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VIETNAM: ELECTRIC POWER INDUSTRY

Presentation for Korean Embassy


May 8, 2009

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)

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1.

Electric power industry structure - Management Organization

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 - Stages


Electric power industry structure is divided into three different stages as
follows:

Generation
Hydro Plants
Thermal Plants
Import
Others

Transmission
Low-tension
Medium-tension
High-tension

Distribution
Companies
Industrial &
Household

Electric power industry structure EVN Parent Company

1.
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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Electric power industry structure EVN Subsidiaries

1.

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 20062007;

2 one member limited liability companies newly established;

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

6 affiliates; and

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

2.

Vietnams demand of electricity


Estimated energy consumption in Vietnam
(Exclude nuclear power)
Billion BTU- billion British thermal unit
10,000,000
8,834,784

9,000,000
8,000,000
7,000,000
6,000,000

5,163,391

5,000,000
4,000,000

2,729,611

3,000,000

1,925,420

2,000,000
1,000,000

2005

Coal

Hydro

2010

Petroleum

2015

Gas

2020

Total consumption

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

2.

Vietnams demand and supply of electricity

Growth rate of electric sector is


equivalent to 2 times of GDP. (GDP
growth 8-9% during 2006-2015)

Bi
kWh

Electric production from 2000-2008

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

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

Vietnams demand of electricity vs power shortage

2.
TKw h

Base case

T Kwh

High case

1,000
900
800
700
600
500
400
300
200
100
-

1,000
900
800
700
600
500
400
300
200
100
-

1995 2000 2005 2010 2015 2020 2025


1995 2000 2005 2010 2015 2020 2025

Electricity output

Electricity output

Electricity demand (high)

Electricity dem and (base)

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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3.Vietnams supply of electricity - Power generation development plan (types of generation)

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3.

Vietnams supply of electricity

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 role
Trend: Additional 2,700 MW required per year
in period 2006 2010
Trend: Coal expected to rise to 20% of
generation by 2010

Hydro Plants
Thermal Plants
Import
Others

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Vietnams supply of electricity - Hydropower potential in Vietnam

3.

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
- Technical economical: 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 8 10
x109 kWh)
Pump storaged projects: At present 10 projects are specified with 10.000 MW in which one project
1.200MW put in operation in 20182020 an one 1.000 MW in 2020 2025

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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 total
capacity 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 in
comparison with other energy sources.

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Vietnams supply of electricity

3.

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


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)


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: 4.0 4.5 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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6.

Establishment of a Competitive Electricity Market

Competitive Market:

Electricity Law outlines development


of competitive power market

Decision 26/2006: detailed roadmap for the


competitive power market
Phase 1 (2005-2014): competitive
generation with single buyer (EVN)
Phase 2 (2015 2022): competitive
wholesales directly to major end-users
Phase 3 (after 2022): competitive retail

EVN restructured into a shareholding


company
Electricity Retail Prices:

Electricity retail prices regulated by government

Decision 276/2006 approved price increase


roadmap and price deregulation
Jan 2007: 5.3 US Cent per KWh
July 2008: 5.6 US Cent per KWh
March 2009: ~5.5 US Cent per KWh (948.5VND)
2010: Retail price determined by market

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7.

Electric Price Determination Policy

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.
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7.

Electric Price Determination Policy - Selling Price

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 when
the 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.
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7.

Electric Price Determination Policy - Purchasing Price

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.

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8.

Electric network connection plan between Vietnam and neighbor countries

1. With Laos
At present:

220 kV Line from Nam Mo Hydro Plant (100MW) Ban Ve Vinh


220 kV Line from Xekaman 3 Hydro Plant (250MW)
A Vuong Hydro Plant Da Nang

In future:

Import energy from Laos with 1000MW up to 2010 and 2000MW afterwards
Planned 500kV transmission line network
From Central Laos to Ha Tinh Province (Nam Thom Hydro 2688MW)
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From South Laos to Pleiku (Sekamas 1, Sekong 4-5, Nam Kong Hydro 1600MW)

8.

Electric network connection plan between Vietnam and neighbor countries


2. With Cambodia
Period 2008 2010: Power supply from Vietnam to Cambodia with 150 - 200MW
by 220kV from Chau Doc to Ta Keo and Phnom Penh
Period 2015 2016: 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 Cai Yen Bai Viet Tri
In 2007 import 250-300MW via 220kV Ha Giang Thai Nguyen
Plan to import 1500MW in period of 2006-2018 by 500/220kV from Hong Ha to
Soc Son
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1
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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9.

Projects rejected by EVN


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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9.

Projects rejected by EVN

Lilama Corporation

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

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

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 Trach thermo powers plants
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10.

Best prospects for Korean companies


Best prospects:
Consulting and engineering services for
thermal power plants
Equipment for thermal power plants
Spare parts and overhaul services for thermal
2 plants
power
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


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

THANK YOU
FOR YOUR ATTENTION!

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