VietNamNet Bridge – The Electricity of Vietnam (EVN) has become the biggest debtor of commercial banks with the total outstanding loans having reached VND144 trillion.

The information has been confirmed by Cap Quang Duong, Deputy Director of the Credit Department under the State Bank of Vietnam, at the conference discussing the capital arrangement for power projects.

The amount of VND144 trillion is the outstanding loans provided to EVN by September 30, 2013, the highest level that the banking system has provided to one institution. The figure represents the increase of VND26 trillion over the figure updated in July.

According to Duong, EVN is a “loyal,” but not attractive client of commercial banks. In general, EVN borrows money to develop its power generation and transmission projects, from which EVN can only take back the investment capital after a long investment period.

To date, funding EVN’s projects is just a “duty” that commercial banks think they need to do, rather than a profitable business they wish to do.

The electricity prices have been raised many times recently, but the retail prices remain unattractive enough to persuade investors to pour capital into power projects. EVN, as a state owned corporation, have to come forward and take the responsibility of developing power projects refused by other investors.

Meanwhile, in most cases, EVN and its subsidiaries only have 20-30 percent of the total capital needed to develop the projects. This means that the other 70-80 percent of capital comes from other sources, including the commercial loans from banks.

Duong has warned that the loans provided by commercial banks to EVN have become very big which have exceeded the credit limits that banks are allowed to provide.

In principle, the credit limits one bank can provide to EVN depend on the bank’s capital, and if it lends to one client more that it is permitted, it would face high risks.

Nevertheless, Duong affirmed that the State Bank of Vietnam instructs commercial banks, especially the four state owned banks, to arrange enough capital to fund EVN’s key power projects which play an important role in the national socio-economic development.

The four banks: Agribank, BIDV, Vietinbank and Vietcombank, for example, have committed the total loans of VND17.5 trillion for the Son La hydropower plant, the biggest hydropower plant in Vietnam and South East Asia.

The State Bank has also given big support in foreign currency arrangement to import equipments.

For the Lai Chau hydropower project, Vietcombank is the head of the group of lenders who provide a syndicated loan worth VND14.5 trillion.

The two big above said projects alone need VND32 trillion worth of bank loans, a huge sum of money.

Though EVN is not a “good” client, its requirements have still been satisfied by commercial banks. EVN can borrow money at stable interest rates despite the interest rate fluctuations. It can delay the debt payment if it meets difficulties in the project implementation.

Nevertheless, despite the huge capital provided, EVN still keeps complaining that it cannot mobilize enough capital for power projects.

In order to fulfill the 2011-2020 national power development program, EVN will need VND927.7 trillion, or $48.8 billion, which means that it needs $4.9 billion a year and $1-1.2 billion for every power project.

Pham Huyen