EVN will continue to repay A0's two loans of nearly 3 million USD and will be repaid when the newly established company has revenue from dispatching and market operation services.

According to the draft project of the State Capital Management Committee, the National Electricity System Dispatch Center (A0), after separating from the Vietnam Electricity Group (EVN), will become the Electricity System Operation Company Limited (EVN) and National Electricity Market (NSMO), belongs to this Committee before returning to the Ministry of Industry and Trade.

EVN grants A0 nearly 3 million USD under the World Bank loan agreement. These are amounts for new power system dispatch centre projects and information infrastructure for the competitive power generation market.

Technical officer on duty to operate dispatchers at the National Power System Dispatch Center (A0). Photo: EVN

According to the A0 separation project, these loans are not subject to credit risk and the assets formed are mortgaged to on-lending agencies authorized by the Ministry of Finance. In the report just sent to the Capital Management Committee, EVN said that these two loans could transfer debt obligations to NSMO with the Prime Minister's approval, according to regulations on public debt management. After establishment, the company will sign a re-lending contract, asset mortgage and debt repayment contract with the re-lending agency. While completing debt obligation transfer procedures, EVN continues to repay debt to re-lending agencies, and NSMO will repay this group.

However, the current problem is that there needs to be legal guidance if EVN continues to repay debt, maintains contractual obligations to re-loan ODA capital to the Ministry of Finance, and handles debt between the two businesses.

This group analyzed that when handing over assets in their original state using ODA loans, depreciation costs will be transferred to NSMO, and EVN will no longer have a source of revenue to repay the loan principal to the Ministry of Finance. Therefore, EVN proposed that the Ministry of Finance approve the transfer of debt obligations to NSMO. If the Ministry does not accept it, there will be instructions on handling and accounting for the loan balance, interest payment obligations and loan fees between the two units.
The charter capital at the time of establishing the National Power System Dispatch Company, after A0 was separated from EVN, was 776 billion VND, but the capital until 2028 has yet to be determined.

Following an analysis and computation of the projects' parallel capital requirements and investment needs for 2024–2028, EVN presented two options for the yearly charter capital growth of NSMO.

Option 1, 30% reciprocal for projects of about 1,426 billion VND, NSMO's charter capital will be 2,202 billion VND in 2028.

Option 2, charter capital in 2028 is 2,677 billion VND if counterpart capital for projects is 40% (about 1,900 billion VND).

In the early stages of establishment, NSMO's capital mobilization is expected to be difficult. Therefore, EVN proposed that the Committee for Management of State Capital at Enterprises choose option 2. The owner's representative agency will decide the source of additional charter capital - the Ministry of Industry and Trade, based on determining the annual charter capital and source from the development investment fund and the state budget.

In addition, this group also proposed to hand over additional assets, about 24 billion VND, through two other projects that the unit is investing in so that A0 has more resources.

After leaving EVN, the new company will have revenue mainly from the cost of dispatching power system operations (SMO) and operating electricity market transactions. Currently, these mechanisms are being developed by the Ministry of Industry and Trade. But this is a special enterprise, operating not for profit, so operating costs (including development investment) are collected from units in the industry and included in electricity prices.

"During the transition period, the costs of dispatching and operating the electricity market need to be decided by the State, and specific prices must be set according to the Price Law," EVN suggested.

Specifically, system dispatch costs and prices will be included in the annual retail electricity price plan to recover from electricity customers. NSMO and EVN, based on the approved costs, sign a service contract during the transition period. The Ministry of Industry and Trade will issue payment of monthly dispatching costs.

This group also proposed that the Ministry of Industry and Trade create a mechanism for A0 after leaving EVN to access low-interest loans, grace periods and long principal repayments to ensure the maintenance and development of infrastructure production equipment.

For example, enterprises' investment projects in the early stages of separation from EVN need a special mechanism (exemption from some loan conditions) to borrow capital from the Vietnam Development Bank or commercial banks. 

For projects requiring large capital, investment projects up to 2030, in addition to the ability of businesses to arrange themselves, the Prime Minister, ministries and branches consider mechanisms to support the arrangement of investment capital for NSMO through public investment sources. , ODA, guarantees or loan mechanism support for construction investment projects that NSMO implements.

Regarding the 5-year production, business, investment and development plan (revenue, costs and profits), EVN calculates that each year NSMO needs 332 billion VND in average capital costs and 379 billion VND for other regular expenses in the period 2024-2028.

Three standard profit options for this company are proposed, including 3%, 10% and 15%. In particular, the standard profit when this enterprise is established is about 3% of equity, corresponding to the standard profit of the current average retail electricity price. After the revised Price Law takes effect, this profit will be included in the regulations on dispatching prices and operating the electricity market developed by the Ministry of Industry and Trade.

A0 was established in 1994, operating power transmission and distribution stages to ensure the safe and stable operation of the power system. This unit is also responsible for operating power plants, reservoir exploitation and regulation, and Troubleshooting 500 kV electrical system.

The separation of A0 from EVN was stated in the 2017 Decision to restructure the electricity industry but has yet to be implemented. The transfer of this unit to the Ministry of Industry and Trade was carried out at the request of the Prime Minister.

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