$220 Million to Continue Bringing Power to the Poor People in Rural Vietnam

Contacts: 

In Hanoi: Hoang Thanh Ha

hha@worldbank.org

t. 84.4.9346600

In Washington, DC: Melissa Fossberg

mfossberg@worldbank.org

t. 202.458.4145
www.worldbank.org/vn        

 

Hanoi, December 6 , 2004 -- A $220 million new credit has recently been approved by the World Bank's Board of Directors to support the Rural Energy II project to help rehabilitate the rural networks in over 1200 communes in 30 provinces, and also convert the present organizations to more efficient and effective management systems in the future.

 

Access to electricity has increased rapidly in Vietnam, from around 51% in 1996 to over 80% at the household level in 2003, but there are still around 16 million people, representing about 3.5 million households, without access to electricity. Moreover, the rural population that is connected suffers from low quality of service, including low voltage and poor reliability. Current systems, often developed by local people to provide rudimentary initial connections are simply unable to meet current and projected load requirements.

 

"The Rural Energy II project aims at meeting the strong need to ensure better distribution of the benefits of electricity supply to all segments of the population, by improving service in rural areas, both to improve living standards directly, and to support development of local industrial, agricultural and commercial activities for economic growth and employment," said Klaus Rohland, Director of the World Bank in Vietnam.

 

It is expected that in the next seven years, the project will complete:

 

(i) major upgrading and/or expansion of rural power networks in about 1,200 communes

(ii) conversion of current ad-hoc local electricity management systems to local distribution utilities (LDUs) as legal entities recognized under Vietnamese law, to improve management of power distribution in rural areas, improve financial sustainability, and better enable future mobilization of private funds

(iii) capacity building assistance for the LDUs, provincial authorities, participating regional power companies, and national authorities involved in the planning and regulation of rural electrification.

 

The project will secure efficient and reliable power supply for about 2.5 million households, representing more than 50% of those currently without electricity. The project will also enable supply of large increases in electric power for expanding productive uses in rural areas, alleviating a major constraint to local economic growth.

 

"The second rural energy project will help rehabilitate existing distribution systems in rural areas so that the losses are cut down, thus also reducing the electricity prices in the rural areas. It will help the local people in taking over the management of the local grids through the creation of rural electricity cooperatives or district level joint stock companies," said Mr. Van Tien Hung, World Bank Task Manager of the Project.  

 

"The joint stock companies will be run as businesses and provide further employment in the rural areas. In the first phase of this project, the six provinces participating have decided to form one joint stock company at the provincial level and 22 at the district level. While this is a pilot, if it is successful it will revolutionize the distribution network in the entire country providing low cost, good quality power to the rural areas for creation of new enterprises and employment opportunities," Hung added.

 

The first rural energy project, which started December 1, 2001 has progressed with great speed. By the end of 2004, it will have connected over 900 communes to the national grid thus providing electricity to over half a million new households. Over 600 construction contracts designed to maximize local contracting industry participation created a major employment potential and the foundation of an efficient local construction industry in the districts.   The project not only provided electricity to the communes, it also laid the foundation for local employment and management by training 2-3 people in most communes to be service agents responsible for routine operations and maintenance as well as commercial activities such as billing and collection.

 

"Following the success of the first Rural Energy project, the second project is a core effort to support the further development of rural electricity systems and institutions, which, if successful, may be further supported through an additional follow-up operation in several years.  There are also plans to expand the coverage to the remaining provinces in another $ 200 million credit in 2006," said Rohland.

 

Additional Notes

 

The World Bank's support to the energy sector in Vietnam focuses on four themes:

(i) improving energy access to the rural areas

(ii) helping the country mobilize finance for meeting the rapidly growing demand

(iii) improving the technical, commercial and financial efficiency of the energy system, and

(iv) initiating a reform of the sector including market restructuring, sector and corporate governance.

 

Since the start of it s operations in Vietnam, the World Bank has approved over $1 billion in credits including: Transmission, Distribution and Disaster Reconstruction Project ($199 million, February, 1998) to reinforce the existing north-south transmission system and rehabilitate distribution systems in 3 cities; Rural Energy I ($150 million, May, 2000) to connect 900 communes to the national power network; System Efficiency Improvement, Equitization and Renewable Project (SEER - $225 million, June, 2002) to improve technical, commercial and financial efficiency of EVN and the power companies; and Partial Risk Guarantee for Phu My 2.2 power project ($ 75 million, October, 2002) which provides an IDA guarantee for a 715 h4W combined cycle gas-based power plant helping mobilize $480 million of private sector financing.

 

These projects have been supported by a significant volume of studies and technical assistance work. Some of the major studies were: Implementing the Gas Master Plan (1998-99); Fueling Vietnam's Development: New challenges for the energy sector (1999-2000); Renewable Energy Action Plan - a 10 year program (2000-2001); Promoting Private participation in Infrastructure (2001-2002); Petroleum product pricing policy (2002-2003).

 

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