E VN technicians work on a grid in Hanoi / PHOTO: NGOC THANG
On August 1 state-owned Electricity of Vietnam, which produces 70 percent of the electricity in Vietnam and is the country's sole distributor, raised power prices for the fifth time since 2011.
Its deputy general director, Dinh Quang Tri, said the hike was necessary to cover increasing costs, including that of coal and gas, adding that even with the latest increase the group would not be able to cover its huge accumulated losses.
It was EVN's usual claim to justify price hikes, one that has always raised doubts among consumers and economists due to the lack of transparency in its price calculations and business performance.
The doubts have been validated by a shocking report by government inspectors earlier this week - EVN suffered losses due to dud investments of billions of dollars including in non-core areas, they said, besides which it had included many unjustified expenses in calculating costs.
They said that as of 2011 EVN had invested more than VND121 trillion (US$5.7 billion) in "outside businesses" including in non-core areas, or 150 percent its chartered capital, but failed to make any profits on them.
It had unreported losses of VND2.19 trillion ($103.8 million), they found.
The inspectors said the company's bosses should be held responsible and everyone else responsible should also be identified and punished.
EVN had violated the Ministry of Finance's regulations by investing more than its chartered capital in "outside businesses," they said.
More than half of the investments were actually loans to 23 subsidiaries, they said, and EVN had borrowed the money, mostly from foreign creditors, with the government's guarantee.
But they did not mention which subsidiaries, how much to each, or how the loans were utilized.
Many of EVN's subsidiaries also ended up suffering huge losses.
The National Power Transmission Corporation has around VND3.1 trillion ($146.7 million) in the red, and the Southern Power Corporation lost over VND1.2 trillion. The Electric Power Trading Company owes more than VND22 trillion ($1.04 billion) to power plants, around half of it overdue debts to the Vietnam National Oil and Gas Group (PetroVietnam).
The inspectors said EVN also invested nearly VND2 trillion ($94.6 million) in "risky" sectors like insurance, stock, and banking, and violated laws by holding more shares than allowed in companies in non-core industries.
Other investments included nearly VND3 trillion in EVN Telecom which EVN lost completely and ended up selling the company to military-run Viettel last year, they said. Viettel has yet to pay a dong for the purchase.
They also slammed EVN for agreeing not to charge Viettel for using its telecom cables for 30 years when selling EVN Telecom, saying the group should have charged the military company to cut its losses.
The agreement has allowed Viettel to cut its prices and earn over VND354 billion ($16.7 million) a year, or VND10.6 trillion ($500 million) during the 30 years, they said.
EVN spent more than $23 million on a program to get master's degrees for 164 of its staff, but the degrees awarded by the US's Griggs University are not recognized by Vietnamese agencies, they said.
Not real expenses
According to the inspectors, among many "unreasonable" expenses that EVN included in its P&L account was nearly VND600 billion ($28.4 million) for building houses, villas, tennis courts, swimming pools, and other facilities for its staff. It accounted for them as "administrative buildings" for six thermal power plants in Can Tho, Hai Phong, Quang Ninh, and other places.
But they should have been included in the projects' capital costs according to regulations, they said.
In 2011 EVN's expenditure increased by more than VND223 billion ($10.5 million), mainly because it wrongly calculated costs for 11 projects, they said.
After the inspectors announced their findings, many economists like Pham Chi Lan have urged EVN and the Ministry of Industry and Trade to recalculate its costs.
EVN's latest 5 percent hike on August 1 took power prices to VND1,508.85 (7.1 cents) per kilowatt-hour.
Speaking to Infonet, an online newspaper belonging to the Ministry of Information and Communication, economist Ngo Tri Long said agencies need to clarify how costs are calculated and whether EVN increased prices to make up for losses it incurred elsewhere.
Le Dang Doanh, a veteran economist, slamming EVN for squandering away trillions of dong in taxpayers' money despite being a state-owned company, said: "[The government] needs to give people an answer for this."
Doanh, a former head of the Central Institute for Economic Management, said the ministries of Industry and Trade and Finance must also be held responsible.
The government had ordered, even before the inspectors found the goings-on, EVN to pull out its investment in five real estate, insurance, stock, and construction companies and AB Bank by 2015.
Following the inspectors' conclusions, EVN sent a release to the media Tuesday saying that of the amount it is accused of investing in non-core areas, nearly VND50 trillion ($2.4 billion) went to subsidiaries that produce and trade electricity.
The loans of around VND70 trillion ($3.3 billion) it had given its subsidiaries were also spent on electricity projects, it said.
It is trying to pull out the VND2.1 trillion investments it has made in non-core sectors like insurance and banking by 2015 in accordance with the government's orders, EVN said.
The group also claimed that it built the villas and other things for its staff from profits or loans, and the costs were not included in the P&L account.
In an interview with Vietweek, EVN board chairman Hoang Quoc Vuong had said the company has "basically" abided by government regulations when calculating expenses and gets its accounts audited every year.
EVN was just being "humane" in building houses, tennis courts, and kindergartens for employees working in remote areas, he claimed.
The company wants to attract skilled people to operate projects worth billions of dollars, he said.
He told Tuoi Tre newspaper that while there was nothing wrong with the inspectors' conclusions, some points were not fully explained and so are misleading.
For knowledgeable people, EVN's so-called wrongdoing as reported by the inspectors would "not be big," he said.
Electricity of Vietnam and its subsidiaries have borrowed around VND45.8 trillion ($2.2 billion), including $888 million from official development assistance and foreign loans, in the first nine months, online newspaper VnEconomy quoted the company as saying Wednesday.
Meanwhile, PetroVietnam has allowed EVN to pay nearly VND10 trillion ($473.3 million) its subsidiary, Electric Power Trading Company, owes in installments.
EVN will pay VND2.65 trillion this year and VND7 trillion in the next seven years along with VND1 trillion in annual interest, it said.
The State Bank of Vietnam reported Wednesday that EVN owed VND118.84 trillion ($5.6 billion) to banks as of July 31.
It quoted the central bank's credit department as saying that the electricity industry needs about $4.9 billion every year until 2020 for the nation's power development program.
While EVN and its member companies play a key role in it, they are only capable of bringing in 20-30 percent of the money and have to rely on loans for the rest, it said.
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