VietNamNet Bridge – A lot of small and medium hydropower plants in Dak Lak province in the Central Highlands have been on the verge of bankruptcy when they have to sell electricity at low prices, even while the bank loan interest rates have been increasing sharply.

The Dak Lak authorities have sent a message that the small and medium hydropower plants in the province will be killed if they are not rescued. There are too many problems existing with the plants: the Electricity of Vietnam EVN, the only electricity buyer for the power plants, set the purchase prices at too low levels, while the plants have to pay high for bank loans. Also, the unreasonable method of calculating water natural resource tax has also put big difficulties for the plants.

How much is electricity?

According to Phan Muu Binh, Chair of the Member Board of Hoa Long Company, the owner of Ea Mdoan hydropower plant, EVN has set up the electricity prices at which it purchases from the power plants, which have been operational prior to 2008, like Ea Mdoan, at 400-607 dong per kwh. The prices were set up after EVN considered the investment capital of the project and the expected time to take back investment capital, about 10 years.

The problem, according to Binh, is that while the input costs to generate electricity have increased, EVN still keeps the purchase prices unchanged. Some years ago, when EVN set up the prices, the bank loan rate was 11.5 percent per annum, while it has jumped to 20 percent already.

“Power plants will die if EVN keep the purchase prices unchanged,” he said.

The power plants, which sell electricity to EVN in accordance with the Decision No 18 by the Ministry of Industry and Trade, prove to be a bit luckier than Ea Mdoan, because they can sell electricity at the little higher prices. However, the plants also complain that they are facing big difficulties. The average electricity prices at which the plants sell to EVN are 650-700 dong per kwh, are higher than that of Ea Mdoan, but are still much lower than the market prices.

Also according to the decision, in the four months of the rainy season, the hydropower plants can sell 85 percent of their capacity at 460 dong per kwh, while the other 15 percent of electricity can be sold at 230 dong per kwh only. As such, the profits gained in the rainy season are not high enough to offset the loss incurred in the other 8 months.

Truong Cong Hong, Head of the Energy Management Division of the Dak Lak Industry and Trade Department, said that according to the Electricity Regulatory Authority of Vietnam (ERAV), in 2011, small and medium hydropower plants sell electricity to EVN in accordance with the Decision 18 at 916 dong per kwh. However, Hong has denied the sale price. “The price does not exist in reality,” he affirmed.

“A hydropower plant has the capacity of 6MW and operates 5000 hours per annum; therefore, the total electricity output would be 30,240,000 kwh and the total turnover would be 20,233,600,000 dong. As such, the average electricity sale price must be 669 dong per kwh, not 916 dong.

Selling electricity at low prices, paying high taxes

Under the current regulations, power plants have to pay the water natural resource tax which is 2 percent of the electricity sale prices. The problem is that EVN only pays 400-607 dong per kwh to the plants which began operating prior to 2008, and pays 650-700 dong per kwh to the plants operational after 2008. However, the owners of power plants have to pay the tax of 1242 dong per kwh, not the tax calculated on the actual electricity sale prices.

According to the representative from Da River Investment and Development Corporation, the owner of Krong Kmar Power Plant, all the 9 small and medium power plants in the locality have to borrow commercial loans, even though a government’s decree stipulates that such power projects can use preferential loans.

Meanwhile, the interest rates of commercial loans increased from 11.5 percent to 18 percent, which made the total construction cost of the projects increase by two folds. Especially, the average interest rate has jumped to 20 percent already.

Hoang Nguyen Company has reported that the total turnover from its three power plants (45MW) is 45 billion dong a year, while it has to pay the bank loan interests of 70 billion dong a year.

Source: Lao dong