VietNamNet Bridge – High power tariffs and policy incentives are needed to attract investments in electricity production, Tran Dinh Long, vice-chairman of the Viet Nam Energy Association, told Hai quan (Customs).

Illustrative image -- File photo

Will you give an overview on the current situation of electricity production and consumption in Viet Nam?

In the last few decades, electricity consumption in our country has increased rapidly. It is considered the most rapid in the region and the world. On an average, there is a 14 to 15 per cent increase each year. However, at present, due to slow economic development, it has dropped to 12-13 per cent.

According to statistics from the World Energy Organisation and the World Bank, Viet Nam needs about US$4 to $6 billion each year to invest in the sector's development. If growth continues, Viet Nam will need a huge investment fund, particularly hard currency.

Do you think that more investment poured into electricity production can help solve the problem?

I don't think the power sector and the Government have the capacity to solve the problem. As a result, we should call for investment from other sectors, both private and public, including foreign investors.

The recent establishment of the PetroVietnam Power (PVN) has opened up a new way to invest in the power business in the country. At present, electricity produced by the PVN accounts for about 14 to 15 per cent of electricity production in Viet Nam. It is projected that PVN's share will increase to 20-25 per cent.

Viet Nam Coal and Mineral Group (VINACOMIN) has invested in several coal-fired power plants and hydro-power plants, plus some private small hydro plants.

However, the attraction of foreign investment into the power sector remains modest. In my opinion, the hurdle preventing foreign investors is lack of incentive. Our tariff rates are much lower than those of other countries.

In March, electricity tariffs increased by 9.5 per cent and a road map for establishing a competitive power market was formulated. Is this a good opportunity for Viet Nam to attract investors?

A prerequisite for attracting investment in power projects is the electric tariff. The promise of high returns is highly attractive. As I have mentioned, tariffs here are not lucrative enough to foreign investors - and there are many other factors to take into account. For example, if investors decide to invest in hydro-power plants, they have to carefully calculate the weather in the locality where the plant will be built.

A road map to increase tariffs offers good opportunities for potential investors to think about. But at present, everything is hanging in the balance.

I think hydro-power production in Viet Nam has already been exploited to the maximum while the cost of thermo-power or gas power production is rather costly. These projects are not attractive to investors. As for investment in building nuclear power stations, the only potential investor is the Government.

What should the Government do to attract private investors in power projects?

The first thing is that the electricity tariff must be lucrative so that the investors can make profits. In addition, related Government policies and legal framework, particularly investment policies, taxation, money transfer and others, must be transparent.

For example, recently many foreign investors expressed anxiety about the exchange of Vietnamese dong into foreign currency to transfer to their home countries.

VNS