World Bank wants careful equitisation of power plants

Although the equitisation of power plants has helped develop the national grid and meet soaring demand, the process would likely encounter roadblocks, the World Bank warned recently.

Shares of equitised power companies listed on the bourse in HCM City and Ha Noi, including Vinh Son-Song Hinh, Thac Ba, Na Loi and Nam Mu, have generated interest from foreign and domestic investors.

However, according to the World Bank’s report on Viet Nam’s electricity industry in 2006, the eq

uitisation process of power plants should be carefully considered. This is especially true in remote areas where companies are less profitable because they are forced to offer power at below-market rates, the bank said.

At present, the State holds a majority stake in several large electricity firms in a bid to stabilise supply nation-wide. Yet industry plans to shrink the State’s stake to less than 51 per cent. World Bank experts warned authorities in rural and remote areas should examine that policy closely.

For instance, the equitised Khanh Hoa power company has had difficulty developing an electricity network in remote areas and luring investors. The State should subsidise enterprises in these areas, said industry experts.

The nation’s developing power industry faces other challenges, according to the report. In other countries, firms usually target strategic and powerful shareholders to finance upgrades and implement state-of-art management methods.

Vietnamese electricity companies saw a shortage of strategic shareholders, however, the report stated. Most shareholders are small investors, looking for immediate profits rather than long-term returns.

Source: Vietnam News