20:41 (GMT +7) - Monday 25/09/2017

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EVN & Vinacomin agree on coal purchase price

Released at: 20:50, 09/09/2017

EVN & Vinacomin agree on coal purchase price

Illustrative image (Source: VnEconomy)

New, undisclosed price came into effect on September 1 but power provider still has concerns.

by Quang Huy

The State-run power monopoly Electricity of Vietnam (EVN) and its coal supplier the Vietnam National Coal and Mineral Industries Holding Corp. (Vinacomin) have finally reached an agreement on the coal price for power production. Not yet disclosed, the price came into effect on September 1, according to the Ministry of Finance.

The relationship between EVN and Vinacomin had been tense, after EVN revealed a plan to cut the volume of coal purchased from Vinacomin, explaining that the group wanted to buy at prices that suited the cost of its power generation technology.

In May, EVN slashed its planned purchase from Vinacomin by 2 million tons to 17.92 million tons, saying imported coal was cheaper. Vietnam is running out of hydropower sources so it plans to focus on developing coal-fired thermal power. The proportion of thermal power will rise to 49 per cent by 2020 and 55 per cent by 2025, EVN has said.

According to Deputy Minister of Finance Do Hoang Anh Tuan, domestically-produced coal currently costs more than imported coal. For example, a certain type of imported coal dust costs around VND1.5-1.6 million ($66-71) per ton, while the same type produced by Vinacomin costs around VND2 million ($88) per ton.

“The price of domestic coal should be competitive, at least the same or lower than imported coal, but we still need to ensure international market commitments are met,” said Deputy Minister Tuan.

While insisting that EVN should continue to buy its coal this year, Vinacomin officials warned that if EVN lowers its purchase by 2 million tons, some 4,000 workers could lose their jobs and one coal mine may be closed. It plans to persuade authorities to reconsider EVN’s plan to cut the volume purchased from Vinacomin and turn to foreign suppliers.

According to a representative from EVN, it was the high coal price that forced EVN to cut it purchase volume. “High coal prices would make electricity production costs increase and force the power sector to bear huge losses,” the representative added. “Therefore, instead of buying from Vinacomin, EVN would consider buying coal from other domestic companies at more reasonable prices.”

Minister of the Office of the Government Mai Tien Dung came to Vinacomin’s defense, saying that while abiding by market rules, “we should ensure domestic production and protect established corporations like Vinacomin, otherwise 4,000 workers could be out of a job.” The government also asked Vinacomin to reduce its production costs and price to ensure they are competitive with imported coal.

For its part, the Ministry of Industry and Trade has been asked to look at long-term measures to protect domestic coal, while Vinacomin should work with local authorities to fight illegal coal exploitation and smuggling.

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