EVN expects increased cost of production in 2017

Vietnam Electricity expects an increase of at least VND4.6 trillion ($206.3 million) in its production costs in 2017.

At the January 3 conference to review the company’s 2016 performance and start implementing the plan for 2017, general director Dang Hoai An said that the prices of some inputs for production have been continuously increasing since 2015, which had not been factored into the retail price of electricity.

“The price of coal rose by 7 per cent since December 24, 2016. This only would drive up production cost by VND4.6 trillion ($206.3 million),” he said.

He also listed many other challenges facing the company, such as fluctuating foreign exchange rates, the tax on water use, the fee for use of forest land, and the difficulty in financing production projects.

“The government would limit guaranteeing loans taken out by state-owned companies that have exceeded their borrowing limit, which makes it difficult,” he said.

EVN proposed that the Ministry of Finance allow it to factor most of the employee benefits into the production cost.

EVN is awaiting the Prime Minister’s approval of its average retail price table for the 2017-2020 period.

It is unclear whether this expected increase in production cost is going to increase the retail price of electricity. However, in the May 2016 draft of the Prime Minister’s decision on the mechanism to adjust the electricity selling price, EVN would be able to make upward revisions every three months by a range of 3-5 per cent in case there are changes to the basic input parameters, without having to report to the MoIT. Thus, the annual maximum rise would be capped at 20 per cent. For a higher rise, EVN would have to secure the PM’s approval.

The draft, which at the moment is not yet ratified, met a lot of opposition especially from industrial stakeholders. 

In 2017, EVN plans to produce and buy a total 197.2 billion kWh, up 11.4 per cent on-year. EVN would produce 43.5 per cent of this amount and buy 56.5 per cent.

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By Thanh Huong