly serious during the dry season, due to lower availability of the hydro-electric power plants, which make up around 40 per cent of the country's installed capacity. In 2010, this led to severe power shortages and cuts, with the electricity outage hours for each firm almost doubling from 50 hours in 2009 to 89 hours in 2010.
The Electricity of Vietnam (EVN) early this year said Vietnam would continue facing a power shortage of at least 3 billion kWh this year due to scarcity of water in reservoirs.
Foreign investors in the electricity generation field claimed that to tackle this problem, Vietnam had to adjust energy prices to regional levels. Only higher but realistic prices, they argued, would enable power businesses to generate operating surpluses to finance capital expenditure, and thus allow these to operate on a commercially viable and sustainable level.
Foreign investors also underscored the need to reshuffle Vietnam's electricity industry, particularly reducing the dominance of EVN by allowing other players in the market.
A Ministry of Industry and Trade official said 11 power projects comprising 10 coal-fired and one gas-fired plants were being implemented. Specifically, construction of the 1,200 megawatt Mong Duong 2 project would begin in July, 2011 in Quang Ninh province and be completed in 2015.
"Once these projects are completed, Vietnam will have an additional 13,000 megawatts of electricity to national power grid," he said.
Vietnam Investment Review - June 8, 2011