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Audit does little to quieten EVN critics   2008-12-21 - VIR

VietNamNet Bridge - While audit results vindicated Electricity of Vietnam’s claim it is suffering power sector losses, analysts still claim its power price increase proposal is still off the mark.

According to State Audit of Vietnam, Electricity of Vietnam’s (EVN) profit in 2007 was VND3.4 trillion ($202 million), higher than EVN’s earlier announcement of VND2.7 trillion ($160 million). However, if only regarding power sector business results, EVN lost VND506 billion ($30 million).

EVN recently proposed to increase electricity selling prices from early next year to avoid losses and raise funds for new power projects. Under the proposal, the selling prices for both households and manufacturing enterprises would increase by around 16 per cent.

However, Centre for Economic and Policy Research at College of Economics economist Nguyen Duc Thanh said the proposal was not convincing because EVN “forgot to mention its productivity at power plants and electricity transfer systems.”

Thanh and his colleagues recently conducted research into the impact of price hikes and found electricity prices had increased by 170 per cent since 1995. Meanwhile, the consumer price index (CPI) has risen 250 per cent against 1995.

Thus, if compared with the CPI, the price of electricity in 2008 was about 30 per cent lower than prices applied in 1995.

But, Thanh said if EVN’s productivity in 2008 had increased over 30 per cent against 1995, the electricity price could be reduced by 1.95 per cent. The increase of productivity depended on investing in new technology and improving management skills and quality of human resources, he said.

He said although the CPI had increased since 1995, telecommunication and internet suppliers reduced their service prices because they increased their productivity. “If EVN could announce an increase in productivity during the past years and prove that it tried its best to improve productivity, the proposal for increasing electricity price would be convincing,” said Thanh.

To reach 30 per cent of productivity increase since 1995, Thanh said the average productivity must increase 2 per cent, each year. Vuong Dinh Hue, State Audit of Vietnam head, said EVN should find solutions to reduce electricity losses, which was put at 6.9 billion kWh, or 10.5 per cent last year.

Hue said with current technology, EVN would find it hard to reduce electricity losses to 8 per cent in 2010 as per the government’s requirement. “EVN said it had not have enough money to invest in new projects and technology to improve productivity, but it has used a large amount of money to invest outside its core-business,” said Nguyen Quang A, president of Institute of Development Studies.

According to the State Audit of Vietnam, total long-term financial investments by the group in non-core business areas, including telecommunications, securities, banking, insurance and property amounted to VND3.5 trillion ($200 million), accounting for 7.2 per cent of the group’s total invested capital in 2007.

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