metadata: authors: 0: author: Lee,Alan David
1: author: Gerner,Franz
count: Vietnam
docna: 0: docna: Learning from Power Sector Reform
            Experiences:  The Case of Vietnam
docty: Policy Research Working Paper
subtopic: Energy Policies & Economics,Energy and Environment,Energy Demand,Energy and Mining,Energy Sector Regulation,Power & Energy Conversion,International Trade and Trade Rules
teratopic: Energy,International Economics and Trade
abstracts: cdata!: Vietnam's power sector has
            developed rapidly since the 1990s to become a top performer
            among developing countries. This success has occurred mostly
            under a state-owned utility, Electricity Vietnam. Select
            market-oriented reforms to date have also had some positive
            impact. By the late 1990s, the Government realized the need
            to gradually introduce competition to ensure long-term
            sustainability without jeopardizing security of supply for
            the fast-growing economy. Vietnam's 2004 Electricity
            Law has provided the framework to develop a competitive
            power market, unbundle Electricity Vietnam, set prices that
            better reflect costs, promote private investment, and
            establish a regulatory authority. Today, state-owned
            entities continue to dominate the sector. Whereas the power
            market is partially competitive, improved operational
            efficiency and financial performance of generators in this
            market has contributed to keeping generation costs
            relatively low. Plans are broadly on track for further
            extensive reforms, including a clean energy transition.
            Lessons include that state-centric institutions can develop
            the power sector with top-level government commitment,
            highly-qualified staff, and consensus among sector
            institutions. Gradual reforms offer an opportunity to learn
            by doing; yet, the sequence of reforms matters. Introducing
            market mechanisms ahead of other elements may limit the
            market effectiveness and even make subsequent reform steps
            more difficult.
geo_reg_key: 517198,517191
repnme: repnme: Learning from Power Sector Reform
            Experiences:  The Case of Vietnam
display_title: Learning from Power Sector Reform
            Experiences: The Case of Vietnam
listing_relative_url: /research/2020/03/31830103/learning-power-sector-reform-experiences-case-vietnam
topicv3: Energy and Extractives m1326595 507,Trade m1326924 698,Power Systems m1327093 508,Power and Electricity Sector m1327094 515,Power Sector Reform m1503425 3937
publishtoextweb_dt: 2020-03-02T00:00:00Z
historic_topic: Energy,International Economics and Trade
origu: INF-EAP-Energy (IEAE1)
no_of_pages: 57
author_keys: 0: author_key: 1278228
1: author_key: 679428
model_extractions: Policy Research Working Paper 9169 Learning from Power Sector Reform Experiences The Case of Vietnam _Alan David Lee Franz Gerner_ Energy and Extractives Global Practice March 2020
Policy Research Working Paper 9169

# **Abstract**

Vietnam’s power sector has developed rapidly since the 1990s to become a top performer among developing countries. This success has occurred mostly under a stateowned utility, Electricity Vietnam. Select market-oriented reforms to date have also had some positive impact. By the late 1990s, the Government realized the need to gradually introduce competition to ensure long-term sustainability without jeopardizing security of supply for the fast-growing economy. Vietnam’s 2004 Electricity Law has provided the framework to develop a competitive power market, unbundle Electricity Vietnam, set prices that better reflect costs, promote private investment, and establish a regulatory authority. Today, state-owned entities continue to dominate the sector. Whereas the power market is partially competitive, improved operational efficiency and financial performance of generators in this market has contributed to keeping generation costs relatively low. Plans are broadly on track for further extensive reforms, including a clean energy transition. Lessons include that state-centric institutions can develop the power sector with top-level government commitment, highly-qualified staff, and consensus among sector institutions. Gradual reforms offer an opportunity to learn by doing; yet, the sequence of reforms matters. Introducing market mechanisms ahead of other elements may limit the market effectiveness and even make subsequent reform steps more difficult.

This paper is a product of the Energy and Extractives Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at adlee@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Learning from Power Sector Reform Experiences: The Case of Vietnam**

**Alan David Lee and Franz Gerner**<sup>1</sup>

<u>Keywords: power sector reform, electric utility, power generation, energy access, state-owned</u> enterprise, regulation, electricity pricing, Vietnam.

<u>JEL Codes: D4; L94; P18; P28; P31; Q4</u> 1 Energy & Extractives Global Practice, World Bank. The authors are grateful for guidance from Vivien Foster and for invaluable contributions from colleagues and consultants, including, among others: data collected by Eric Groom and Macroconsulting S.A (Argentina); interviews conducted in Vietnam by Nguyen Trinh Hoang Anh, Adam Fforde, and Tran Dinh Long; inputs and support from Anshul Rana, Rahul Kitchlu, Ky Hong Tran, Thi Ba Chu, Hoa Chau Nguyen, Pedro Antmann, and Joeri de Wit; and review comments from Cia Sjetnan, Sebastian Eckardt, Oliver Behrend, and Madhu Raghunath. All views expressed and any shortcomings are the authors.
# Contents

|Foreword ................................................................................................................................................. 4|
|---|
|1<br>Introduction .................................................................................................................................... 5|
|2<br>Vietnam’s power sector reform story ............................................................................................. 5|
|2.1<br>Pre-1990s: State-managed utilities in small, disconnected grids ........................................... 7|
|2.2<br>1994-2003: Consolidation of state institutions with market reform debates ........................ 9|
|2.3<br>2004-2008: Ambitious long-term reform plans take shape ................................................. 11|
|2.4<br>2009-2018: Gradual and continuous implementation of power sector reforms ................. 12|
|3<br>Performance and institutions of Vietnam’s power sector ............................................................ 16|
|3.1<br>Security of Supply ................................................................................................................. 16|
|3.2<br>User access and affordability ................................................................................................ 19|
|3.3<br>Supply-side efficiency & financial viability ............................................................................ 22|
|3.4<br>Tariffs and cost recovery ....................................................................................................... 33|
|4<br>Conclusion ..................................................................................................................................... 39|
|ANNEX: Detailed Rethinking Power Sector Reform Indices.................................................................. 43|
|REFERENCES .......................................................................................................................................... 53|
|ACRONYMS ........................................................................................................................................... 55<br>**Tables**|
|Table 1: Ownership of Domestic Large-Scale Power Generation in Vietnam, 2018 ............................ 12|
|Table 2: Total Installed Capacity, Peak Demand, and Reserve Margin in Vietnam by Region, 2018 ... 17|
|Table 3: Institutional arrangements for power sector planning and procurement in Vietnam and|
|comparators, 2015 ................................................................................................................................ 19|
|Table 4: Technical efficiency indicators for Vietnam’s distribution power companies, 2011 to 2017 . 23|
|Table 5: Summary of Financial Indicators for Vietnam’s NPC against sample average ........................ 31|
|Table 6: Nationally-determined average retail tariff (ART) excluding value-added tax, 2005-2019 .... 34|
|Table 7: Formal regulatory governance in Vietnam and comparators, 2015 ....................................... 38|
|Table 8: Formal regulatory substance in Vietnam and comparators, 2015 ......................................... 38|
|Table 9: Summary of indicators of_de jure_and effective regulation in Vietnam’s power sector ......... 39|
|Table 10: Summary evaluation of Vietnam’s power sector reform efforts from 1990 to 2018 ........... 41|

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|**Figures**|
|---|
|Figure 1: Timeline of key power sector reforms in Vietnam, 1970-2018 ............................................... 6|
|Figure 2: Index of announced and implemented power sector reforms for Vietnam 1990-2015 ......... 7|
|Figure 3: Capacity Traded in the Vietnam Competitive Generation Market (GW), 2012-2018 ........... 13|
|Figure 4: Installed generation capacity and system-wide reserve margin, 2000-2018 ........................ 17|
|Figure 5: Improvement in power system performance ........................................................................ 18|
|Figure 6: Vietnam electricity user access rate and consumption per person 1990-2018 .................... 20|
|Figure 7: Affordability of average consumption level in Vietnam, 2016 .............................................. 21|
|Figure 8: Changes in Vietnam residential electricity incremental block tariffs, 2007-2015 ................. 21|
|Figure 9: Transmission and distribution system losses in Vietnam, 1990-2017 ................................... 22|
|Figure 10: Thermal efficiency of fossil-fuel power plants in Vietnam, 1990-2014 ............................... 23|
|Figure 11: Annual revenues and collection rate for EVN, 2012-2017................................................... 25|
|Figure 12: Financial ratios for EVN, 2013-2017 with linear trend......................................................... 26|
|Figure 13: Profitability for EVN, 2013-2017 with linear trend .............................................................. 26|
|Figure 14: Financial highlights for National Power Transmission Corporation, 2015-2017 ................. 27|
|Figure 15: Operational efficiencies and average tariffs for HCMCPC and NPC, 2009-2015 ................. 29|
|Figure 16: Debt ratios and profit margins for NPC and HCMCPC, 2010-2015 ...................................... 30|
|Figure 17: Nationally-determined average retail tariff excluding value-added tax, 2005 to 2019 ...... 33|
|Figure 18: Average revenue versus cost recovery levels per unit of energy sold for NPC, 2010-2016 35|
|Figure 19: NPC Average revenue per unit energy billed by customer type vs. cost-recovery levels ... 36|
|Figure 20: Percent of Revenue vs. Percent of Consumption ................................................................ 36|
|Figure 21: Elements of quasi-fiscal deficit for NPC and HCMPC, 2010-2016 ........................................ 36|

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# <u>Foreword</u>

“Rethinking Power Sector Reform” is a multiyear global initiative of the Energy & Extractives Global Practice that provides an updated assessment of power sector reform experiences across the developing world. The initiative aims to revisit and refresh thinking on power sector reform approaches, in the light of accumulated evidence about the performance of countries undertaking different types of reforms. The goal is to reignite the policy debate around reform approaches by articulating a new vision that incorporates lessons learned over the past 25 years. It also reflects on how recent technological trends and business models that are disrupting the sector may call for a new thinking on reform strategies.

Since the 1990s, a standard set of policy prescriptions for power sector reform has been widely used. These include vertical and horizontal unbundling of power utilities; private sector participation; creation of an independent regulator; achievement of cost recovery pricing; and the introduction of competition in power generation. While this package of reforms was, at least partially, adopted by several developing countries, momentum and uptake slowed considerably in the 2000s. There is a need to revise approaches in the light of 25 years of experience, evidence, and technological disruptions to provide practitioners with a flexible frame of reference that can help identify the types of reforms needed to improve the power sector in different country contexts.

Supported by the World Bank’s <u>Energy Sector Management Assistance Program</u> (ESMAP) and the <u>Public – Private Infrastructure Advisory Facility</u> (PPIAF), the initiative works with different partners and experts across the World Bank Group (WBG) and beyond to generate evidence, analysis and insights on key themes of interest to power sector reform practitioners and decision makers globally: cost recovery, utility governance and restructuring, power markets, regulation, and political economy. Findings and recommendations on each of these themes will be included in a forthcoming Flagship Report.

The initiative is strongly evidence-based, grounding its research in an in-depth exploration of the 25year power sector reform journey of 15 World Bank Group client countries that represent a wide diversity of geographies, income levels, and approaches to reform. The selected countries are Colombia, the Dominican Republic, the Arab Republic of Egypt, India, Kenya, Morocco, Pakistan, Peru, the Philippines, Senegal, Tajikistan, Tanzania, Uganda, Ukraine, and Vietnam.

An important output of the project is a series of case studies – of which this is one – that provide a narrative of the reform dynamics in each country and evaluate the impact of reforms on key dimensions of sector performance including security of supply, operational efficiency, cost recovery and energy access. For a subset of countries that pursued deeper reforms – Colombia, India, Peru and the Philippines – the project also includes a series of free-standing case studies that evaluate the experience with wholesale power markets. The purpose of the case studies is to reflect upon the experiences of individual countries with a view to extracting lessons of broader interest to the global community. It is not the role of these papers to recommend any particular way forward for the countries in question.

These case studies, which constitute companions to the synthesis of the Flagship Report, are being published in the Policy Research Working Paper series of the World Bank. As such, the case studies represent the views of the authors alone and should not be attributed to the World Bank or to any other person or institution. For more details, visit: <u>www.esmap.org/rethinking_power_sector_reform.</u> 4
# 1 <u>Introduction</u>

**This case study examines Vietnam’s power sector development and reform experience from the 1990s to 2018.** It explores links between country context, power sector institutions and market reform attempts, and dimensions of power sector performance. The case study is structured in three parts (after this introduction). Part 2 describes how power sector institutions have developed over time in context of the 1990s global model of market-oriented sector reforms. Part 3 focuses on sector performance in terms of four issues: security of supply; user access and affordability; supply-side efficiency and financial viability; and regulation of tariffs and other selected elements. Part 4 synthesizes the findings and reflects on lessons from Vietnam that may be relevant to other countries.

**The case study employs a mixed methodology with inputs from multiple sources** . It has involved a review of literature, collection of data from official sources, analysis of utility financial accounts for the period 2013 to 2017, comparison of several dozen indicators against good practice benchmarks, and 19 interviews with 25 actors including current or former government officials as well as academics and civil society representatives in Vietnam.

**Vietnam has seen significant changes to its market structure, gradually moving from a vertically integrated structure to a more competitive power market.** In less than two decades, the country’s power sector evolved from fragmented companies with high technical and financial losses to an integrated power system, and then to an unbundled group of stated-owned corporations with sizeable participation of domestic and international private sector actors in power generation. Vietnam has achieved rapid electrification and averted major crises of supply, thanks to technically-sound power system planning with political leadership and follow-through by national institutions. A highly dedicated and trained workforce, and a sociopolitical emphasis on ensuring consensus among key actors in the power sector at each reform step, have contributed to continuous implementation of the power sector reform agenda, albeit at a relatively slow rate of institutional reform.

# 2 Vietnam’s power sector reform story

**Over the past few decades, Vietnam’s power sector has developed around stable state-centric institutions and companies, gradually implementing the government’s sector reform agenda.** Prior to the 1990s, state institutions dominated three geographically distinct grid systems in north, central, and south Vietnam. From 1994, as a national grid developed, corresponding institutions were consolidated, just as attention was increasingly paid to “socialist market economy” reform proposals. The government’s motivations for reforming the power sector from the mid-1990s were to ensure long-term reliable power supply in a manner efficient and affordable to users and to the government, with minimal spillover effects on the macroeconomy and on the distribution of wealth across segments of society. A key means to achieve these objectives has been to move from a centrallyplanned monopoly to a power market with private sector investment in power generation capacity, and with multiple competing participants buying and selling power. From 2004, following the passage of the Electricity Law, competition and new market structures have been gradually introduced. The competitive generation market began full operation in 2012 and the wholesale electricity market is planned to begin full operation by 2021. Figure 1 summarizes the timeline of key electricity sector reform elements in the context of other country-level developments.

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for up to two terms each of five years. From 1976 to the present, leadership transitions in Vietnam have been orderly and peaceful. Generally, Party positions provide strategic direction, which are concretized through government policy. Individual party members work to coordinate positions within and across bodies of the Party, state, and society.<sup>4</sup> A norm of shared responsibilities means that no one ministry is held solely accountable for managing state assets.

**From 1976 through 1994, Vietnam’s power sector featured three vertically-integrated utilities, each serving a distinct territory, under central government control.** These utilities are known as the Northern Power Company (PC1), Southern Power Company (PC2), and Central Power Company (PC3). Each utility was responsible for generation, transmission, and distribution within their respective territories. No transmission infrastructure linked the systems. Each company was formally owned and managed by the central Ministry of Power and Coal, later reorganized as the Ministry of Power, then the Ministry of Energy. Sundry additional companies provided engineering, design, construction, manufacturing, and associated services, linked in various ways to the main power companies.

**Informal local markets also existed for distribution and retail.** These arose organically in coexistence with the state-owned enterprises, in different ways depending on the conditions of each locality, province, and region, especially in the rural electricity networks. Companies, cooperatives, and individuals would buy electricity from the power companies to sell on to end users. This ‘secondary market’ had no clear set of formal regulations, and prices were set locally.

**In the 1970s and 1980s, power sector development focused on agriculture and industry, largely isolated from global market reform ideas** . From 1975 to 1991, Vietnam was involved in continued regional conflict (the Third Indo-China War). Under a US-led embargo, trade and financial relations were severely restricted with many countries. The Soviet Union remained one of the few nations to continue contact with Vietnamese financial institutions during this period, though their associated aid also diminished in the late 1980s. The country’s political isolation meant that relations with many potential bilateral and multilateral donors, including the World Bank, were dormant.

**Domestic political stability allowed for a focus on rebuilding national infrastructure, which was in a poor state.** In the 1980s, the government started electrification schemes primarily for economic objectives by connecting hydropower resources with industries. Residential use of electricity in rural areas was largely a by-product of electrification focused on pumps to irrigate and drain farmland, especially rice fields and rural industries. By 1985, around 9 percent of all households had electricity, while average power consumption per person remained low (65 kWh/year, equivalent to little more than domestic lighting).

**In response to a growing socio-economic crisis, sweeping reforms in the late 1980s and early 1990s shifted Vietnam from a centrally planned economy to a “socialist-oriented market economy”.** Central planning implemented from the late 1970s to early 1980s led to hyperinflation and economic hardship, culminating in a far-reaching social and economic crisis by the mid-1980s. In 1986, a formal reform program, known as ‘Doi Moi’,<sup>5</sup> was launched. It abolished key central planning structures, liberalized prices and, for the first time, officially accepted private enterprises, including foreign ones.

> 4 Vietnam’s constitution provides for promotion of “social consensus” in particular through an alliance of stakeholders called the Vietnamese Fatherland Front as the “political base of the people’s government” (1980 Constitution, Article 9). The exercise of constitutional provisions for freedom of speech, press, association, and assembly, is prescribed by law (1980 Constitution, Article 25).

> 5 The Vietnamese term _đổi mới_ literally means “change (to) new” and is commonly translated as “renovation”.

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State-owned enterprises were given more autonomy and output targets were at least nominally replaced with profit targets. In 1992, a new constitution abolished direct Party control of socioeconomic affairs, emphasized state-managed market mechanisms, and identified three forms of ownership: people; collective; and private. Foreign investors were granted rights to ownership and protection against nationalization. These reforms can be understood as a combination of selective responses by state leaders to various forces, some beyond their control, and not necessarily aligned with a grand design.<sup>6</sup>

**While the Doi Moi reforms did not immediately concern the power sector, they laid the foundation for sector reforms to follow.** The sector most immediately affected by the Doi Moi reforms was agriculture. This is unsurprising given it was the mainstay of Vietnam’s economy at the time. One reason the 1980s reforms did not involve the power sector may be because electrification rates and consumption levels were so low at that time. Market reform ideas in the power sector did not really surface until the late 1990s, after the sector had already substantially developed.

**The end of the Soviet Union in the early 1990s and resumption of economic relations with the United States in 1993 created opportunities for Western donor influence and capital market development in Vietnam.** In 1993, multilateral lending resumed, though Vietnam and the World Bank had been in dialogue for some years. The absence of lending during this period has been later described as a “blessing in disguise”, as knowledge could be built up and shared without any pressures to negotiate support for large infrastructure operations (Baird 2012).

**In the early 1990s, the north had excess power generation capacity while the southern region suffered from serious power shortages.** During the 1980s and 1990s, several large Soviet financed hydro power plants were completed in the north. As a result, the northern region began to record an excess of electricity. Several hydropower projects (e.g. Hoa Binh) and thermal power plants (e.g. Uong Bi and Pha Lai) were running below capacity due to low demand in the northern system. Meanwhile, in the south, a day of uninterrupted power would be followed by two- or three-day long outages. The government had to consider whether to sell excess power from the north to China or build a 500 kilovolt (kV) transmission line from the north to the south. Despite widespread skepticism (in and outside the country) over the feasibility, efficiency, and ambitious construction time of the project, the government approved the construction of the 500 kV line in February 1992. After 700 days of work to construct 1,500 km of cables across 14 provinces and cities, the 500 kV transmission line was inaugurated in May 1994.

# _2.2 1994-2003: Consolidation of state institutions with market reform debates_

**The development of Vietnam’s national grid in 1994 shaped sector institutions and subsequently spurred rural electrification as well as massive increases in demand.** The 500 kV transmission line can be considered one of Vietnam’s most significant technical achievements and it has fundamentally shaped how the power sector has developed. Not only did the transmission line connect previously isolated systems, and thus improve reliability, it also created the necessary conditions for rapid expansion of rural electrification, especially in the south and central regions. The differences in grid

> 6 In different respects Doi Moi reforms were arguably "driven as much by bottom-up developments as by topdown models" (Painter 2014: 210). According to Hayton (2010: 4), leadership of reforms was "begun to protect the state sector, not to dismantle it" and the state’s involvement has “remained consistently high throughout". Political elite have been selective in adoption of internationally prevalent reform ideas, and for all these reasons, reforms have had unintended effects (Gainsborough 2010, Fforde & de Vydler 1996).

9
technologies of north and south required a new, unified approach for the national system. To manage its operation, the National Load Dispatch Center (NLDC) was established in 1994, under the then Ministry of Energy.

**In 1995, Electricity Vietnam (EVN) was established by merging the existing three regional power companies into a single national entity.** At the time, EVN was owned by the state through the Ministry of Industry as the ministry then responsible for energy. In the same year, an Institute of Energy was established, as part of EVN, to be responsible for planning. EVN, the government, and the Party would maintain close interrelations, with many staff moving between the Ministry and EVN over their careers. Staff would require Party membership to reach mid-level and senior positions within EVN, and Party members would also play an active role through a coordinating committee in EVN, as is the norm for large Vietnamese organizations. These features are part of the structures by which consensus is maintained among key actors on designing and implementing sector reforms.

**In 1996, work began to draft a new Electricity Law.** Drafting was led by the Ministry of Industry, with a team including representatives from EVN and other ministries and government offices. Over the next eight years, some 25 versions would be prepared. Many international organizations gave technical and financial support during the drafting period. The World Bank invited international experts to share their experiences and financed visits to observe and to learn lessons from other countries, including in Europe, North America, and South America. The dialogue, as was the case for other areas of partnership at the time, involved a gulf between Vietnam’s ideology and that of development partners, which led to both sides having to be flexible and open to new ideas.

**In parallel to the drafting of the new law, incremental steps were taken to allow for private sector participation in generation and limited unbundling.** Vietnam’s first sizeable privately-owned coalfired power plants were commissioned in 1996, totaling 720 MW of installed capacity. The next largescale private-owned power project would not be commissioned until 2001. By 2003, the private sector invested about 1.5 GW of generation assets mostly in natural gas, diesel, and coal through privatefinanced build-operate-transfer (BOT) projects. Meanwhile, in 1999, the Prime Minister directed the separation of construction companies from EVN. In 2003, EVN was also restructured to prepare its generation assets for partial privatization, known as ‘equitization’ in the Vietnam context.

**Government reluctance to accept higher market prices for new power generation hindered private sector investment.** During the early 2000s, completion of some nine BOT projects was put in doubt due to protracted price negotiations. The lack of competitive bidding made negotiations challenging and time consuming. To fill the gap, the government mandated other SOEs, namely PetroVietnam (state oil and gas company) and Vinacomin (state coal company), to construct large coal- and gas-fired power plants. Around the same time, the World Bank advised the government to raise electricity tariffs to cost recovery levels, as tariffs were too low to allow EVN to buy electricity from unsubsidized suppliers. For details of tariff levels over time, see Section 3.4.

**Broader economic policy ambivalence in a context of economic growth was a limiting factor on energy sector reform.** Partly as a result of evolving market conditions and reforms, Vietnam experienced sustained rapid economic growth in the 1990s, driven by rapid industrialization and macroeconomic stability. The 1997 Asian Financial Crisis had little impact on Vietnam, as its financial markets were undeveloped. Notwithstanding economic growth over this period, Vietnam had a total of some 6,000 SOEs, mostly small, two-thirds of which had become unprofitable by 1997. Many relied excessively on debt, and for some SOEs, debt levels exceeded capital. Through the 1990s and early

10
2000s, there was deep disagreement within Vietnam’s leadership as to the role of state-owned enterprises. In 2000, an Enterprise Law led to an increase in the number of private businesses. In 2002, Party members were allowed, for the first time, to engage in private business activities. Yet, official targets to partly or fully privatize 150 SOEs had made essentially no impact. The main resistance came from the SOEs themselves, reluctant to give up privileged access to credit, land, and contracts, despite benefits of flexibility from privatization.

# _2.3 2004-2008: Ambitious long-term reform plans take shape_

**The Electricity Law was passed in 2004 and set the framework for comprehensive sector reform.** The law establishes market principles and requires the unbundling of EVN, diversification of generation ownership, and tariff reform, with a long-term vision of competitive markets. Some changes occurred soon after the law came into force in July 2005. In 2005, the Electricity Regulatory Authority of Vietnam (ERAV) was established, with responsibilities including to: set grid codes and standards; issue licenses and monitor compliance; review power sector plans and financing needs; advise on tariffs; and prepare and enforce regulations for competitive power markets. In 2006, by Prime Ministerial decision, EVN became a state holding company structured as a group of dependent non-revenue accounting units (cost centers) in generation and transmission, and nominally independent accounting units (profit centers) in distribution. The Electricity Power Trading Company (EPTC) was established in 2008 as a subsidiary of EVN responsible for purchasing all power.

**In 2006, the Prime Minister also laid out a 20-year ‘roadmap’ for implementation.** The roadmap sets out the gradual development of a competitive electricity market in three stages:

- _Phase 1: 2005-2014._ Competitive electricity generation market where multiple power generators compete to sell electricity to a single buyer, which on-sells to distribution companies.

- _Phase 2: 2015-2022._ Competitive electricity wholesale market to involve multiple generators selling power to multiple wholesale purchasers (i.e. distribution companies and large off-takers).

- _Phase 3: after 2022._ Permission would be granted for a competitive electricity retail market with up to 30 percent private sector participation in each distribution company.

The roadmap set out a deliberate and careful approach to rolling out reforms, designing each stage of the process as a pilot to test and refine details followed by full implementation. This approach reflects the high priority given by the government to gradual, consensus-driven change to avoid negative shocks to the economy and final consumers.

**Economic turbulence affected reform progress in the short-term.** Supply shortages loomed from 2005 to 2008 as demand grew at annual average rates of 12 to 15 percent. Added capacity could not keep pace with fast-growing demand. EVN’s need for financial support was exacerbated by electricity tariffs that failed to cover investment costs and chronically lagged inflation, economic activity slowed markedly as Vietnam began to experience adverse effects from the global financial crisis. Amid global turmoil, Vietnam’s export performance deteriorated sharply and foreign direct investment (FDI) inflows to manufacturing plunged, leading to a deceleration of output growth. The government devoted fiscal resources to stimulus measures, which further reduced the space to finance EVN. In this context, the government approved EVN's proposals for importing power from China and encouraging more foreign private investment in power generation. In addition, between 2005 and 2008, 3.3 GW of private sector financed coal, gas, and hydropower generation were commissioned, demonstrating the government’s capacity to speed up private sector negotiations to meet potential supply shortages.

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_2.4 2009-2018: Gradual and continuous implementation of power sector reforms_ **Privatization plans proceeded slower than originally planned in parallel to other reform steps.** In 2010, by Prime Ministerial Decision, EVN became a State-Owned Single Member Limited Liability Company. The Prime Minister set principles for unbundling generation with EVN, with the intention that most power plant companies would be privatized and become fully independent from EVN by 2014. EVN would retain ownership and operating control of three strategic multipurpose hydropower plants (SMHPs). However, from 2009 to 2010, EVN suffered financial stress, due in part to large foreign exchange losses as many power purchase contracts are denominated in US dollars and Japanese yen, and EVN was not permitted to hedge. Independence from EVN Group as the holding company was not possible without significant equity injection from the government. This led the government to defer the privatization of EVN’s three generation companies. Instead, between 2008 and 2010, several joint stock generation companies were formed with non-EVN SOE majority ownership and some with minority private participation. Meanwhile, in 2010, MOIT set the terms for standard power purchase agreements (PPAs), issued a new grid code, and moved the Institute of Energy from EVN to the Ministry.

**By the end of 2018, EVN’s power plants accounted for 59 percent (28 GW) of total installed generation capacity, largely unchanged since 2010.** Between 2010 and 2016, EVN partially divested 1.9 GW of thermal and hydropower generation capacity. In 2016, the government issued a policy discouraging SOEs from investing further in the power sector. In 2017, the Prime Minister approved a plan to ‘equitize’ EVN generation assets starting from 2018, with EVN holding at least 51 percent of the shares.<sup>7</sup> The government would assess results after two years, with the aim of continuing to fully divest the state’s share in power generation. In February 2018, an attempted IPO for 16 percent of EVN Generation Company No. 3 was unsuccessful due to its high valuation and indebtedness. As of 2018, the three main generation companies, and SMHPs, remain fully owned by EVN, accounting for 60 percent of total domestic large-scale power generation, and other SOEs account for 13 percent (6 GW), while domestic and foreign private sector account for 27 percent (12.8 GW). See Table 1.

**Table 1: Ownership of Domestic Large-Scale Power Generation in Vietnam, 2018**

|**Owner**|**MW**|**Percent of total**|
|---|---|---|
|EVN Corporate (strategic multipurpose hydropower plants)|8,720|18|
|EVN Generation Company No. 1|7,189|15|
|EVN Generation Company No. 2|4,495|9|
|EVN Generation Company No. 3|8,152|17|
|Vinacomin|1,715|4|
|PetroVietnam|4,262|9|
|Private and Joint Venture|8,854|19|
|Foreign Private Build-Own-Transfer (BOT) plants|3,976|8|
|**TOTAL**|**47,363**|**100**|

Source: NLDC. Note: Imports from China and Laos provide an additional 1,372 MW.

> 7 In 2017 the government also fully divested EVN Finance Joint Stock Company (JSC) and restructured other six specialized EVN subsidiaries for full divestment, including Thu Duc Electrical and Mechanical JSC, Dong Anh Electrical Equipment Corp., Binh Thuan Wind Power JSC, EVN Power Engineering Consulting Joint Stock Company No.3 (PECC3) and EVN PECC4.

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**Establishment of the Vietnam Competitive Generation Market (VCGM) occurred ahead of the planned privatization of EVN generation companies.** In 2011, the VCGM was established as a pilot, followed by full operation in 2012 with direct participation of 9.3 GW installed capacity. The market design is based on an energy-only model from Australia. Market participants included EVN and locallyowned plants by other SOEs with installed capacity of 30 MW and above. Competition occurs through spot trading for the day-ahead and fixed-term contracts with the EPTC as the single-buyer. Strategic multi-purpose hydropower plants and some IPPs are ‘indirect participants’ where EPTC bids on their behalf. Indirect participants totaled 17.2 GW in 2012. Foreign-owned BOT plants have long-term power purchase agreements with EPTC and do not participate directly in the VCGM. All plants below 30 MW, mostly small hydropower plants, sell directly to distribution companies.

**By 2018, direct participants in the VCGM grew to 23 GW, representing more than 50 percent of total installed capacity of large power plants in Vietnam.** Figure 3 shows the growth of direct and indirect participation in the VCGM from 2012 to 2018. Excluding plants below 30 MW, a total of 149 power plants were operating in Vietnam in 2018, with a total installed capacity of 45 GW. Among these, 90 power plants with a combined capacity of 23 GW directly trade in the VCGM competing to get economically dispatched. Indirect participants totaled 22 GW. In 2018, NLDC reported that the total value of electricity traded through the spot market was US$4.6 billion. With those generators bidding every day, every hour into a spot market competing to be dispatched has substantially improved operational efficiency of generators and their financial performance, contributing to keep generation costs lower than they would have otherwise. However, the VCGM has not yet served to set investment incentives for the private sector independent of long-term PPAs.

**Figure 3: Capacity Traded in the Vietnam Competitive Generation Market (GW), 2012-2018**

<!-- Start of picture text --> 50<br>Direct Indirect<br>40<br>20.10 21.98<br>30 24.32<br>21.16<br>21.14<br>20 18.65<br>17.16<br>10 18.16 22.54 23.02<br>9.31 11.84 12.82 15.11<br>0<br>2012 2013 2014 2015 2016 2017 2018<br><!-- End of picture text --> Source: NLDC

# **As the planned successor to the VCGM, the Vietnam Wholesale Electricity Market (VWEM), has been**

**running in pilot ‘paper’ phase since 2016.** In 2013, the government updated the roadmap to articulate a pilot phase of the VWEM from 2015 and full operation by 2021. Achievements to date include finalization of the market design, installation of relevant IT infrastructure for billing and settlement, and activities to build the capacity of market participants. The key feature of the VWEM is that large industrial consumers and PCs (i.e. distribution companies) can negotiate and contract directly with public and private generators. This provides further transparency in the market and stimulates competition among multiple buyers and sellers. Once the VWEM is implemented, EVN will lose its status as a single buyer. The spot market will initially operate on an hourly basis and be eventually reduced to 30-minute trading intervals. In 2018, MOIT approved the detailed VWEM market rules and key market features. These include: (i) gradual transition from cost-based to price-based pool model;

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(ii) all generators larger than 30 MW must directly participate in market; (iii) BOT plants directly or indirectly (via BOT trader) participate in market; and (iv) all PCs must buy energy from the market to meet customer demand.

**Distribution-level reforms have involved centralization and increased state-ownership ahead of planned future participation in markets.** In 2010, EVN consolidated its 11 distribution companies into five power companies (PCs) responsible for the grid up to 110 kV across the areas of North, Central, South, Ha Noi and Ho Chi Minh City (HCMC). The aim was to create distribution companies of similar size and customer mix to be ready to become viable buyers in the wholesale market. As part of this process, EVN reversed its partial privatization of one distribution company and took control of many local distribution utilities (LDUs) that were not previously affiliated with EVN. The power sector reform roadmap updated in 2013 proposed a pilot phase of retail competition in 2021 followed by full operation by 2023. From 2021 onwards, the PCs are to conduct separate accounting for their distribution and retail businesses to prepare for retail competition.

**While some reform elements have been delayed, the government’s overall commitment to longterm reforms remains intact, and efforts to ensure transparent and efficient operation of power sector markets are ongoing.** The main structure of Vietnam’s energy sector today is depicted in Box 1, showing the overall responsibility of the Ministry and other institutions in the sector. The unitary ownership of EVN’s fully-owned subsidiaries across the supply chain entails a risk of discretionary behavior towards suppliers, where priority is given to EVN’s own power plants or to partners with which it has privileged relationships. Whereas the single-buyer, EPTC, remains under EVN until the wholesale market becomes operational, EVN arguably benefits from high bargaining power for prices, volumes, and grid-connection conditions. However, significant changes are planned to the power sector structure and the role of EVN to introduce efficient wholesale competition. This includes the establishment of an independent System and Market Operator (SMO), and competitive bidding for new generation. According to government plans, NLDC will function as an independent SMO and be converted to an independent accounting unit of EVN by 2021. By 2025, the SMO will be fully separated from EVN, while remaining under government control. The PCs, and the National Power Transmission Company (NPT), established in 2018 as a ‘reunification’ of various regional subsidiaries, PCs will remain under full public ownership. Current plans do not provide for third-party access to the transmission and distribution network. However, the Prime Minister has instructed EVN to review private sector participation opportunities in network infrastructure development.

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<!-- Start of picture text --> Government of Vietnam<br>Ministry of Industry and Trade<br>Electricity and Renewable Energy Authority<br>Science and Technology and Energy Efficiency Department<br>Institute of Energy<br>Policy, research, and planning<br>Foreign-ownedplants PetroVietnamVinacomin andplants Electricityeeuf Vietnam ;( (EVN ) ieroducerspens<br>3 Generation companies Electric National Load National 5 Power Corporations<br>(Genco 1, 2 and 3) Power Dispatch Center Power (North, Central, South,<br>- Trading 5 Transmission Hanoi, Ho Chi Minh City)<br>Strategic Multi-Purposea Company ystemMarket and Corporation<br>Hydropower Plants Oo 7<br>Single buyer<br><!-- End of picture text -->
# 3 <u>Performance and institutions of Vietnam’s power sector</u>

It is important to consider Vietnam’s power sector reform experience in the context of its sector performance and institutions. This section describes how Vietnam’s power sector performance changed from 1990 to 2018 in four main aspects:

- (i) security of supply;

- (ii) access and affordability;

- (iii) utility efficiency and financial viability; and

- (iv) regulation, with a focus on tariffs and cost recovery.

Each dimension of performance includes a discussion of accompanying institutions and the extent to which reforms, or lack thereof, help explain how performance has evolved.

# _3.1 Security of Supply_

## _3.1.1 Performance_

**Until recently, Vietnam was mostly self-sufficient in electricity production, drawing on domestic gas and coal fields and abundant hydropower resources.** From the late 1990s, hydropower, coal- and gas-fired power generation increased rapidly to meet fast growing demand. In 2005, Vietnam became an importer of electricity, signing its first power import contract with China. Since then it has remained a net importer, despite exporting power to Cambodia since 2009. However, the amount traded is only a relatively small share of national demand. As of 2018, electricity imports from China and also from the Lao People’s Democratic Republic together comprised less than 3 percent of total energy demand (Table 1, page 12). Use of renewables other than hydropower has been negligible to date. However, Vietnam is planning to rapidly build solar and wind power capacity to reach respective targets of 12 GW and 6 GW by 2030.

**Vietnam has averted major, ongoing power supply crises faced by other developing countries mostly due to good power system planning and government commitment.** Demand for electricity in Vietnam has grown exponentially since the 1990s, at annual rates of 12 to 17 percent up to 2010, and 10 to 12 percent since then, often higher than the economic growth rates. This has been driven largely by electrification of households as well as industrialization, with relatively little attention paid to demand side management. Vietnam has an energy-intensive economy. The main response to periodic concerns of looming shortages has been spurts of rapid capacity expansion by government approving critical generation and network investment projects and speeding up internal approval processes. From 1990 to 1997, capacity more than doubled from 2 to 4.8 GW, almost entirely led by the state. The first major private power plant was commissioned in 1996, and since then IPPs have contributed about 14 percent of total installed capacity, covering all technologies available in Vietnam from small hydro to coal. Since 2001, supply has well exceeded demand. Capacity increased to almost 20 GW by 2010, then rose precipitously to over 45 GW by 2018 (Figure 4). As demand continues to keep rapidly grow, some analysts predict a supply crunch in coming years unless planned supply projects are expedited in parallel with demand-side management.

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<!-- Start of picture text --> £ i. oo<br>FL 5 t- peneennenennnnsneneennnnncnenenncnsnnnnsnsnsnecennanee<br>6[=] 3o 4 - SS SS SS ES ES SS ES SS SEnTSE RmSe eens<br>26<br>3 3<br>2 ~ ee Peee ee ee eee<br>2o 5 2 +- Sees =a «6s sete stehaiahalahalseelaiaiaiabaiehelsaalataieiaiataia<br>Lka yi Ff — | |<br>a<br>1 a “" 8 & 8<br>2 & %& 8&8 & & 8<br>Momentary Average Interruption Frequency Index (MAIFI) is measured in units of monetary<br>power interruptions (1 minute or less than 5 minutes) per customer. [tis usually measured<br>over the course of a year<br><!-- End of picture text -->
committee that oversees the unit responsible for the plans, the Institute of Energy draws on parallel plans for gas, coal, and industrial sectors (e.g. steel) as inputs. After internal government consultation, power system plans are formally approved by a Prime Minister Decision.

**Table 3: Institutional arrangements for power sector planning and procurement in Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines **|**Vietnam**|**International**<br>**benchmark**|
|---|---|---|---|---|---|
|**Planning andprocurement**|**95%**|**77%**|**59%**|**59%**|**70%**|
|Generationplanning|86%|43%|71%|71%|56%|
|Procurement ofgeneration|95%|90%|100%|50%|85%|
|Transmissionplanning|100%|75%|50%|100%|72%|
|Transmissionprocurement|100%|100%|17%|17%|64%|

Note: Scores based on index developed for the Rethinking Power Sector Reform Project, where 100% denotes good practice. For detailed planning and procurement index, see Annex.

**Wholesale markets would change the role of generation planning.** The current approach to transmission planning is expected to continue following the proposed full implementation of the competitive wholesale electricity market from 2021. The future role of generation planning following the introduction of a wholesale market at this stage is less clear. The PDP to date is based entirely on the premise of a central planner and does not conform to the view of a market. In principle, as the sector departs from the single-buyer model in the future, generators will independently contract with the PCs, not with EPTC. Furthermore, PCs decisions should be guided by current and projected wholesale market prices, which may vary from the plan. If so, the generation plan should become indicative or informative, rather than being mandatory as it has been interpreted to date.

**Vietnam’s institutions for power sector procurement have been assessed as relatively weak, especially for transmission.** However, this is not the case where ODA funding is concerned **.** In terms of procurement, generation is rated 50 percent and transmission plans 17 percent in terms of good practice factors for success (Annex Table B). Vietnam lags some countries in the creation of a specific framework for procurement of new power generation plants or new transmission lines. International competition is allowed for entry of new generation, but not public auctions or unsolicited bids (as the latter two methods have been associated with corrupt practices). All investment projects in transmission facilities are most often awarded to the incumbent transmission company as this is seen to be an efficient process particularly when the incumbents are providing satisfactory services.

# _3.2 User access and affordability_

## _3.2.1 Performance_

**Vietnam achieved high rates of access to electricity, well before embarking on market reforms.** In 1990, the share of households with a grid electricity connection was less than 14 percent. By 1996, the household grid electrification rate had reached 61 percent. By 2005 when the Electricity Law was promulgated, the rate was 87 percent. Universal access was reached around 2011 (Figure 6).

**Electricity consumption per capita has increased rapidly.** Average per capita electricity consumption in 1990 was less than 200 kWh/year, which was enough only for general lighting and a few low-power appliances. By 2015 it had reached 1400 kWh/year and by 2018 it had reached 2100 kWh/year, enough for high-power appliances such as air-conditioning units. Vietnam’s economy is energy-

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<!-- Start of picture text --> 2,500 100<br>90<br>2,000 80 w<br>z=<br>70 °<br>2<br>1,500 60 g8<br>= 50 2<br>= -<br>1,000 40 +3S<br>30 52<br>o<br>500 20 %<br>10<br>0 0<br>og NmMtF uN WOR WADT SC aA NMTNWORAD CA NMT NORM<br>QOQaqaqaqadqaqaqonqaqo nadnoceeoesgceeeoeesee9seeqgeu@Wdtiedtidedtidadtiddot aad<br>MA7Aannnnnanananacoc”’cicoocooooccocococococioccococcocc$o9c oe<br>Art nt nti ti ti ti tT Tt TEN NNNNNNN NN NN NNN NNN<br>== Consumption per capita == Households with electricity<br><!-- End of picture text -->
<!-- Start of picture text --> 3.50%<br>5 @ Kenya<br>= 3.00%<br>om]<br>2)<br>c<br>°<br>a.s) 2.50%<br>ze}<br>$=<br>3 = 2.00% @ Dominican Republic Shianzania<br>ey @ Colombia<br>£3wvoo — 1.50% @ Vietnam<br>« $ © Philippines<br>go 2 @ Morocco si<br>3 1.00% @ Tajikistan<br>c8© bsaingtan5<br>S 0.50%<br>ar] @ India<br>8 @ Senegal<br>0.00% © Eevet<br>0% 5% 10% 15% 20% 25%<br>% of monthly GNI spent on consuming avg consumption level<br>oe 211, Jan-07<br>eo _— 189, Mar-09<br>17> _ -18s3—- oy<br>cr _— a2—_—___——T , Mar-10<br>— — 16 158, Mar-11<br>5s 54-7159, Jun-14<br>Sy —— 1]<br>Zz Ae a<br>js, aa3" 7-<br>2 a . _-<br>oa- ]g-------.1107><br>2- --s°-S re<br>so”<br>a<br>63 65<br>57<br>0-50kwh 51-100kwh 101-150kwh 151-200kwh 201-300kwh 301-400kwh 400kwh+<br><!-- End of picture text --> Notes: Vertical axis: Yo of average retail tariffs Horizontal axis: blocks of total monthly consumption with an increasing unit price Lifeline tariffs for low-income households between March 2011 and June 2014 are not shown in this figure. For each period, they were lower than the tariffs in the 0-50kWh/ month bracket
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**Table 4: Technical efficiency indicators for Vietnam’s distribution power companies, 2011 to 2017**

||||**T**|**arget Value**|**s**|**Values as of**|
|---|---|---|---|---|---|---|
|||**Unit**|**2011**|**2015**|**2018**|**Dec 2017**|
||NPC||5145|4947|4656|1826|
||CPC||3631|3436|3234|2117|
|**SAIDI**|SPC|Minutes|6958|5871|5525|777|
||HCMPC||1682|716|384|130|
||HNPC||299|296|291|268|
||NPC||19.8|19.2|18.65|14.91|
||CPC||23.53|22.26|20.95|5.72|
|**SAIFI**|SPC|Times|24.3|22.9|21.6|3.235|
||HCMPC||7.62|3.82|2.5|0.93|
||HNPC||1.73|1.7|1.67|1.63|
||NPC||60|52|40|42|
|**Voltae**|CPC||0|0|0|0|
|**g**<br>**fltti***|SPC|Times/Year|25|10|4|4|
|**ucuaon**|HCMPC||0|0|0|0|
||HNPC||0|0|0|0|
||NPC||24.38|16.59|11.39|11.06|
|**Ditibti**|CPC||13.58|11.67|10.39|4.87|
|**sruon**<br>**l**|SPC|Percentage|10.24|8.66|7.6|4.44|
|**osses**|HCMPC||7.86|6.44|5.5|3.72|
||HNPC||19|14.8|12|9.9|

* Voltage fluctuations outside +/-5 percent at 110 kV/MV transformers in project areas

Source: World Bank (2018).

**Efficiency of thermal power plants has increased from 22 percent in 1990 to 45 percent in 2014.** See Figure 10. Installed thermal capacity is only partly used to balance the variability of hydropower. Generation companies show high capacity factors but low load factors especially for coal and gas (<53 percent in 2011-2012).<sup>9</sup> Suggested reasons for low load factors include low capacity in the 500 kV north-south transmission line, and high reserve generation requirements related to either security or cycling requirements. EVN expects a shift towards relatively more gas- and coal-fired generation, which would increase load factors as less reserves are needed to manage fluctuating hydrological and variable renewables conditions.

**Figure 10: Thermal efficiency of fossil-fuel power plants in Vietnam, 1990-2014**

<!-- Start of picture text --> 50%<br>40%<br>30%<br>20%<br><!-- End of picture text --> 9 Capacity factor is total output divided maximum theoretically possible output for a given year (or other period). Load factor is average load divided by actual maximum load, for a given year (or other period).

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**Until NPT, PCs, and the generation companies were corporatized, the financial performance of EVN’s subsidiary companies were not independent of each other or of the holding company.** EVN headquarters allocated assets and liabilities to subsidiaries and managed cash flow centrally. As such, the subsidiaries operated under considerable financial constraints: tariffs were low, and the companies had limited equity. EVN charges distribution companies for bulk supply of power at a bulk supply tariff. The bulk supply tariff may be adjusted to account for differences in costs across the PCs and EVN’s other subsidiaries. For example, losses originating from EVN Holding may be assigned to the PCs. As a result, the PC’s financial performance is not independent of EVN and its other member companies. This approach enables the National Uniform Tariff to be maintained and equalizes key financial performance indicators of each subsidiary. This effectively means that distribution companies cross-subsidize each other. However, this practice has gradually changed and to date, EVN subsidiaries are corporatized with their own balance sheets responsible for raising financing and managing their business. However, the bulk supply tariff regime for PCs still exist and the government plans to revise it to ensure the functioning of the wholesale electricity market.

**EVN’s financial position has variously swung from periods of loss to profitability, based on internal and external factors.** To assess the overall financial performance of EVN as a holding company, several key financial indicators are relevant, including (i) annual revenues; (ii) solvency/liquidity; (iii) profitability; and (iv) debt service. From 2008 to 2011, EVN’s annual net operating margins were negative and debt grew three-fold. Positively, EVN reduced the time needed to collect revenue by around 20 percent, from 84 to 68 days. However, PCs earned barely enough revenue to cover their operating costs. In 2010 and 2011, significant financial losses occurred chiefly due to several factors. First, low rainfall caused a temporary shift away from lower cost hydro to more expensive thermal. Second, there was a substantial devaluation in the Vietnamese Dong against EVN’s major borrowing currencies (Japanese yen and US$). Tariffs were not increased in such a way as to compensate for either of these factors (see section 3.4). In 2012 **,** good rainfall levels as well as three increases in tariffs each of 5 percent over 18 months lead to a net operating margin of 13 percent. In 2013, profitability was maintained, as tariffs increased 5 percent, and foreign exchange losses were minimal.

# **Since 2013, EVN’s financial position has improved substantially, gradually becoming a profitable**

**entity.** EVN’s annual revenues increased significantly from 2013 to 2017. Revenues, of which revenues from electricity sales accounted for 98 percent, increased between 8 to 19 percent per year (14 percent in 2014, 19 percent in 2015, 13 percent in 2016, 8 percent in 2017). Annual revenues increased from US$ 8.4 billion (VND 177 trillion) in 2013 to US$ 13 billion (VND 292 trillion) in 2017. Tariff as well as electricity demand increases were the major contributors for the large revenue increase. Tariff collection is one of the key credit strengths of EVN and its subsidiaries, the five power companies. Average collection rates against receivables have improved progressively from 2012 to 2016 and ranged between 98 and 100 percent for all five PCs. See Figure 11.

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<!-- Start of picture text --> 350.0300.0 270.5 292.8 3s 103.00<br>2500200.0 176.6 201.5 239.3 aeZ3 101.00 -<br>150.0 5<br>2<br>100.0 2 oe<br>50.0 & .<br>2<br>o<br>2013 2014 2015 2016 2017 2<br>S 97,00 Ro) un + a) N<br>@TMTM Revenue ——Linear (Revenue) 3SN oSN 3N ioN 3SN<br>——EVN NPC —— EVN SPC m—— EVN CPC<br>—— EVN HANO] = EVN HCMC —— EVN<br><!-- End of picture text -->
<!-- Start of picture text --> 2.00<br>150129 150 150 25 0.90 0.89 0.89<br>499 24 24 24 28 0.85 0.83<br>1.00 0.8 7<br>0.86 24 0.80 0.79<br>0.500.00 l] ; 232.3 |28 |230 0.750.70- ; ; [|<br>2013 2014 2015 2016 2017 2013 2014 2015 2016 2017<br>mmm Debt service ratio mmm Debt service ratio == Current ratio<br>—— Linear (Debt service ratio) —— _ Linear (Debt equity ratio) —— Linear (Current ratio)<br><!-- End of picture text -->

<!-- Start of picture text --> 12% 11% 20% 18%<br>10% 18%<br>8% 16% 4% 13% 14%<br>14%<br>6% 12%<br>4% 10%<br>8%<br>2% 1% 1% 6%<br>0% 4%<br>2013 2014 2016 7 2%<br>-2%<br>0%<br>-4% “2 2013 2014 2015 2016 2017<br>==" Returns on Sales ——~ Linear (Returns on Sales) S88 Gross profit margin ——— Linear (Gross profit margin)<br><!-- End of picture text -->
<!-- Start of picture text --> EBITDA and EBITDA Margin Gross debt/EBITDA (x)<br>VND Billion 14,594<br>11,564 12,953 4% <94.26<br>3.74<br>LLL<br>2015 2016 2017 2015 2016 2017<br>Operating Cash Flow and CAPEX Debt-to-Equity Ratio (x)<br>VND Billion Debt/Equity Ratio < 3x<br>12,187 12,235 won nee nnn ean nen eeneee<br>to101, 2.66 255 746<br>2.47<br>2 2 2<br>(13,194) (21,288) (10,051) 2015 2016 2017 Dec-18<br><!-- End of picture text -->
percent below the regional average of efficient losses for comparable utilities. Both companies have a strong ability to service debt and a positive profit margin in five of the last six years (Figure 16). Both made a net financial loss in 2011, when various factors contributed to poor performance. Drought meant that generation shifted from lower-cost hydropower to higher-cost fossil fuel resources, at a time when the Vietnamese currency was also substantially devalued. Also, in 2010 and 2011, system losses increased slightly as regional low-voltage rural systems were integrated into the national grid. However, system losses did not exceed target levels.

**NPC is now one of the strongest performers in the sector and is fully capable of servicing its debt.** Improved performance is reflected in the reduction of technical losses from 10.2 percent in 2010 to 7.7 percent in 2016. The organizational restructuring of NPC in 2011, undertaken immediately after its establishment in 2010, resulted in better financial performance. The company ultimately benefitted from streamlining and more effective management in the years following the transition. EVN revalued the assets of its transmission and distribution companies in 2012. This resulted in higher value of assets, significant additional equity on the balance sheet, and improved financial indicators. For example, the debt-to-equity ratio went from 73:27 to 45:55 for HCMPC, and from 77:23 to 59:41 for NPC. This nominal improvement in the debt-to-equity ratio did not, however, equate to additional cash for the businesses. As such, one concern is that this revaluation may give the impression of financial security that may not necessarily reflect actuality.

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<!-- Start of picture text --> Mmmm % Revenue lost due to distribution losses mami% Revenue lost due to collection rate<br>—@— Average Tariffs LCU Index —@=— Average Tariffs USD Index<br>30.00% 490%<br>25.00%<br>n 390%<br>ov<br>Ss<br>c nn<br>2 20.00% 3<br>2 a=}<br>= 290% £<br>2©<br>315.00% o<br>a ad<br>'cx 190% vu©<br>8 10.00% $<br>a° <=<br>2<br>5.00% — 90%<br>SEeess a es No data (1990-2009) ee ee ee a<br>0.00% ee -10%<br>PPPSoSSY oh PPom ooof PP©PPP© o\ SP5 ogOD LF© LPFSS Dd oe FF& OO FF© Sd HKoOPK PeSDDO GeeWD DYAD wyVPWD wfOPAD OO<br><!-- End of picture text --> <!-- Start of picture text --> mmm% Revenue lost due to distribution losses mami % Revenue lost due to collection rate<br>—@— Average Tariffs LCU Index —=@=— Average Tariffs USD Index<br>30.00% 490%<br>25.00%<br>n 390%<br>uv<br>CcSs n<br>2 20.00% 8<br>2 a=]<br>so 290% =<br>E©<br>315.00% o<br>a oo<br>‘:x 190% wv©<br>¥ 10.00% g<br>—°<<br>x<br>5.00% 20%%<br>S| EE SE SS SS Se CS SlNo SS dataSS (1990-2009)Sl Gs Se Ss Ss See Ge GSN ISL od<br>0.00% ————— -10%<br>PPPSSSY BYobPPoo of SP© PFLF© PP9SS oFo> PFOD OD LPPSS dh FFoe oo FFoO © FFPdh &o O KeSOYWO HPWD MPADV WD HSYSwh OO<br><!-- End of picture text -->
<!-- Start of picture text --> Gama Debt Service Coverage Ratio Ml Debt-to-Equity Ratio ==@®= Net Profit Margin<br>10 3%<br>; 2% Cc<br>87 1%<br>= =<br>ae 6 0% =<br>© 5 =<br>Ee 4 1% ©<br>cyt] a<br>=c 3 -2% @<br>z<br>,<br>1<br>| No data 1990-2009 | ATT 3%<br>0 ES ES ES GS GSS GE DS DL -A%<br>SGcog NmMtTHNwWOrDAATAANMAMUORAAAANmMAYHW<br>aanriaranaaqaancceoc$qoceocdc cd GOGO dadacd dace<br>aAararmrnmanrnainraraararnr—anrveoecdaocqococoocnooqocococ°ceco lo<br>san nt Ai ntti nti nti at AT ANN NNN NN NNN NNN NN ON<br><!-- End of picture text -->

<!-- Start of picture text --> Ga Debt Service Coverage Ratio Ml Debt-to-Equity Ratio =@®< Net Profit Margin<br>10 3%<br>9<br>2%<br>9<br>S 7 1% bCc o<br>5<br>©© 0% =<br>= 5 F =<br>e 4 1% ©<br>oa<br>=3 2%<br>2<br>1 -3%<br>0 a No data 1990-2009 [ -4%<br>SAN MTN YORFrAAGANMAMNM WORF AASA NM AH<br>Aamararariaaqa»atdoecd?ecdcoeocoeocqceococgrdt dtd dtd a =a<br>amma arAaraAarmarmrimaedwseceaoaoceeaececeeoeoceeceeaensrcceos<br>Ant ti ti ti ti ti et TD TAT NNN NNN NNN NNN NNN OS<br><!-- End of picture text -->
36.2 percent and maximum of 92.4 percent over the seven years observed. EVN’s recent credit rating should enable NPC to make further progress to improve its own creditworthiness.

**Table 5: Summary of Financial Indicators for Vietnam’s NPC against sample average**

||**NPC**<br>**(Vietnam)**|**15 country**<br>**sample**<br>**average***|
|---|---|---|
|Net profit (loss) margin|-0.02%|-13%|
|Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)margin|1.5%|4%|
|External Financing Index Ratio|0.522|6.90|
|Investment as a percent of revenues|14%|18%|
|Average borrowing rate|4%|7%|
|Government transfers as percentage of utility revenue|0%|5%|
|Needed investments covered by operating revenue (net operating expenses)|9%|49%|

*Includes select utilities from Tanzania, Senegal, Peru, Colombia, Pakistan, the Philippines, Vietnam, Kenya, Uganda, Tajikistan, the Indian states of Rajasthan, Odisha, and Andhra Pradesh, Egypt, and Ukraine

Source: World Bank staff for Rethinking Power Sector Reform project

# _3.3.2 Institutions_

# **EVN and its subsidiaries maintain strong state linkages through their legal structure and corporate**

**governance, with limited autonomy.** As noted previously, EVN is as a fully state-owned enterprise group that dominates each part of the electricity sector value chain. It has a majority share of Vietnam’s power generation capacity (61 percent of capacity as of 2018). It also owns and operates the electricity transmission and distribution network through subsidiaries. The Government of Vietnam appoints EVN’s board and senior management and directs investments. PCs are organized as one-member limited liability companies wholly-owned by EVN. They have no Board of Directors, and instead have a Management Board comprising the Chief Executive Officer and four Directors-General and a full-time controller reporting directly to EVN. Members of the subsidiaries’ management boards are drawn exclusively from EVN management, with appointments made centrally. The management boards make few decisions autonomously. Rather, they carry out functions as determined and directed by EVN. As such, the current governance arrangements leave responsibility for management and control of both EVN and its subsidiaries largely in the hands of EVN headquarters.

**Management practices in EVN, as for other organizations in Vietnam, have roots in specific aspects**

**of the country’s society and culture.** A thesis by Tham (2012) examines EVN’s corporate culture in the context of reforms and identifies attributes of agricultural Confucianism and Socialist central planning, with emphasis on hierarchy, stability, collectivity, and interpersonal relations. Clear superiorsubordinate relationships mean that "obedience from lower levels is expected in all circumstances”. Obedience may thus be a key motivation for implementing units to follow government plans. Corporate-level performance, as for other SOEs, tends to be assessed on end contract targets rather than maximizing profits or productivity. For employees, evaluation tends to be informal and at the level of teams rather than individuals, underpinned by trust developed through socialization prior to and during employment. This approach mitigates the risk of disagreements or loss of face that could result from relying on formal monitoring of with objective indicators of individual performance. A performance-based salary incentive for individuals is "not popular since it neither matches the purpose nor goal of collective orientation”. When reforms create ambiguity for workers, EVN has

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tended to respond by “providing greater job stability, establishing more formal rules, and rejecting nonstandard ideas and behavior”. These cultural factors contribute inertia to reform, as captured in the following quote: “Networking seems to be the best strategy to minimize risks and uncertainty [especially during a transition period of institutional reform]. Hence it is not surprising for EVN to rely on connections with government for resources, privileged treatments over private participants and favorable policies such as delayed introduction of competitive market. Until now, this linkage proved to be among the most pivotal factors that guarantee EVN's survival and development.” (Tham: 128-9)

**NPC and HCMPC score poorly against most benchmark indicators of good practice corporate governance and utility management but score highly on information technology.** See the Annex for details of benchmark indicators. The utilities get top scores for use of information technology to manage quality of service, customer care, and corporate management, including smart meters, feedback mechanisms, and other technologies to monitor performance.

**The financial discipline of utilities is a function of business imperatives and top-down policy objectives.** The objective of Vietnam’s utilities includes to operate profitably, maintain the capital of the business, maintain reliable and safe supply of electricity, and contribute to social objectives (including the national uniform tariff) and national defense objectives. The utilities have defined public service obligations, but these are un-costed, not compensated by the government, and undisclosed. The utilities are not required to meet financial performance targets. PCs’ financial positions are assured through the approach to setting the wholesale electricity price as the retail price minus each PC's costs. However, PCs are subject to tight control by EVN through the setting of the overall spending and capex budgets for each PC. EVN also sets output, and service targets for the PCs. Audited financial statements are available from 2013 onward, however completion of audited accounts takes up to a year, which is slow by international standards. While there is a general lack of transparency, the utilities do publish an annual report that includes financial accounts to international standards audited by an external auditor.

**While state support for the utilities is stable, their financial positions are most vulnerable to politically-imposed limits on electricity prices.** The overall financial position of the sector has been constrained in large part by the politically-imposed limits on electricity prices, which are set below full costs. Any return on assets at the distribution company level may thus come at the expense of generation prices that are enough to recover the costs of new capacity. Sub-optimal returns are partly compensated by state support for EVN, which includes tax incentives, guarantees, loans with favorable terms from state-owned banks, and subsidies for strategic projects. EVN is not listed on a stock exchange and does not have the liberty to issue new equity. EVN is thus one of Vietnam’s key borrowers. EVN’s first credit rating, issued in 2018 at EVN’s request (with support from the World Bank), raises the potential for pursuing external financing in the future. While the government has suggested that subsidies should be eliminated, one concern is that changing electricity prices while maintaining the current structure of the sector could decrease the efficiency of performance, unless matched by other incentives to improve performance.

**Human resource management in EVN has a mix of distinct features.** Human resource management and industrial relations in EVN can be understood as a function of broader sociocultural practices and networks further to the context described above. EVN has more than 100,000 employees, which corresponds to a relatively high number of employees per customers compared to other countries. For NPC and HCMCPC, the number of employees has remained relatively stable over the period 2010

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<!-- Start of picture text --> 2,100 . 8.50<br>2,000 USD nominal<br>1,900 (right axis) TM 8.00<br>1,700 7.00<br>= 1,600 6.50 =<br>= 1, 54 00 VNDanominal 6.00 2=<br>s 1,300 (left axis) 5.50 9<br>S 1,200 a<br>5.00 a<br>1,100 VND real 2005 ><br>1,000 (left axis) 4.50<br>98 00 aan l 4.00<br>700 3.50<br>600 3.00<br>SP? GF FFX PSF S&S 8? SP SFM Pg?<br><!-- End of picture text -->
**Table 6: Nationally-determined average retail tariff (ART) excluding value-added tax, 2005-2019**

|**Year**|**ART (VND/kWh),**<br>**nominal increase**|**Notes**|
|---|---|---|
|2004|Not available|Electricity Law passed: provides that ART should reflect costs of supply, while**PM retains**<br>**tariff-setting authority**.|
|2005|789|ART is 789 VND/kWh as of January. In July, the Electricity Law took effect. Electricity<br>Regulatory Authority of Vietnam established.|
|2006|795,↑0.8%|PM (Decision 26) issued roadmap to market-based, cost-reflective tariffs that would be<br>based on market price from 2010.|
|2007|842,↑5.9%||
|2008|890,↑5.7%|Despite ART increase, EVN incurred net loss of VND 7.3 trillion due mainly to global<br>financial crisis impact on EVN’s foreign currency debt exchange rate.|
|2009|949,↑6.6%|ART increase in March reflected reported supply costs for 2009.<sup>13</sup>PM (Decision 21)<br>required ART to be updated annually and transparently, and delegated MOIT to adjust<br>them by up to 5 percent per year above the last rate delegated to MOIT.|
|2010|1,058,↑11.5%|PM increased ART in March based on a forecast of costs in 2010. Costs proved higher<br>than expected due to drought-induced reliance on thermal generation, as well as high<br>inflation and currency depreciation. MOIT (Circular 13) set system market operator fees.|
|2011|1,242,↑17.4<br>1,304,↑5.0%<br>_Note: Cost recovery_<br>_would have seen a_<br>_rise to 1,584,_<br>↑_27.5 %_|<br>MOIT proposed increase to recover 2010 actual costs and 2011 forecast costs. Due to<br>concerns about inflation, the PM increased it in March to cover only expected costs for<br>2011, deferring recovery of 2010 costs and losses to future rates. In April, PM Decision<br>24 allows for adjustment once in three months to reflect generation cost changes, but<br>**adjustments shall be managed with a view to maintain macroeconomic stability and**<br>**contain inflation**. Master Plan approved by the Prime Minister in July states prices will<br>be increased gradually to cover long-term marginal cost by 2020. In December, a second<br>increase covered forecast costs for 2012, but not pending costs and exchange losses.|
|2012|1,369,↑5.0%;<br>1,437,↑5.0%|ART adjusted twice in 2012 (July and December).|
|2013|1,509,↑5.0%|Amended Electricity Law (effective July) emphasizes public transparency regarding<br>changes of component elements to retail price adjustments,**formalizes role of MOF in**<br>**several key aspects of the tariff framework**. PM Decision sets the bracket of 1,437-1,835<br>VND/kWh ART adjusted in August. PM Decision 69 (December) raised the maximum that<br>MOIT can increase tariffs to 10% but provides for ART**recalculation every 6 months**<br>**(instead of 3 months), with a mandatory 12-month delay for any increase over 7%**.|
|2014|No change|Circular further defines procedures for setting ART, and calculation of distribution costs.|
|2015|1,622,↑7.5%|The Prime Minister approved a bracket of 1,437-1,835 VND/kWh, equivalent to -5<br>percent to +22 percent from the previous average rate. ART adjusted in March 2015.|
|2016|No change||
|2017|1,720,↑6.0%|In June 2017, PM Decision 24 guarantees the transparency of tariff management<br>requirements according to market rules and allows EVN to increase ART by up to 5% each<br>6 months subject to macroeconomic conditions. The ART increase, in November, was<br>based on costs in 2016 and was made to avoid imbalance in EVN’s finances|
|2019|1,864,↑8.4%|Increase, in March, based on higher input prices from coal and gas and forex.|

Note: **Bold red text** indicates elements less aligned with a market approach to attract new investment. Source: Authors based on Hughes & Flochel 2016; Neefjes 2016; VNN 2017.

13 The 2009 tariff increase was a prior action for World Bank-supported Development Policy Operation.

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<!-- Start of picture text --> 0.12<br>0.10<br>= Full capital cost<br>S 0.08 Limited capital cost<br>a)<br>2 Operating cost<br>un<br>$s<br>2 0.06<br>v<br>><br>2<br>wv<br>i)<br>© 0.04<br>v><br><=<br>0.02<br>0.00<br>Industry and Agriculture Residential and Other Commercial<br>Mining government<br><!-- End of picture text --> <!-- Start of picture text --> 100%<br>90%<br>80% y<br>co)<br>= 70%<br>$<br>a 60%<br>a<br>‘5 50%<br>= 40% j<br>fs<br>5 30%<br>a 20%<br>10%<br>0%<br>0% 20% 40% 60% 80% 100%<br>Percent of Consumption<br>600 0.30%<br>500 0.25%<br>Q 400 0.20% &<br>S id<br>2 300 0.15% 2<br>©<br>== ov2<br>= 200 0.10% 2<br>.0 7 7 —0.00%<br>2010 2011 2012 2013 2014 2015 2016<br>lm QFD from collection losses mami QFD from T&D losses<br>Mmmm QFD from underpricing + —@®—Total QFD as% of GDP<br><!-- End of picture text -->
# _3.4.2 Institutions_

**The performance of the regulatory system is evaluated from various standpoints** .  Performance of regulation is assessed on: (i) regulatory governance, represented by accountability and autonomy aspects; and (ii) regulatory substance, represented by tariff regulation, quality regulation and marketentry regulation. First, an evaluation is made of the de jure performance by comparing the laws, rules, and regulations in place with various criteria that would be desirable in an ideal system. Second, a perceived evaluation based on experts’ comments and perceptions of the actual performance of the various aspects of regulation. In most cases the indices are averaged to reach the high-level score, but in some cases, the indicators are multiplied. Multiplication, rather than an average, of sub-indices is used to reflect the fact that a pair of variables (i.e. autonomy and accountability, governance and substance) are only meaningful when they go together. Average of sub-indexes is adopted as aggregation method when these are largely independent from each other (i.e. tariff and entry regulation).

**Many, but not all, elements of Vietnam's tariff regulation framework align with a market approach**

**to attract new investment.** Since the 2004 Electricity Law, successive instruments have elaborated and adjusted the tariff regulatory framework. Many elements of the tariff framework can be considered positive from the perspective of attracting new investment through a market approach. Tariffs can be ‘automatically’ adjusted (through authority delegated from the Prime Minister to the Ministry) based on increasingly detailed methodologies to reflect actual costs, within limits. Crosssubsidies between customer classes are to be gradually eliminated, and eventually the uniform national tariffs are expected to be removed for industrial and commercial customers or for specified regions. However, as highlighted in Table 6 above, some elements do not closely align with a marketbased approach. The government stipulates a uniform average retail rate applicable to all customers regardless of their location in Vietnam. Adjustments above a certain percentage are recommended by MOIT and ultimately require approval by the Prime Minister. In 2011, the Prime Minister decided that adjustments shall be managed with a view to maintain macroeconomic stability and contain inflation, and the 2013 amendment to the Electricity Law formalized a role for the Ministry of Finance in defining the tariff framework. Despite various provisions for regular updates, tariffs have, in practice, been updated sporadically and have chronically lagged inflation.

**Vietnam rates poorly on indicators of regulatory governance (accountability and autonomy).**

Notwithstanding the existence of ERAV since 2005, regulatory functions are not carried out independently of government in Vietnam. Decision powers formally reside in almost all instances with the Minister and Prime Minister, while noting the culture of consensus building among key actors as previously described. Certain stakeholders have expressed general skepticism over regulatory processes and outcomes. For example, ERAV’s budget composition is unclear and the majority of ERAV’s funding appears to not come from levies, which implies a structural dependence on government. Legal appeals are formally allowed. In practice, however, lack of transparency around recommendations, and lack of broad formal participation in decisions, reduces the likelihood that a wide set of stakeholders would be positioned to meaningfully engage in the regulatory process (Table 7).

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**Table 7: Formal regulatory governance in Vietnam and comparators, 2015**<sup>**_14_**</sup>

||Colombia|Peru|Philippines|Vietnam|<sup>International</sup><br>benchmark|
|---|---|---|---|---|---|
|**Regulatory Governance**|**45%**|**83%**|**48%**|**32%**|**59%**|
|**Accountability**|**75%**|**85%**|**95%**|**64%**|**83%**|
|_Regulatory Oversight_|67%|67%|100%|67%|81%|
|_Legal Appeals_|100%|100%|100%|100%|100%|
|_Transparency_|57%|89%|85%|25%|67%|
|**Autonomy**|**60%**|**98%**|**51%**|**50%**|**71%**|
|_Decision-Making Autonomy_|64%|92%|79%|36%|79%|
|_Budgetary Autonomy_|88%|100%|50%|50%|80%|
|_Leadership Autonomy_|88%|100%|75%|14%|66%|
|_Managerial Autonomy_|0%|100%|0%|100%|59%|

Note: Scores based on indices developed for the Rethinking Power Sector Reform Project, where 100% indicate ‘good practice’. See Annex Tables J and K for details.

**Vietnam nevertheless rates well on indicators for effective regulation of power sector tariffs.** Using the study’s benchmarks indicators for tariff regulation, Vietnam scores 100 percent on the overall regulatory framework and 67 percent on how tariffs are to be determined (table 10). It is notable that, while the regulator has limited independence in making decisions, in technical areas of tariff setting, quality regulation, and market entry, it performs at global average levels. The main shortcomings are that utilities are not compensated for the cost of stranded assets, and users do not bear the cost of incentive mechanisms for renewable energy generation. Some evidence suggests that ERAV does not fully enforce regulations to ensure distribution PCs and transmission NPTC receive a reasonable return.<sup>15</sup>

**Table 8: Formal regulatory substance in Vietnam and comparators, 2015**

||Colombia|Peru|Philippines|Vietnam|<sup>International</sup><br>benchmark|
|---|---|---|---|---|---|
|**Regulatory Substance**|**81%**|**83%**|**95%**|**85%**|**76%**|
|**Tariff Regulation**|**92%**|**100%**|**93%**|**83%**|**77%**|
|_Regulatory Frameworkfor Tariffs_|100%|100%|86%|100%|90%|
|_Determination of Tariffs_|83%|100%|100%|67%|64%|
|**Quality Regulation**|**100%**|**100%**|**92%**|**71%**|**75%**|
|_Quality of Service Standards_|100%|100%|100%|75%|82%|
|_Quality of Service Enforcement_|100%|100%|83%|67%|68%|
|**Market Entry Regulation**|**50%**|**50%**|**100%**|**100%**|**77%**|
|_Permitting New Entrants_|50%|100%|100%|100%|90%|
|_PPA Approvals_|50%|0%|100%|NAP|57%|

Note: Scores based on indices developed for the Rethinking Power Sector Reform Project, where 100% indicate ‘good practice’. See Annex Tables L, M and N for details.

# **Vietnam rates moderate to moderately well on indicators of perceived regulatory substance service**

**quality, and market entry regulation.** Using the benchmark system developed for this study in terms of the perceived effectiveness of regulation, Vietnam scores 71 percent for service quality, and 50 percent for market entry. The major shortcoming in quality regulation are that there are no fines for failing to meet quality of service standards, no validation of utility data, and no financial incentives to

> 14 For the complete regulatory governance index, see the annex.

> 15 Mercados (2015) _Strategic Options for Enhanced Financial Performance of EVN_ , cited in Hughes & Flochel (2011: 39) with reference to Circular 14/2009 on transmission tariffs, and Circular 12/2014 on bulk supply cost.

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meet customer services standards. On market entry, significant shortcomings include that the regulator does not monitor compliance with the terms of licenses, and the regulator has no authority to impose penalties for violation of license or permit terms, or other contractual provisions. However, companies have been forced to relinquish licenses for a violation of license terms or contracts. Over 10 licenses were withdrawn in 2014 and 2015 due to not meeting requirements such as metering requirements or not complying with requirements to notify ERAV of relevant changes. In summary, compared to the other 14 country cases of the present study, Vietnam performs below average in governance aspects of regulation, but on or above average on substance.

**Table 9: Summary of indicators of** **_de jure_ and effective regulation in Vietnam’s power sector**

|**Indicators**|**De Jure**|**Perceived**|
|---|---|---|
|**Overall Regulation**|**27%**|**3%**|
|**Regulatory Governance**|32%|5%|
|**_Accountability_**|64%|31%|
|_Regulatory Oversight_|_67%_|67%|
|_Legal Appeals_|_100%_|0%|
|_Transparency_|_25%_|25%|
|**_Autonomy_**|50%|17%|
|_Decision-Making Autonomy_|_36%_|36%|
|_Budgetary Autonomy_|_50%_|0%|
|_Leadership Autonomy_|_14%_|14%|
|_Managerial Autonomy_|_100%_|NAV|
|**Regulatory Substance**|85%|63%|
|**_Tariff Regulation_**|83%|67%|
|_Regulatory Framework for Tariffs_|_100%_|83%|
|_Determination of Tariffs_|_67%_|50%|
|**_Quality Regulation_**|71%|71%|
|_Quality of Service Standards_|_75%_|75%|
|_Quality of Service Enforcement_|_67%_|67%|
|**_Market Entry Regulation_**|100%|50%|
|_Permitting New Entrants_|_100%_|50%|
|_PPA Approvals_|_NAP_|NAP|

# 4 <u>Conclusion</u>

**Vietnam’s power sector has developed rapidly since the 1990s to become one of the best performing power sectors of any developing country today. This success has occurred mostly under the state-owned utility, EVN.** Market-oriented reforms, including to establish partial competition in generation with a single buyer, have also had some positive impact as part of long-term reform plans still underway. Between 1990 and 2018, power generation capacity increased dramatically from 2 gigawatts to over 45 gigawatts, and grid connections went from around 10 percent to over 99 percent of households. Supply-side efficiency and reliability also improved over this period. Important contributing factors include top-level government commitment, highly-qualified staff in EVN, and consensus-based decisions among sector institutions.

**By the late 1990s, the government realized the need to gradually introduce competition to ensure long-term sustainability without jeopardizing security of supply for the fast-growing economy.** Vietnam’s 2004 Electricity Law has provided the framework to develop a competitive power market, unbundle EVN, set prices that better reflect costs, promote private investment, and establish regulatory authority, ERAV. Today, Vietnam’s power sector continues to be dominated by stateowned entities. However, improved operational efficiency and financial performance of generators under the partly-competitive power market has contributed to keeping generation costs relatively low. The government plans further reforms to ensure effective operation of a wholesale market with

39
multiple buyers by 2021, and retail competition by 2023. Further steps planned include to privatize EVN’s generation assets, establish competitive bidding for all generation technologies, establish an independent system and market operator, make the tariff regime more transparent, and promote clean energy sources to avoid overreliance on fossil fuels.

Findings on the performance and institutions of Vietnam’s power sector with respect to power sector performance and reform are summarized below and in Table 10.

# **First, with respect to security of supply, Vietnam has averted major crises of supply, despite periods**

**of low reserve margins and seasonal outages** . A major contributor has been Vietnam’s focus on power system plans, which have been closely implemented by the dominant state-owned utility, EVN. In times of looming power shortages, the government sped up approval processes for generation and network development. Planning and procurement processes remain largely internal to the government. While Vietnam has implemented significant market reforms, its power sector institutions continue to be state-controlled.

# **Second, on access and affordability, Vietnam has achieved almost universal electricity access from**

**low rates in the early 1990s** . Electrification benefited from strong sociopolitical emphasis from the highest-level down to local villages, which shared the costs of network development. Low base rates and cash transfer schemes have targeted low-income households with improved accuracy over time, albeit still with some inefficiency. To ensure social equity, a uniform national tariff regime has been adopted and is still applied such that urban and large energy consumers cross-subsidize rural households.

**Third, technical performance improved substantially over the last decade** . In earlier years, low technical efficiency of transmission and distribution were exacerbated by rapid grid extension outpacing investments in grid capacity. Today, network losses, collection rates, and wider system performance indicators are mostly in line with regional and international best practice, indicating the strong technical and operational capacity of EVN.

**Fourth, the financial sustainability of the sector has evolved.** Spikes in fuel costs and exchange rates make the utilities depend on state backing, and vulnerable to credit risk. Tariffs remain below full cost recovery levels. Some elements of Vietnam's tariff regulation framework align with a market approach to attract new investment, while other elements do not. Regulation is largely effective with respect to service quality, but mixed on market entry, and relatively weak on accountability and autonomy. De jure regulatory quality is generally higher than de facto practice. In recent years, EVN and its subsidiaries have been profitable, covering operating costs and debt service, as confirmed by the recent positive credit rating of EVN and NPT by Fitch Rating Agency. However, utilities score relatively poorly on indicators of good practice corporate governance and management. Distribution utilities are tied to the holding company EVN, which in turn has strong financial and governance links to the state.

40
**Table 10: Summary evaluation of Vietnam’s power sector reform efforts from 1990 to 2018**

|**Issue**|**Performance**|**Institutions**|
|---|---|---|
|**Security of**<br>**supply**|Vietnam has averted major crises of supply, with<br>rapid construction of generation capacity from a<br>total of 2.2 GW in 1990 to over 45 GW in 2018.<br>Most of this has been public. As of 2018,<br>60 percent of domestic generation capacity was<br>owned by EVN, and 27 percent was privately<br>owned.|Plans are closely followed by the state-owned utility,<br>EVN, which dominates the sector. An EVN<br>subsidiary is the single buyer competitive generation<br>market was established in 2012 with. Planning and<br>procurement processes remain largely internal to<br>government.|
|**User**<br>**access and**<br>**affordability**|The share of households with grid access<br>increased from an estimated 14 percent in 1993 to<br>>99 percent since 2010. Low base rates and cash<br>transfer schemes have targeted low-income<br>households with improved accuracy over time.|Rapid electrification was facilitated by completion in<br>1994 of the North-South transmission line,<br>consolidation of national power sector institutions in<br>the mid-1990s, and local buy-in.|
|**Supply-side**<br>**efficiency**<br>**and**<br>**financial**<br>**viability**|Technical performance has improved after years of<br>low efficiency: from 1990 to 2017 transmission and<br>distribution losses fell from 25 percent to 7.6<br>percent. Collection rates are high. Input price<br>volatility and rigid tariffs make the utilities depend<br>on state backing.|Utilities score poorly on indicators of good practice<br>corporate<br>governance<br>and<br>management.<br>Distribution utilities are tied to the holding company<br>(EVN). Improvements to grid capacity lagged the<br>pace of grid extension but have caught up.|
|**Regulation**<br>**of tariffs**<br>**and other**<br>**sector**<br>**elements**|Sporadic increases in average retail tariffs have not<br>covered capitals costs or inflation. Cross-subsidies<br>from commercial to other users have decreased in<br>recent years.|Vietnam's tariff regulation framework is a mix of<br>elements some of which align with a market<br>approach. Regulation is largely effective for service<br>quality, but mixed on market entry, and poor on<br>accountability and autonomy.|

The following lessons emerge from Vietnam’s experience on power sector reform.

**1. State-centric institutions can rapidly and successfully develop a power sector with concerted efforts, notwithstanding the opportunity for well-regulated competition and private sector participation to improve efficiency and financial viability.** Vietnam, like many, if not all countries in the world, achieved large-scale capacity expansion and near-universal electrification led by the state in terms of planning and ownership. The case of Vietnam thus demonstrates that there are alternative institutional pathways to a well-performing power sector, beyond that provided by the 1990s marketoriented reform model, particularly in contexts of increasing demand. Vietnam’s striking success on generation capacity expansion and electrification was, however, accompanied by subsidized tariffs that resulted in a reliance on public financing and an inability to attract private investments. The latter has in the past been limited by financial creditworthiness constraints of EVN and its distribution companies, and the fact that new generation costs of IPPs were higher than allocating new power generation projects to EVN and other SOEs. Nevertheless, creditworthiness has improved in recent years.

# **2. Gradual reform steps offer the opportunity to build consensus each step of the way and learn by**

**doing. This can lead to different outcomes than expected, as policy drivers evolve.** Vietnam’s culture of policy-making by consensus, in combination with long-running rifts among conservative versus reformer factions within the Party, have made it difficult at times for a clear policy direction to emerge on economic policy in general. Yet, in Vietnam’s decades-long transition from socialist planning to markets, incremental reforms have largely been sustained. This is also the case in Vietnam’s power sector, where the government explicitly designed the reform process to be gradual to reduce the risk

41
of shocks to the economy and to consumers. Unlike other countries and sectors, there have been no ‘big bang’ reforms in Vietnam’s power sector, but a consistent evolution towards a better performance. The Prime Minister in 2006 set out a 20-year “Roadmap” for developing a competitive electricity market with several years between key milestone <mark>s and phases of market development. In practice, implementation was slower than planned.</mark> In part, this may relate to the absence of major crises in the power sector, which has given Vietnam breathing space. Tight sector finances and low power reserve margins due to demand growing at high rates for several years created pressure for reforms, yet the state also found non-market solutions to address these in the short-term.

**3. The sequence of reforms matters. Introducing market mechanisms ahead of other vital elements may limit their effectiveness and make subsequent reform steps more difficult.** Vietnam has been selective in its adoption of elements of the international model of power sector reform, including with respect to sequencing. Vietnam’s competitive generation market began in 2012 before putting effective limits on market power concentration and on conflicts of interest among state-owned market participants, and without fully cost-reflective tariffs. As of 2015, EVN not only maintains supervision or ownership over two-thirds of generation capacity, but also the dispatch center and market operator. This setup echoes other sectors in Vietnam’s economy, where commercialization preceded new governance mechanisms. A concentration of semi-independent institutional power in the sector, without a proportionately strong regulatory oversight, increases the risk of ‘elite capture’ such as patronage and rent-extraction, which can shape or hinder subsequent reforms. Another way to consider this is that technical progress in market reform requires matching political action, with transparency not only in the operation of the market, but also in the enactment of policy and institutional reforms. While Vietnam’s overall sector plan remains in the direction of market-oriented reforms, the challenge will be to find a way to balance institutions of different strengths (i.e. EVN group vis-à-vis the regulator), among other factors.

Overall, Vietnam has developed its own unique and evidently successful path to power sector development and market reform based on its unique political and socio-economic characteristics.

42
# **<u>Annex: Rethinking Power Sector Reform Indices</u>**

The ‘Rethinking Power Sector Reform’ study employs various indices to measures reforms. As the main global index, a simple Power Sector Reform Index aggregates four dimensions of power sector reform consistent with the standard package of reforms prescribed by international donors in the 1990s. These dimensions are: restructuring (vertical and horizontal unbundling of power utilities); private sector participation; creation of an independent regulator; and competition in power generation. The index gives each country a score from 0 to 100 on each of the above four dimensions of power sector reform. The scores are based on giving equal weight to each step on each dimension of the reform continuum (see tabulation below). The average of the four 0-100 scores is used to provide an overall summary of the extent of reform. _The score of 100 for the reform index is not intended to signify ‘good practice’ but merely alignment with the 1990s model._

## **A. Global reform index**

<!-- Start of picture text --> Regulation No regulator Regulator<br>= 0 = 100<br>Restructuring Vertically integrated Partial vertical Full vertical Vertical & horizontal<br>unbundling unbundling unbundling = 100<br>= 0<br>= 33 = 67<br>Competition Monopoly IPPs Single Buyer Bilateral Competitive<br>Model Contracts market<br>= 0 = 25<br>= 50 = 75 = 100<br>Private Sector 0.5*(Percentage of generation capacity with private sector participation)<br>Participation<br>+<br>0.5*(Percentage of distribution utilities with private sector participation)<br><!-- End of picture text --> Separately, a set of distinct indices are used to measure regulatory and governance frameworks in the power sector. The scores for Vietnam and a selection of other case study countries, are presented below. _For these scores, 100% corresponds to what can be considered ‘good practice’._ 43
# **B. Generation and transmission planning index for Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines**|**Vietnam**|**International**<br>**benchmark**|
|---|---|---|---|---|---|
|**Planning and Procurement**|95%|77%|59%|59%|70%|
|**Generation Planning**|86%|43%|71%|71%|56%|
|Countryhas ageneration masterplan|||||94%|
|Countryhas an overall energy plan|||||65%|
|Competent entityis responsible forproducingthe|||||88%|
|Inter-governmental committee oversees theplanning|||||29%|
|Powergeneration systemplan is mandatory|||||19%|
|Plan leads to timelyinitiation ofprocurement|||||38%|
|Planning process is transparent andparticipatory|||||59%|
|**Transmission Planning**|100%|75%|50%|100%|72%|
|Competent entityis responsible forproducingthe|||||100%|
|Explicitlylinked topowergenerationplans|||||88%|
|Plan is mandatory|||||29%|
|Planning process is transparent andparticipatory|||||71%|

# **C. Generation and transmission procurement index for Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines**|**Vietnam**|**International**<br>**benchmark**|
|---|---|---|---|---|---|
|**Procurement of Generation**|95%|90%|100%|50%|85%|
|There is a framework forprocurement|||||82%|
|Country allows International competetive bidding or<br>public auctions forprocurement|||||94%|
|Types ofprocurement methods allowed||||||
|_Unsolicited bids_|||||29%|
|_Direct negotiation_|||||47%|
|_International competitive tendering_|||||88%|
|_Public auctions_|||||41%|
|_Stand-alone capacity market_|||||0%|
|Auction design score|0.86|0.71|NAP|NAP|80%|
|_Country usespublic auctionsforprocurement_|||||41%|
|Clear and comprehensive established rules|||_NAP_|_NAP_|100%|
|Crediblepenalties for violatingthe rules|||_NAP_|_NAP_|86%|
|Guarantees andpenalties to ensure timelycompletion|||_NAP_|_NAP_|86%|
|Standard,non-negotiable contracts|||_NAP_|_NAP_|86%|
|Stapled financingterms or risk mitigation instruments|||_NAP_|_NAP_|86%|
|the auction|||_NAP_|_NAP_|14%|
|Efforts to inform and attract bidders to the auction|||_NAP_|_NAP_|100%|
|**Transmission Procurement**|100%|100%|17%|17%|64%|
|There is a framework for procurement of new<br>transmission lines|||||59%|
|Methods used toprocure new transmission-|||||69%|
|_Competitive tender_|||||65%|
|_Direct negotiation_|||||24%|
|All projects are awarded to the incumbent<br>transmission company|||||47%|

Satisfactory result Unsatrifactory result NAP Not applicable NAV Not available 44
# **D. Access policy framework index for Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines**|**Vietnam **|<sup>**International**</sup><br>**benchmark**|
|---|---|---|---|---|---|
|**Regulation of New Connections**|**68%**|**88%**|**57%**|**14%**|**65%**|
|Roles of regulator, utility, rural electrification agency<br>clearlydefined||||NAV|93%|
|Utilities have regulatory obligation to connect new<br>customers|||||94%|
|Regulatory entity has authority to approve connection<br>charges for new customers|||||71%|
|Connection charges are set usingshallow entry||||NAP|58%|
|Governmentprovides subsidyfor new connections|||||53%|
|Connection has to beprovided in a specified time|||||94%|
|Regulatory entity monitors tiem taken to provide new<br>connections|||||44%|
|Regulator has authority to levy penalties for not<br>connectingcustomers on time|NAP||NAP|NAP|71%|
|Time taken toprovide connectionspubliclyavailable|||||24%|
|There are connection charges||||NAV|94%|
|Customerpays limited connection charges||||NAP|43%|
|Connection charge ispubliclyavailable|||||71%|
|**Regulation of solar home systems**|**100%**|**50%**|**100%**|**0%**|**66%**|
|Minimum technical standards and post-installation<br>warrantyrequirements for solar home systems|||||71%|
|Regulator reviews and approves prices of surplus SHS<br>sales of electricityto thegrid operator|NAV|||NAV|62%|
|**Regulation of mini-grids**|**33%**|**33%**|**67%**|**NAV**|**44%**|
|Privatelyowned mini-grids legallyallowed to operate||||NAV|81%|
|Clear options for mini-grid operator when the<br>interconnected grid reaches the area, including<br>compensation||||NAV|7%|
|Subsidy or other mechanism to help mini-grid<br>operators recover their costs||||NAV|47%|

# **E. Corporate governance- accountability index for Vietnam and comparators, 2015**

||**Vie**|**tnam**|**Philip**|**pines**|**Col**|**ombia**|**P**|**eru**|**International**|
|---|---|---|---|---|---|---|---|---|---|
|**Corporate governance**||||||||||
||NPC|HCMPC|MERALCO|BENECO|EPM|CODENSA|Luz del Sur|Hidrandina|**benchmark**|
|**Accountability**|**17%**|**17%**|**100%**|**67%**|**75%**|**92%**|**92%**|**58%**|**60%**|
|Private orpublic shareholders appoint board|||||||||36%|
|Transparentprocess exists for Board selection|||||||||36%|
|Board members cannot be removed at will|||||||||29%|
|Chairperson & CEO are separatepositions|||||||||75%|
|Function of CompanySecretaryexists|||||||||82%|
|Board Sub-Committees for different issues|||||||||68%|
|Audit committee of the Board|||||||||71%|
|Board Code of Conduct exists|||||||||64%|
|Requirement to declare conflicts of interest|||||||||75%|
|Utility has carried out any third party<br>transactions in last fiveyrs|||||||||46%|
|Minorityshareholders' rights areprotected|||||||||39%|
|Utility publishes an Annual Report|||||||||93%|

Satisfactory result Unsatrifactory result NAP Not applicable NAV Not available 45
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# **M. Regulatory substance- quality of supply index for Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines**|**Vietnam **|<sup>**International**</sup><br>**benchmark**|
|---|---|---|---|---|---|
|**Quality Regulation**|100%|100%|92%|71%|75%|
|**Quality of Service Standards**|100%|100%|100%|75%|82%|
|Requirement to meet quality of service standards|||||100%|
|Specific quality of service standards are formally<br>written and publicly available for- quality of the<br>product, quality of the service and customer<br>service|||||97%|
|Performance on quality of service standards is<br>public|||||71%|
|Fines for failing to meet quality of service<br>standards|||||59%|
|**Quality of Service Enforcement**|100%|100%|83%|67%|68%|
|Requirement to report technical data on a<br>periodic basis|||||100%|
|Regulator specifies how to collect technical<br>performance data|||||71%|
|Regulator reviews or validates technical<br>performance data|||||47%|
|Automated information management systems<br>are required to measure the quality or reliability<br>of the power supply|||||71%|
|Measurements of the quality or reliability of<br>power supply are made public|||||65%|
|Financial incentives to meet customer service<br>standards or increase customer satisfaction|||||53%|

Satisfactory result Unsatrifactory result NAP Not applicable NAV Not available 51
# **N. Regulatory substance- market entry index for Vietnam and comparators, 2015**

||**Colombia**|**Peru**|**Philippines**|**Vietnam**|**International**<br>**benchmark**|
|---|---|---|---|---|---|
|**Market Entry Regulation**|**50%**|**50%**|**100%**|**100%**|**77%**|
|**Permitting New Entrants**|50%|100%|100%|100%|90%|
|Responsible for monitoring compliance<br>with the terms of the license orpermit|||||88%|
|Authority to impose penalties for<br>violatinglicense orpermit terms|NAP||||100%|
|Penalties are formally written and<br>publiclyavailable|NAP||||80%|
|Provisions to force companies to<br>relinquish licenses or permits for<br>violation|||||100%|
|**PPA Approvals**|50%|0%|100%|NAP|57%|
|Legally required to approve all power<br>sales contracts either directlyor indirectly|||||59%|
|Approve or refuse a proposed PPA in a<br>legallyspecifiedperiod of time|NAP|NAP||NAP|60%|
|Authority over the process by which<br>utilities can select or procure power from<br>IPPs|||||50%|

Satisfactory result Unsatrifactory result NAP Not applicable NAV Not available 52
# **REFERENCES**<sup>16</sup>

BAIRD, Mark (2012) _Vietnam and the World Bank: A strong and enduring partnership; A brief annotated history._ World Bank.

BHATIA, Mikul & Nicolina ANGELOU (2015) _Beyond connections: Energy access redefined._ Technical Report 008/15. Energy Sector Management Assistance Program (ESMAP) & World Bank.

EDWARDS, Vincent & Anh PHAM (2008) “Trade unions in Vietnam: From socialism to market socialism” in John BENSON & Ying ZHU (editors) _Trade unions in Asia: An economic and sociological analysis_ . Routledge.

EIU [Economist Intelligence Unit] (2018) _Vietnam Country Reports_ . EIU.

EVN [Electricity Vietnam] (2017) _Development history._ Updated February 23, 2017. Available at <u>https://en.evn.com.vn/d6/news/Development-history-2-34-391.aspx</u> Fitch Ratings (2018) _Fitch assigns Vietnam Electricity first-time ‘BB’ rating; Outlook stable._ Press release 6 June 2018. www.fitchratings.com/site/pr/10031946 FFORDE, Adam & Stefan DE VYLDER (1996) _From plan to market: The economic transition in Vietnam._ Westview Press.

FUEYO, Norberto; Antonio GÓMEZ & César DOPAZO (2014) _Energy security, sustainability, and affordability in Asia and the Pacific._ ADB.

GERNER, Franz & Mark GIBLETT (2018) _Vietnam: Maximizing finance for development in the energy sector._ World Bank Group.

GENCER, Defne, Peter MEIER, Richard SPENCER & Hung Tien VAN (2011) _State and people, central and local, working together: The Vietnam rural electrification experience._ World Bank.

GILLESPIE, John (2010) “The jurification of state regulation in Vietnam”, in John GILLESPIE & Albert H.Y. Chen, editors, _Legal reforms in China and Vietnam: A comparison of Asian Communist regimes_ . Routledge.

GOSCHA, Christopher (2016) _Vietnam: A history._ Basic Books.

HAYTON, Bill (2010) _Vietnam: Rising dragon_ . Yale University Press.

HUGHES, Wendy & Thomas FLOCHEL (2016) _Socialist Republic of Vietnam: First, Second and Third Power Sector Reform Development Policy Operation Implementation Completion and Results Report._ Report ICR3360. World Bank.

Independent Evaluation Group (2014) _Project Performance Assessment Report: Vietnam Transmission, Distribution and Disaster Reconstruction Project, Rural Energy Project, and System Efficiency Improvement, Equitization and Renewables Project_ . Report 88453. World Bank Group.

Independent Evaluation Group (2016a) _Financial viability of the electricity sector in developing countries: Recent trends and effectiveness of World Bank interventions_ . World Bank Group.

Independent Evaluation Group (2016b) _Vietnam Power Sector Reform Development Policy Operation Implementation Completion Report Review._ Report ICRR0020396. World Bank Group.

LEE, Alan David & Zainab USMAN (2018) _Taking stock of the political economy of power sector reforms in developing countries: a literature review._ Policy Research Working Paper 8518. World Bank Group.

LONG Giang Thanh (2017) _Policy discussion paper: Ensuring social equity in Viet Nam’s power sector reforms._ British Embassy Hanoi; Vietnam Academy of Social Sciences Centre for Analysis and Forecasting; UNDP.

MAWENI, J. & M. BISBEY (2016). _A financial recovery plan for Vietnam Electricity_ . World Bank.

16 Note: This reference list retains the spellings ‘Viet Nam’ and ‘Vietnam’ per respective works’ original title (both are anglicized forms of the Vietnamese language word _Việt Nam_ ). Author family name is denoted by use of SMALL CAPS. Author name may occur before personal name (without a comma) as it appears in each original work.

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MOE [Vietnam Ministry of Energy] & EVN [Electricity Vietnam] (1995) _Power sector reform and restructuring in Viet Nam: Final report to the Steering Committee._ Energy Sector Management Assistance Programme Report 174/95. World Bank.

NAM, Kee-Yung, John WEISS, Lucille LANGLOIS, Jindra Nuella SAMSON & Paulo Rodelio HALILI (2015) _Assessment of power sector reforms in Viet Nam: Country report._ ADB.

NEEFJES, Koos & DANG Thi Thu Hoai (2017) _Towards a socially just energy transition in Viet Nam: Challenges and opportunities._ Friedrich-Ebert-Stiftung Viet Nam Office.

NEEJFES, Koos (2016) _Greening the power mix: Policies for expanding solar photovoltaic electricity in Viet Nam._ UNDP.

NGUYEN Anh Trun (2011) _Energy for all: Viet Nam’s success in increasing access to energy through rural electrification._ ADB.

NGUYEN, Vinh Quoc & Tu Ngoc TRINH (2018) _Electricity regulation in Vietnam: Overview._ Thomas Reuters Practical Law Country Q&A. Resource ID 4-628-5349. <u>https://content.next.westlaw.com/Document/Ib182d3a3228311e698dc8b09b4f043e0/View/FullText.html</u> PAINTER, Martin (2014) “Governance reforms in China and Vietnam: Marketisation, leapfrogging and retrofitting.” _Journal of Contemporary Asia_ 44(2): 204-220. doi.org/10.1080/00472336.2013.870829 THAM, Huyen Anh (2012) _Deinstitutionalisation from the perspective of sensemaking: An empirical investigation of the Electricity of Vietnam Corporation_ . PhD thesis, University of Nottingham. <u>http://eprints.nottingham.ac.uk/28387/1/575481.pdf</u> VAGLIASINDI, Maria & John BESANT-JONES (2013) _Power market structure: Revisiting policy options_ . World Bank.

VIETNAM PLUS (2018) _Vietnam's electricity wholesale market to open next year_ . October 18, 2018. Vietnam New Agency. https://en.vietnamplus.vn/vietnams-electricity-wholesale-market-to-open-next-year/140346.vnp VIỆT NAM NEWS (2017) _Average electricity price rises to $0.076 per kWk_ . December 1, 2017. <u>http://vietnamnews.vn/economy/418630/average-electricity-price-rises-to-0076-perkwk.html#KzqK0bPfJRPciqQU.99</u> VU THANH Tu Anh (2014) _The political economy of industrial development in Vietnam: Impact of state-business relationship on industrial performance, 1986-2012._ World Institute for Development Economics Research Working Paper 2014/158. United Nations University.

WANNIACHCHI, Aruna K., Duy-Thanh BUI, Hyunjung LEE, Choon-Sik JUNG, Au Minh TUAN (2015) _Viet Nam: Energy sector assessment, strategy, and road map._ Asian Development Bank.

WORLD BANK (1996) _Viet Nam Power Development Project Staff Appraisal Report_ . Report 14893-VN. World Bank.

WORLD BANK (2010) _Vietnam First Power Sector Reform Development Policy Operation Program Document._ Report 53119-VN.

WORLD BANK (2012) _Vietnam Distribution Efficiency Project Appraisal Document._ Report No: 71622-VN <u>http://documents.worldbank.org/curated/en/968561468140041023/pdf/716220PAD0P1250Official0Use0Onl y090.pdf</u> WORLD BANK (2017) _EVN and World Bank collaborate to promote gender equality and career advancement for women._ Press release 6 October 2017. www.worldbank.org/en/news/press-release/2017/10/06/evn-world- <u>bank-collaborate-to-promote-gender-equality-and-career-advancement-for-women</u> WORLD BANK (2018) _Vietnam Distribution Efficiency Project Implementation Status and Results Report._ May 2018. http://documents.worldbank.org/curated/en/229401528807743334/pdf/Disclosable-Version-of-the- <u>ISR-Distribution-Efficiency-Project-P125996-Sequence-No-11.pdf</u> 54
# **ACRONYMS**

|ART|Average Retail Tariff|
|---|---|
|BOT|Built-Operate-Transfer|
|CPC|Central Power Company|
|discom|distribution company|
|DSM|Demand-Side Management|
|EBITDA|Earnings Before Interest, Taxes, Depreciation and Amortization|
|EPTC|Electricity Power Trading Company|
|ERAV|Electricity Regulatory Authority of Vietnam|
|ESMAP|Energy Sector Management Assistance Program|
|EVN|Electricity Vietnam|
|FDI|Foreign Direct Investment|
|FIT|Feed in Tariff|
|HCMCPC|<br>Ho Chi Minh City Power Company|
|HNPC|Ha Noi Power Company|
|LDU|Local Distribution Utility|
|MOIT|Ministry of Industry and Trade|
|MOLISA|Ministry of Labour, Invalids and Social Affairs|
|MW|Megawatts|
|NLDC|National Load Dispatch Center|
|NLDC|National Load Dispatch Center|
|NPC|Northern Power Company|
|NPT|National Power Transmission Company|
|PC|Power Company (in Vietnam this refers to a vertically integrated utility pre-1995, and a<br>distribution company after 2003)|
|PPA|power purchase agreement|
|PPIAF|Public–Private Infrastructure Advisory Facility|
|SMO|System and Market Operator|
|SOE|State-Owned Enterprises|
|SMHPs|strategic multipurpose hydropower plants|
|SPC|Southern Power Company|
|VAT|value-added tax|
|VCGM|Vietnam Competitive Generation Market|
|VWEM|Vietnam Wholesale Electricity Market|
|WBG|World Bank Group<br>**UNITS OF MEASURE**|
|$|United Stated Dollar|
|k|kilo (1,000)|
|M|mega (1,000,000)|
|Wh|Watt-hour|
|W|Watt (Joule per second)|
|V|Volt|

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