Electric Power Industry Final-jd

8/10/2019 Electric Power Industry Final-jd

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VIETNAM: ELECTRIC POWER INDUSTRY

Presentation for Korean Embassy

May 8 2009


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Presentation Overview

1. Electric power industry structure

2. Vietnams demand for electricity

3. Vietnams supply of electricity

4. Investment in Electric Power Sector

5. Independent power plants

6. Establishment of competitive power market

7. Electric Price Determination Policy

8. Electric network connecting plan between

Vietnam and neighbour countries

9. Projects calling for foreign investment

10. Projects rejected by EVN

11. Best prospects for Korean companies

12. Competitors and Challenges to foreign

suppliers

13. Market entry recommendation

14. Q & A session

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1. Electric power industry structure- Management Organization

Proposed Electric Power Industry Organization (Source: EVN) 3


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1

Ministry of Industry and Trade (MOIT): Industry regulator and

policy maker

Vietnam Electricity (EVN): State owned monopoly

EVN: 3th largest SOE in terms of revenue

EVN reports directly to Prime Minister

EVN: Single buyer of electricity from power plants and single

electric transmission body

Industry Legal Framework

Electricity Law 2004

Sixth Power Development Master Plan (Decision 110/2007)

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1. Electric power industry structure - Management Organization


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1. Electric power industry structureEVN Parent Company

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i. 3 large hydro-power generation companies;

i. The National Electricity Dispatch Center;

i. The Electricity Information Center;

i. The Electricity Source Project Management Boards;

i. The Management Board of the Executive Center and Electricity Telecoms

Projects; and

i. Most notably, the new to-be-established Electricity Trading Company and Electric

Transmission Corporation


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1. Electric power industry structureEVN Subsidiaries

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According to the Decision 147, EVN Group includes:

6 one member limited liability enterprises 100% owned by the State;

5 enterprises converted into one member limited liability enterprises in 2006-

2007;

2 one member limited liability companies newly established;

26 enterprises with the EVN Group's stake of more than 50% of charteredcapital;

6 affiliates; and

5 professional units.


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2. Vietnams demand of electricity

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Electricity production by sources. Source: Electricity of Vietnam www.evn.com.vn (Retrieved September 1st, 008)

Estimated energy consumption in Vietnam

(Exclude nuclear power)

1,925,420

2,729,611

8,834,784

5,163,391

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

2005 2010 2015 2020

Coal Hydro Petroleum Gas Total consumption

Billion BTU- billion British thermal unit


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2. Vietnams demand and supply of electricity

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Growth rate of electric sector is

equivalent to 2 times of GDP. (GDP

growth 8-9% during 2006-2015)

Actual demand for electricity grew

by 16-17% per year

Generating capacity was 14,000

megawatts (MW) in 2008. In order

to achieve high economic growth,the installed generating capacity

would have to more than double to

26,000 megawatts (MW) by 2010.

Power shortage from 2006 till 2009

Electric production from 2000-2008Bi

kWh



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2. Vietnams demand of electricity vs power shortage

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-

10 0

20 0

30 0

40 0

50 0

60 0

70 080 0

90 0

1,000

1995 2000 2005 2010 2015 2020 2025

Base case

Electricity output Electricity demand (base)

TKwh

-

100

200

300

400

500

600

700

800

900

1,000

1995 2000 2005 2010 2015 2020 2025

High case

Electricity output Electricity demand (high)

T Kwh

As addressed in Decision 110, in the base case, the shortage is 46.3 TWh in 2015 and 159.8

TWh in 2020 and 102.4 TWh in 2015 and 270.8 TWh in 2020, in the high case, alternately.


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Power Generation

Total power generation capacity of EVN

generation plants was 71% in 2008 and IPPs

29%

Potential of hydro power in Vietnam 123

billion kWh/year, Hydro plants exploit 50%;

productivity of 66,9 billion kWh/year

Coal, Gas (South) and Hydro (North and

Center) play major roleTrend: Additional 2,700 MW required per year

in period 2006 2010

Trend: Coal expected to rise to 20% of

generation by 2010

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Hydro Plants

Thermal PlantsImport

Others


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3. Vietnams supply of electricity - Hydropower potential in Vietnam

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Natural conditions

Area 328.000 km2; 4/5 mountains and highlands

Mean annual rainfall : 2.000 mm

In Vietnam: 2.400 rivers with the length of 10 km and longer

Most of the rivers run into the East Sea with about 870km3 water volume annually (37.500 m3/s in

discharge)

Hydropower potential

Theoretical potential: 300 x109 kWh

- Technical potential: 123 x109 kWh

- Technicaleconomical: 75 80 x109 kWh (1.800 -2.000 MW)

- At present: 20% potential is in utilization (4.200 MW and 18 x109 kWh)

Potential of Small Hydropower 30 MW is about 300 projects (total of 2.000 3.000 MW and 810

x109 kWh)

Pump storaged projects: At present 10 projects are specified with 10.000 MW in which one project1.200MW put in operation in 20182020 an one 1.000 MW in 20202025


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3. Vietnams supply of electricity Hydropower Potential

Hydropower accounts for a large

portion of electricity production.

It is estimated that by 2020, the totalcapacity of hydropower plants shall

reach around 13,000-15,000 MW.

Over the long term, the percentage of

capacity and power generation of

hydropower will decline significantly incomparison with other energy sources.

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Power Transmission & Distribution

In 2006:

500 KV:

220 KV:

110 KV:

Rural electrification rate: 97,26%

of households (Jun. 2008)

Goal: 100% by 2020

Expansion of Transmission &Distribution systems required


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4. Investment in Electric Power Sector

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Estimated Investment:

US$ 40 billion required until 2015

US$ 30 billion for power generation

US$ 10 billion for Transmission and

Distribution

Expected Sources:

EVNs funds

Equitization of power plants and

power distribution companies. ODA loans

State budget

Commercial loans

Export credit

Private funds (IPP projects)


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5. Independent Power Plant (IPPs)

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Overview:

IPPs: 29% of total output capacity

IPPs play increasing role

IPPs developed by local and foreign

companies

Two major foreign IPPs:

Phu My 3 (716 MW, Gas, US$ 412 million)

Phu My 2.2 (715 MW, Gas, US$ 410 million)

Active IPP developers: EDF, Sumitomo,

Sojitz, BP, Semcorp, Petrovietnam,

Vinacomin

Large number of upcoming IPP projects PPA with EVN: 4.04.5 US Cent per KWh

Challenges:

Legal and regulatory issues

Lack of transparent competitive market

Access to fuel (gas and coal)

Coordination among government agencies


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Under the Electricity Law, the following factors are used as the

basis to determine electricity prices:

Policies on electricity prices of the Government;

Socio-economic development conditions of the country and the

incomes of citizens in each period;

Relationship between electricity supply and demand;Costs of producing and trading electricity and a reasonable profit

for electricity entities; and

Development level of the electricity market.

7. Electric Price Determination Policy

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ERAV is responsible to formulate retail price lists in order for the Minister

of Industry and Trade to consider and submit them to the Prime Minister

for his decision. The retail price lists must be approved by the Prime

Minister.

In general, electricity selling prices to industrial/business users are higher to

cross-subsidize lower prices of residential and rural users. Those high and

low prices are further differentiated depending on the sector and segment of

use, the purpose of use, the voltage of electricity, and the time of day whenthe use occurs (routine hours, low-demand hours, and high-demand hours):

From January 1, 2010 the price of electricity shall be adjusted in

accordance with the market price.

7. Electric Price Determination Policy - Selling Price

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The legislation on the topic of electricity prices for sale and purchases by EVN from

generation plants is Decision No. 2014/QD-BCN dated June 13, 2007 of the MOI (now is

MOIT) temporarily providing the guidelines on the contents of economic analysis, investment

finance and electricity price brackets of electricity projects (Decision 2014):

Decision 2014 provides the guidelines on the calculation and analysis of economic and

investment finance and the electricity price brackets applicable to investment projects for

electricity sources, aimed to form a foundation for negotiation of power purchase

agreements (PPA), to unify methodologies and ensure the selection of effective

investment projects.

Decision 2014 is applicable to the entities and individual investing into the projects on

electricity sources. In case of differences with the provisions on methods and figures

used in calculation, during the project appraisal, approval and PPA negotiation project

investors shall attach explanations.

7. Electric Price Determination Policy - Purchasing Price

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8. Electric network connection plan between Vietnam and neighbor countries

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2. With Cambodia

Period 20082010: Power supply from Vietnam to Cambodia with 150 - 200MW

by 220kV from Chau Doc to Ta Keo and Phnom Penh

Period 20152016: in case of Lower Se San & Lower Serepok Hydropower Plants

(430MW) in Cambodia will be built, energy will be supplied to Ho Chi Minh City

3. With China

In 2006 import 250-300MW via 220kV Lao CaiYen BaiViet Tri

In 2007 import 250-300MW via 220kV Ha GiangThai Nguyen

Plan to import 1500MW in period of 2006-2018 by 500/220kV from Hong Ha to

Soc Son


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9. Projects calling for investment (Decision 110)

No. Project Name Location Investment Form

1. Power Turbine Plant. Can Tho BOT, BOO

2. Power Turbine Plant. Southern Vietnam. BOT, BOO

3. Nghi Son II Coal Power Plant. Thanh Hoa. BOT

4. Kien Giang I Coal Thermal Plant. Kien Giang. BOT, BOO

5. Son My Coal Fired Plant. Binh Thuan. BOT, BOO

6. Kien Giang II Coal Power Plant. Kien Giang BOT, BOO

7.Plant producing power transmission

transformers

Hai Phong, Quang Ninh,

and other localities with

the right condition.

JV, 100% FOC


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In August, 2008, EVN has decided to return 13 electric power projects

which were assigned by the Government. Official Letter No.

7469/VPCP-KTN of the Government Office on disposition of 13

projects as follows:

EVN will undertake:

Duyen Hai 1(in Tra Vinh Province) which has the capacity of 2 x 600MW

Vinh Tan 2(Binh Thuan province) which has the designed capacity of 2 x 600MW.

Malaysias Janakusa Group:

Duyen Hai 2(in Tra Vinh Province) which has the capacity of 2 x 600MW

China Southern Power Grid:

Vinh Tan 1(in Binh Thuan province) which has the capacity of 2 x 600MW

The Vietnam National Oil and Gas Group (PetroVietnam) Long Phu 1(in Soc Trang Province) which has the capacity of 2 x 600MW


EVN usually complaint of capital lacking

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Lilama Corporation

Vung Ang 1(in Ha Tinh province) which has the capacity of 2 x 600MW

Vietnam Coal and Mineral Industries (Vinacomin)

Hai Phong 3 which has the capacity of 2 x 600MW

Group of contractors, including EVN and One Energy and Pacific CorporationG

Vinh Tan 3(in Binh Thuan province) which has the capacity of 2 x 1000MW

The group of Lilama, REE, and One Energy

Vung Ang 2 which has the capacity of 2 x 600MW

Three projects are still under consideration: Duyen Hai 3, Long Phu 2, Long Phu 3

Two projects are being preparing for international bidding:

Vung Ang 3 thermo powers plants

Quang Trachthermo powers plants


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10. Best prospects for Korean companies

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Best prospects:

Consulting and engineering services for

thermal power plants

Equipment for thermal power plants

Spare parts and overhaul services for thermalpower plants

Investment in IPP projects/upgrade existing

electric power plants projects

Participate in O&M contract

Prospective buyers:

Foreign IPP developers

Coal and gas fired project developers

Foreign contractors (Chinese, Japanese,

French and German)

Vietnamese contractors


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11. Competitors and Challenges to Foreign Suppliers

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Competitors:

Equipment: US, Chinese, Japanese,

Thai and European

Services: Chinese, Japanese and

European

Challenges:

Project delay

Red-tape and lack of transparency

Complicated bidding procedures

Corruption Flexibility and adaptability to local

business environment

Price competition

Finding good local partners


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14. Q & A session

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THANK YOU

FOR YOUR ATTENTION!

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Electric Power Industry Final-jd