Consulting services for strategic options
Support to enhance the financial performance of Vietnam electricity's power companies.
Description of project:
Vietnam Electricity, known as EVN, and its subsidiaries play a dominant role in Vietnams power sector. The EVN group is involved in all electricity activities and is the single wholesale purchaser from power generators. As of 2011, EVN held about 70 percent of the installed generating capacity either directly or through its subsidiaries. Electricity transmission facilities are owned and operated by the National Power Transmission Corporation (NPT), an EVN subsidiary which was formed in July 2008. EVNs five subsidiary Power Corporations (PCs) own distribution assets and sell electricity within their franchise areas at voltage levels of 110 kV and below. As of 2011, about 75 percent of distribution networks were under PCs. The balance of the distribution network is owned by local distribution units (LDUs) that purchase electricity from PCs and other small generators for resale to end customers.
In this context, the objective of the services is to support EVN in developing a comprehensive strategy for addressing the current financial performance constraints facing its group of power companies.
- A diagnostic analysis of the financial performance of EVNs group of power companies in the past four years (2009-2012) to identify potential efficiency improvements and key factors that may impact their future performance. The diagnostic analysis will include traditional financial ratio analysis covering profitability, liquidity and solvency as well as indicators of operational efficiency and the comparison of indicators to industry averages for power utilities with similar structures and functional responsibilities. In this task the consultant also provided recommendations for the allocation of assets and liabilities to recently established generation companies which are being unbundled from EVN into separate corporate entities;
- Preparation of financial projections for the group for a period of five years (2013-2018), based on existing electricity demand growth projections, the sector investment plan, efficiency improvement measures identified from the diagnostic analysis, and scenarios for adjustment of power tariffs to be agreed with the Government of Vietnam;
- An assessment of the social impacts (including on gender) of the assumed tariff adjustment scenarios including issues of affordability of electricity for end-users, distributional and poverty impacts the fiscal cost of mitigation, if required;
- And preparation of a financial restructuring and recovery plan designed to help EVN to return to profitable operations at the earliest possible time consistent with sustainable social and fiscal impacts of price adjustments. The plan would be expected to offer solutions for addressing accumulated past financial losses, any legacy excess debt, and losses that may arise in the transition period to full cost recovery. The plan will also need to include a set of metrics and targets for monitoring implementation of the recovery plan, a monitoring plan as well as an accountability matrix with clear responsibilities and obligations of the concerned parties (e.g EVN, Government of Vietnam and the Electricity Regulator of Vietnam).