The Government Inspectorate has said that ineffective and massive non-core business activities are to blame for Vietnam Electricity Group (EVN)’s great losses.
EVN’s non-core investment reached VND121 trillion (USD5.76 billion) by the end of 2011
Construction problems on many power projects have also caused extra costs and these are among the reasons for the group’s power-price hikes.
Many thermal power projects have also incurred extra costs for construction of “Operation and repair building” like O Mon 1, Phu My 1 and 4, Nghi Son 1, Haiphong 1 and Quang Ninh 1.
However, in reality, the buildings provide living space for the companies’ officials such as, detached houses, luxury houses with swimming pools, tennis courts and pre-schools. The buildings cover a total area of 355,000 square meters and cost more than VND595 billion (USD28.3 million), which is considered part of the investment in the power projects, therefore, they are also added into the selling price of electricity.
The Government Inspectorate concluded that by the end of 2011, EVN’s non-core investment reached VND121 trillion (USD5.76 billion), surpassing its charter capital of almost VND77 trillion (USD3.7 billion). This is a violation of Ministry of Finance regulations, plus, despite the big non-core business investment, EVN made a loss of VND2.2 trillion.
Earlier on July 31, in a surprise move, EVN decided to raise power prices by 5%, starting from August 1. Dang Huy Cuong, Head of the Ministry of Industry and Trade's Electricity Regulatory Authority of Viet Nam (ERAV), said the price rise was due to the higher costs of coal and gas earlier this year. That was especially true for the price hike of 37-41% which began on April 20.
Cuong noted that EVN is facing great pressure for power price increases because of higher input costs from now until the year's end and the following years as well. It is estimated that EVN will have to pay extra coal costs of VND4 trillion for power generation by the end of 2013.
