The Government Office has released a document announcing the Prime Minister’s decision on the plan to restructure power generation and supply and develop the power market.

The plan was compiled by the Ministry of Industry and Trade and submitted to the Government in December 2008. This is an important preparation step for the forming up of the competitive power market in Vietnam in 2024.

The Prime Minister has issued concrete instructions on three main issues: power generation projects, electricity prices and the restructuring of Electricity of Vietnam (EVN).

Regarding the restructuring of EVN, EVN will be split into five power corporations across the country. The Prime Minister has assigned EVN to build up a plan to reorganise the power generation units into independent generation companies and submit the plan to the Prime Minister in the first quarter of 2010.

EVN will also have to submit to the Prime Minister in the third quarter of the year a plan to establish power distribution corporations, including corporations in the north, south, central region, Hanoi and HCM City which will operate under the mode of holding corporations. The corporations will be set up on the basis of reorganising the existing power companies No 1, 2, 3 and the companies in Hanoi, HCM City and local companies which now belong to EVN.

Regarding power sources, the Prime Minister has asked the Ministry of Industry and Trade to check the implementation of the projects listed in the approved power development strategy (strategy 6). The projects whose investors are not capable of implementing them will be given to other investors. Those projects which still do not have investors need to find investors soon to stay on schedule. EVN, PetroVietnam and Vinacomin will be the priority investors.

Regarding the three groups, the Prime Minister said that the restructuring of power generation and supply needs to aim to gradually apply the market mechanism in the power sector. The electricity price needs to be reasonable to attract investment in the power sector. EVN, PetroVietnam and Vinacomin will still hold the controlling proportions in the total capacity of power sources.

As far as electricity prices, the Prime Minister has assigned the Ministry of Industry and Trade to join forces with the Ministries of Finance and Planning and

Investment to build up a mechanism on electricity pricing. Electricity prices need to be high enough to ensure profit for investors. The electricity pricing will follow the market mechanism, while subsidisation will only be applied in special areas, including remote and mountainous areas, poor households and for some other special subjects.

In order to help fix the problems in electricity price negotiation between investors and EVN, the Ministry of Industry and Trade will set up a taskforce on electricity price negotiations.

Electricity prices will be negotiated based on investment costs for the technologies of power production, and will ensure reasonable profit and benefits for all involved parties.

The restructuring of power generation and distribution needs to aim to provide high-quality electricity in accordance with demand and in a safe mode. The forming up and development of the competitive electricity market needs to go step by step and in a sustainable way.

The Prime Minister has also assigned the Ministry of Industry and Trade to promulgate a document on national power system management, which stipulates punishments for companies which do not obey regulations when joining the power market