EVN borrows, braces for blackouts

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Electricity of Vietnam (EVN) is seeking VND13 trillion (US$668 million) in government loans to feed its oil-fueled thermal plants in anticipation of significant power shortages.

The loans should help generate about 3.8 billion kilowatt-hours (kWh) during the six-month dry season, officials from the nation's sole power distributor said at a recent meeting in Hanoi.

According to Dao Van Hung, chairman of the state power utility, serious water shortages in major hydropower plant reservoirs may cause a 3-4 billion kWh shortfall in 2011 - as opposed to last year's shortfall of 1 billion kWh.

Nguyen Phuc Vinh, general director of the Northern Power Corporation, an EVN subsidiary, said the Hoa Binh Hydropower Plant, is expected to see its reservoir dry out by March.

Though the plant is considered the largest of its kind in Vietnam, Vinh said he did not expect the situation to be much better, elsewhere.

He said his firm alone needed VND5.4 trillion ($278 million) to buy oil for thermo-electricity plants during the 2011 dry season. The corporation could not obtain loans from commercial banks because the loans would not bring profits, which is why it turned to government support, he said.

Vinh also said that if the steel and cement industries cut back their consumption by 30 percent, his firm would not need the VND5.4-trillion loan.

"Cement and steel firms consume a large volume of power," he said. "In the north, the two industries account for 10 percent of the total demand."

At the meeting, EVN officials asked for an additional VND15-trillion ($771 million) loan from the Vietnam Social Insurance Fund to further expand Vietnam's electrical output. In addition, it sought a government guarantee before issuing overseas bonds worth $1 billion.

EVN officials hope that the bonds will generate more funds for power projects.

Duong Quang Thanh, deputy general director of EVN, said Vietnam will need around 117.6 billion kWh of electricity this year - a 17.6 percent year-on-year increase.

To meet the demand, EVN will generate 48.1 billion kWh and intends to buy 64.5 billion kWh from other producers, he said.

Dao Van Hung said EVN incurred a loss of VND8 trillion ($411 million), last year, due to the fact that the utility had to buy power at high prices from fuel-run plants to ease shortfalls during the dry season.

"Frankly, EVN is in a tight corner," he said.

Responding to EVN officials' proposal to hike power prices at the meeting, Vu Huy Hoang, minister of Industry and Trade, said his agency would submit new prices to the government soon.

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