Power Generation, Transmission and Distrubution
Vietnam
Overview
2004(Actual) 2005(Actual) 2006(Estimates)
Total Market Size (Excluding IPPs) 1,367 1,866 2,185
Total Local Production 341 485 775
Total Exports N/A N/A N/A
Total Imports 1,026 1,381 1,410
Imports from the U.S. 54 70 73
Note:
* Figures are in U.S. $
* The total market size for equipment and services is based on EVN and World Bank’s (WB) statistics and estimates.
* Other statistics are unofficial estimates
* Total Market equals Imports Plus Local Production minus Exports
Industry Organization: The electric power sector represents one of the most promising areas for U.S. commercial prospects in the Vietnamese market. Currently Electricity of Vietnam (EVN), a state owned enterprise with more than 50 subsidiaries under the Ministry of Industry (MOI), holds a monopoly in electricity generation, transmission and distribution.
Fifth and Sixth Power Development Master Plans: To manage the development of the electric power sector, the Vietnamese government uses Power Development Master Plans, which forecast power demand growth and map out the overall development of the power industry in ten-year periods. The current master plan, the Fifth Power Development Master Plan, approved by the Prime Minister in June 2001 with two revisions in March 2003 and October 2004, has become outdated and a new master plan will be required for the period between 2006 and 2015. In early 2006, the Sixth Master Plan was completed by the Institute of Energy, a subsidiary of EVN, under the guidance of MOI and was submitted to MOI for appraisal before approval by the Prime Minister (PM); final approval is expected in early 2007.
Electricity Demand: The demand for electricity grew by 15% per annum over the period 1995 to 2005. According to the draft Sixth Master Plan, this growth is expected to reach 16% in the period 2006 through 2010 (see figure 1). This soaring demand is attributed to both increasing industrial and residential use. Many power shortages are expected during this period if measures are not taken to increase the power supply accordingly.
Figure 1 – Electricity Production and Sales Forecast by 2025 (Source: Draft Sixth Master Plan – EVN, October 2006)
Electricity Supply: At the end of 2005, Vietnam’s total generation capacity was 11,360 MW of which EVN’s facilities accounted for about 81%. The remainder was under the control of other local and foreign Independent Power Producers (IPPs). The current power generation system relies mainly on thermal gas power (39%) and hydropower (37%) while thermal coal power, which currently accounts for 13%, will play an increasingly important role in the medium and long term.
Figure 2 - Composition of Power Generation Capacity in 2005 (Source: EVN, October 2006)
According to the Sixth Master Plan, it is estimated that an additional yearly capacity of 2,700 MW will be required between 2006 and 2010 to meet the rapidly growing demand for power. Figures 3 and 4 provide more details about the projected expansion of the power generation system in Vietnam.
Figure 3 – Additional Average Generating Capacity Required Per Year Forecast Over Every Five-Year Period by 2025 (Source: Draft Sixth Master Plan and Dau Tu, June 12, 06)
Figure 4 – Electricity Production and Sales Forecast by 2025
(Source: Draft Sixth Master Plan – EVN, October 2006)
Transmission and Distribution Systems: As of October 2006, the rural electrification rate in Vietnam was 91.53% and is expected to reach nearly 100% by 2020. The following charts show the current transmission system as well as its projected development by 2025.
Figure 5 – Projected Expansion of the Power Transmission System by 2025 (Source: Draft Sixth Master Plan – EVN, October 2006)
Figure 6 – Projected Expansion of the Power Transmission System by 2025 (Source: Draft Sixth Master Plan – EVN, October 2006)
In addition to the transmission system, Vietnam currently operates a power distribution system of about 115,659 km of 6kV, 10kV, 15kV, 22kV and 35kV lines with a total capacity of 3,662 MVA and 109,199 km of 220V lines with a total capacity of 32,061MVA. The rapid development of the power generation and transmission systems will require a respective expansion of the distribution system.
Investment Requirements: Over the period of 2006 to 2010, an investment of over $16 billion, including investment in IPP projects, will be needed for the development of new transmission and distribution systems, as well as about 44 new power generation projects. Sources of finance for this development are expected to come from EVN’s funds (self-financing), Official Development Assistance (ODA) loans, Vietnam’s Development Assistance Fund (DAF), commercial loans and foreign export credit, as well as IPP developers (private sector). The following chart depicts EVN’s projected investment in the power sector over 2006 – 2010.
Independent Power Projects (IPPs): As EVN’s self finance and other sources of financing can only meet about 66% of the total investment requirements, IPPs are expected to carry a large portion of the investment in the power generation sector, including those to be developed by foreign investors. In 2005, the Ministry of Industry, which is the Government agency responsible for planning, executing bidding, and contracting procedures for large IPPs, introduced a list of 15 IPP projects with a combined capacity of 11,818 MW open for foreign investment. To date, a considerable number of foreign investors have shown keen interest in developing IPP projects in Vietnam, yet few projects have been realized due to obstacles including legal and regulatory issues, low electricity purchase prices by EVN, a lack of a transparent and competitive market as well as poor coordination among related Government agencies. In recognition of these deterrents, MOI has taken radical measures in an effort to facilitate IPP development, including signing a financial advisory agreement in August 2006 with the International Finance Corporation (IFC). The major goal of this agreement is to increase private participation in the power sector through open competitive bidding. In particular, MOI and IFC expect to raise electricity purchased from IPPs from 14% of the total electricity output in 2005 to 33% by 2010.
Electricity Retail Price: The Government strictly regulates electricity retail prices, with adjustments recommended by MOI and requiring approval by the Prime Minister. A unified tariff is applicable across the country and is considered rather low in comparison with other regional countries. Both average urban and rural residential rates are cross-subsidized by higher rates for industry, commerce, and foreign consumers. To attract more investment from the private sector in developing IPP projects, MOI and EVN have been working on a three-phase roadmap over the period 2006 –2010 for price increases and gradual elimination of the Government’s control. It is expected that an increase in electricity retail price will be implemented in 2007 according to the roadmap.
Establishment of Competitive Power Market: In 2004, the Vietnamese National Assembly passed the new Electricity Law that outlines the development of a competitive electricity market in three phases: the first phase focuses on creating competition in power generation, the second phase introduces competition for bulk supply of electricity, including supplying directly to major industrial customers, and the final phase involves competition at the retail level. MOI anticipates that this market restructuring process may take as long as 20 years.
Industry Restructuring: One of the many key transitional steps towards a competitive electricity market is the restructuring of EVN, a state owned monopoly with many wholly owned subsidiaries, into shareholding companies with different types of shareholders including local and foreign private investors. This restructuring aims to create a more market-oriented business model not as closely tied to Government. The enterprise reform involves splitting various subsidiary entities away from EVN to form new shareholding companies.
Best Products/Services
The power generation market may be divided into five main segments:
· Consulting and engineering services, including project management
· Installation and construction services
· Machinery, equipment and materials
· Supply of equipment, spare parts, materials, consumables, and overhaul and maintenance services (aftermarket)
· Investment in new IPP power projects in the form of BOT, BT, BTO and JV
The power transmission and distribution market may be divided into four main areas:
· Consulting and engineering services, project management
· Installation and construction services
· High, medium, and low voltage electrical equipment for the national grid
· Medium and low voltage electrical equipment for industrial, institutional and household users
American companies will find significant business opportunities in the above market segments.
Opportunities
· Sales opportunities exist in 44 ongoing and upcoming power generation projects (a specific list of these projects can be provided on request).
· Investment opportunities in more than 15 IPP projects as proposed by M)I (a specific list of these projects can be provided on request).
· $327.8 million Second Transmission and Distribution Project II funded by the World Bank ($200 million) and the Vietnamese Government was approved in July 2005 and is to be completed in December 2010. (For more information, please visit: www.worldbank.org.am/external/default/main?pagePK=64027221&piPK=64027220&theSitePK=301579&menuPK=301612&Projectid=P084871)
· $380 million Northern Rural Power Project funded by ADB ($120 million), AFD (EUR 40 million) and the Vietnamese Government ($103 million). This project was approved in August 2005 and is to be completed in June 2009. (For more information, please visit: www.adb.org/Documents/Profiles/LOAN/32273013.ASP)
· Other EVN funded power transmission and distribution projects. Information available upon request.
Resources
For more information, please contact the following addresses or visit the following websites:
· Nguyen Dzung, Commercial Specialist
U.S. Commercial Service
U.S. Embassy in Hanoi
E-mail: nguyen.dzung@mail.doc.gov
· Le Son, Commercial Specialist
U.S. Commercial Service
U.S. Consulate General in Ho Chi Minh City
E-mail: Le.Son@mail.doc.gov
U.S. Commercial Service: www.buyusa.gov/vietnam
Electricity of Vietnam Corporation: www.evn.com.vn
Ministry of Industry: www.moi.gov.vn
Asian Development Bank: www.adb.org
World Bank: www.worldbank.org