Development strategy of petrovietnam powercorporation to 2015 and orientation to 2025

With the development objectives of Vietnam National Oil and Gas Group PetroVietnam – PVN in the direction of diversification of industry, PetroVienam Power Corporation PV Power was estab

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CAPSTONE PROJECT REPORT

DEVELOPMENT STRATEGY OF PETROVIETNAM POWER CORPORATION

1 Vũ Thanh Hải

2 Mai Thanh Lâm

3 Nguyễn Văn Thế

4 Hồ Đức Toàn

5 Nguyễn Tuấn Anh

HOCHIMINH CITY, VIETNAM – 2011

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

Website: www.griggs.edu.vn Email: gamba@griggs.edu.vn

ACKOWLEDGEMENT

We, Members of Group 4 GaMBA01.C0409, owe a debt of gratitude to many people who helped us complete this report We would like to acknowledge the help of all Firstly, thank all of leaders of the Global Advanced Program – Master of Business Administration (GaMBA) have created more favorable conditions for us to participate in learning and make great graduation exercises Please thank the management division classes provided good support and documentation, timely information in the learning process;

Sincerely thank the teachers who have dedicated instructions and communication of knowledge, updating the latest information to help us link the knowledge and skills they have learned to actual work We always remember the good feelings that most trainers have for us and the students of class in time;

Thank Board President of PetroVietnam Power Corporation, financial accounting departments, planning-service, organize administrative, technical safety support to provide data and comments to complete this graduate seminars

report could not be done without their daily support and encouragement

Although there has been close cooperation and have tried our best of Group 4, but due to limited time, so exercises may be large gaps, are looking forward to understanding of the Teachers and program Leaders GaMBA

Sincerely,

TABLE OF CONTENTS

ACKNOWLEGEMENT………1

TABLE OF CONTENTS 2

LIST OF ACRONYMS AND ABBREVIATIONS 6

LIST OF TABLE, DRAWING, CHART 7

INTRODUCTION 9

1 Reasons to choose topics 9

2 Objectives and tasks of research topics 10

2.1 Objectives 10

2.2 Tasks 10

3.1 Research object 10

3.2 Object scope 10

4 Research methods and data sources 11

4.1 Research methods 11

4.2 Data sources 11

5 Contribution benefits of group exercise 11

6 Structural group exercises 11

7 Group memberts 11

CHAPTER 1: THE CONCEPT OUTLINES THEORIES ABOUT STRATEGIC MANAGEMENT AND THE NEED TO APPLY FOR PETROVIETNAM POWER CORPORATION 12

1.1 OVERVIEW OF BUSINESS STRATEGY 12

1.1.1 The basic concept of strategy 12

1.1.2 The model of strategic management 13

1.1.3 Some tools for construction and options trading strategy 14

1.1.3.1 External Factors Evaluation Matrix (EFE) 14

1.1.3.2 Internal Factors Evaluation Matrix ( IFE ) 14

1.1.3.3 Construction and selection strategy – SWOT matrix 15

1.2 THE ROLE OF THE PETROLEUM SECTOR IN VIETNAM ELECTRICITY DEVELOPMENT 16

1.2.1 General about Vietnam Electricity Power 16

1.2.2 The role of the petroleum sector in Vietnam electricity development 18

1.2.3 The need of the petroleum sector in Vietnam electricity development … 19

1.3 THE NEED OF STRATEGIC PLANNING OF PETROVIETNAM POWER CORPORATION 20

CHAPTER 2: BUSINESS DEVELOPMENT STRATEGIC PLANNING OF PETROVIETNAM POWER CORPORATION 22

2.1 INTRODUCTION ABOUT PETROVIETNAM POWER CORPORATION 22

2.1.1 The formation and development 22

2.1.2 The position and role of PetroVietnam Power Corporation 26

2.1.3 The basic business indicator has achieved in recent years 27

2.1.4 The existence and causes 29

2.2 BUSINESS DEVELOPMENT STRATEGY OF PV POWER CORPORATION TO 2015 AND ORIENTATION TO 2025 30

2.2.1 Business strategies building context 30

2.2.2 Basis for business development strategies building 31

2.2.3 Forecast 2011 - 2015 32

2.2.4 Capacity of PetroVietnam Power Corporation 33

2.2.5 Potential of PetroVietnam Power Corporation - Opportunities and Challenges 34

2.3 PLANNING BUSINESS DEVELOPMENT STRATEGY OF PETROVIETNAM POWER CORPORATION TO 2015 AND ORIENTATION TO 2025 36

2.3.1 Analysis of the external environment - opportunities and challenges (EFE matrix)36 2.3.1.1 Analysis of general environment 36

2.3.1.2 EFE Matrix 40

2.3.2 Internal Factors Evaluation Matrix –IFE Matrix 41

2.3.2.1 Analysis of internal environment 41

2.3.2.2 IFE Matrix 45

2.3.3 Swot matrix of pv power 46

2.3.4 The strategies formed from swot matrix 48

2.3.4.1 Group of S-O Strategies 48

2.3.4.3 Group of W-O Strategies 49

2.3.4.4 Group of W-T strategies 49

2.4 STRATEGIES TO DEVELOP PETROVIETNAM POWER CORPORATION TO 2015 AND ORIENTATION TO 2025 50

2.4.1 Viewpoints 50

2.4.2 Principles 51

2.4.3 Overall targets 51

2.4.4 Specific targets 52

2.4.4.1 In business 52

2.4.4.2 Service business sector 58

2.4.4.3 On investment 59

2.4.4.4 Strategy for training and human resources development 62

2.5 ORIENTATIONS TO THE YEAR 2025 66

2.5.1 Development of power industry 66

2.5.2 Transmission and Distribution 68

2.5.3 Welcoming the beginning stages of the electricity market 68

2.5.4 Other service activities 69

CHAPTER 3: IMPLEMENTING SOLUTIONS FOR STRATEGIES OF PV POWER CORPORATION 70

3.1 DIFFICULTIES AND PROBLEMS 70

3.1.1 On the production 70

3.1.2 The investment in the development / arranger 71

3.1.2 On the management and human factors: 71

3.2 SOLUTIONS PERFORM STRATEGY 71

3.2.1 Immediate Solution 71

3.2.1.1 Production Solutions 71

3.2.1.2 Capital Investment Solutions: 72

3.2.1.2.1 Investment Solutions 72

3.2.1.2.2 Capital Solutions 72

3.2.1.3 Solutions for Investment Cooperation, International Economic Integration 72

3.2.1.4 Solutions for Organization and Resource Management 73

3.2.1.5 Solutions for Training of Science and Technology 73

3.2.1.5.1 Method of training 73

3.2.1.5.2 Solutions for Science and Technology 74

3.2.1.6 Solutions for Environmental Protection 74

3.2.1.7 Solutions for Technical Management and Operations 75

3.2.2 LONG-TERM MEASURES 75

3.2.2.1 Measures for investment and capital 75

3.2.2.1.1 Measures for investment 75

3.2.2.1.2 Measures for capital 76

3.3 RECOMMENDATIONS AND PROPOSALS 78

3.3.1 On the production 78

3.3.2 Investment and Development 78

3.3.3 Capital management 79

3.3.4 Human resource attraction 79

CONCLUSION 80

REFERENCES 81

Appendices 84

LIST OF ACRONYMS AND ABBREVIATIONS

development in 2006-2015 has taken 2025

LIST OF TABLES

Table 1.1 External Factors Evaluation Matrix - EFE……… 14

Table 1.2: Internal Factors Evaluation Matrix – IFE……….14

Table 1.3: SWOT Matrix 16

Table 2.1: Results of operations for 2008-2010 of PV Power……… 28

Table 2.2: Vietnam's major macroeconomic data of period 2005-2009………37

Table 2.3: External Factors Evaluation Matrix of PV Power (EFE)……….41

Table 2.4 : Fuel use for factory operation from 2008 to 2010……… 43

Table 2.5: The ratio measures the financial ability of PV Power………45

Table 2.6: Internal Factors Evaluation MatrixPV Power (IFE)……….46

Table 2.7: SWOT Matrix of PV Power ……….47

Table 2.8: Main targets of PV Power in the period of 2011 -2015……….52

Table 2.9: Calendar time plants in commercial operation by 2015 ……….54

Table 2.10: Capital needs in 2011-2015 ……… 60

Table 2.11: Human resource requirements in 2011-2015………62

Table 2.12: Manpower structure in 2011-2015……….63

Table 2.13: Cost of postgraduate training period 2010-2025 ……… 63

Table 2.14: Costs of operational training, regular training period 2010-2015 …………64

Table 2.15: Total power output of PV Power ………66

Table 2.16:Gas thermal power output of PV POWER ……… 67

Table 2.17: Coal thermal power output of PV POWER ………67

Table 2.18: Hydropower output of PV POWER ……….68

Table 2.19: Renewable energy power output of PV POWER ……… 68

LIST OF DRAWING, CHART

Figure 1.1: A model of comprehensive strategic managemen ……….13

Figure 1.2: The manufacturing process of the electricity industry………17

Figure 1.3: source structure according to capacity………17

Figure 1.4: source structure according to output ……… 17

Figure 1.5: Source structure according to the owner……….18

Figure 1.6: Structural power consumption 2001-2009……… 18

Figure 2.1: Organizational Chart of PetroVietnam Power Corporation…………25

Chart 2.1: Commercial output of PV Power in period from 2011 to 2015………55

Chart 2.2: Revenue PV Power from 2011 to 2015………56

Chart 2.3: The profit from 2011 to 2015………57

Chart 2.4: Demand for capital investment in the period from 2011 to 2015…….61

INTRODUCTION

1 REASONS TO CHOOSE TOPIC

Energy determines quality of daily life and is one of themost important drives of economic development Energy services directly affect the economic efficiency and the social equity of a country In Vietnam the development plans of electricity, coal, oil and gas have been established and revised independently for many years On the other hand, average annual energy consumption from 1990 indicated 11% which is 1.5 times of GDP growth It is estimated this growth will continue with the average of 8.1% until 2020 Now, in order to secure energy supply, to maintain sound development for energy sector, Vietnam needs to consider the development of all sub-sectors based on the unified and comprehensive strategy

With the development objectives of Vietnam National Oil and Gas Group (PetroVietnam – PVN) in the direction of diversification of industry, PetroVienam Power Corporation (PV Power) was established with the objective to participate in building and development power supply, power production and business purpose, striving always to stand in second place (after EVN) in all groups/total production companies - trading electricity, accounting for about 16% of the national electricity market in 2015, and about

30% in 2020 Therefore, the required to build a "Power development strategy and power

production business of PetroVietnam Power Corporation to 2015 and orientation to 2025", set out specific targets, assess the opportunities and challenges, and outlines

potential areas, the steps along with the implemented solutions, is an objective urgent requirement The business strategy of PV Power will be the basis for formulation of detailed plans for the construction of thermal power and gas, coal, hydro, renewable energy, including nuclear power, building distribution power networks in the immediate short-term and involved the construction of transmission power in the long term On that basis, timely construction of facilities business management, building a team of technical experts, specialized and synchronized labor to meet the target

Rational development based on a proper strategy, PV Power definitely will help build PetroVietnam on a development and contribute more firstly to develop the industry,

Derived from the requirement that we choose the theme "Development Strategy of

PetroVietnam Power Corporation to 2015 and orientation to 2025." for research

2 OBJECTIVES AND TASKS OF RESEARCH TOPIC

2.1 Objectives:

Corporation

Corporation On the basis of environmental analysis inside and outside to identify the strengths and weaknesses as well as current threats and opportunities affecting the development of the corporation

2.2 Tasks:

 In terms of reasoning: the system of some basic theoretical issues, research common practice issues to clarify the concept of strategic management

 In practice: Analysis of the actual situation of production and business activities

at PetroVietnam Power Corporation, which saw the advantages, disadvantages, strengths, weaknesses, opportunities and challenges Since then, we propose measures to expand production and development PetroVietnam Power Corporation to 2015 and orientation to 2025

3 OBJECT AND RESEARCH SCOPE

4 RESEARCH METHODS AND DATA SOURCES

5 CONTRIBUTION BENEFITS OF GROUP EXERCISE

The research results will be applied to business strategy of PetroVietnam Power Corporation in the next period

At the same time these results can also be used as a reference application for the plant, the members company of the PetroVietnam Power Corporation

6 STRUCTURAL GROUP EXERCISES

Besides the introduction, recommendations, conclusions, reference lists and appendices, exercises structure consists of 3 chapters:

 Chapter 1: The concept outlines theories about strategic management and the need

to apply for PetroVietnam Power Corporation

 Chapter 2: Business Development Strategic Planning of PetroVietnam Power Corporation

 Chapter 3: Solutions and recommendation to PetroVietnam Power Corporation

7 GROUP MEMBERS

CHAPTER 1:

THE CONCEPT OUTLINES THEORIES ABOUT

STRATEGIC MANAGEMENT AND THE NEED TO APPLY FOR

PETROVIETNAM POWER CORPORATION

1.1 OVERVIEW OF BUSINESS STRATEGY

1.1.1 The Basic Concept Of Strategy:

Business strategy are defined in various ways by managers This comes from a variety of approaches to different studies

determination of the basic objectives and long term business, and how the choice

or course of action and distribution of necessary resources to implement that goal

direction and management to ensure complete long-term goals, the primary purposes of the company

 According to Michael E.Porter: Strategy is choice what we need to do and what not to do, something to meet a group of customers, not all

Position, Perspective, Ploy

Overall, the concept of business strategy, though there are differences about the wording but still contained the following contents:

 Set and selection solutions to achieve the goal

1.1.2 The Model Of Strategic Management:

Strategic management process can be studied and applied through the model Each model represents a certain kind of process Proving performance in Figure 1.1 is a comprehensive management model (general model) are widely accepted Model does not guarantee success, but it represents a clear methodology and practice in the formulation, implementation and evaluation strategies

Figure 1.1: A comprehensive strategic management model

(source :Strategic management- PTIT )

Feedback

Measurem ent and performan

ce evaluation

Enforcemen

t Strategy

Formation Strategy

Assessment Strategy

Implementing external controls

to identify opportunities

Establis

h term goals

long-Set annual goals

Redefin-Distributi

on of resources

Implement internal controls

to identify the strengths and weaknesses

Choose Strategy

to pursue Proposed

policies

Feedback

1.1.3 Some Tools For Construction and Options Trading Strategy:

1.1.3.1 External Factors Evaluation Matrix (EFE):

This matrix allows summary and evaluation the external environment of business Regardless of the main opportunities and threats are included in external factors evaluation matrix, total score of the highest importance that an organization can have is 4.0 and the lowest is 1, 0 Total score of average importance is 2,5 Total important score

is 4 that organizations are responding very well to the opportunities and threats present in their environment The total score of 1 indicates that the strategy that the company did not set out to take advantage of opportunities or avoiding external threats

The external factors Important level Classification Important score

List the external factors

Total

Table 1.1 External Factors Evaluation Matrix – EFE

1.1.3.2 Internal Factors Evaluation Matrix ( IFE ):

Internal Factors Evaluation Matrix (IFE) is a tool used to summarize and evaluate the strengths and weaknesses of the important parts of business function and it also provides the basis for identifying and evaluating relationships between these components

The internal factors Important level Classification Important score

List the internal factors

Total

Table 1.2 Internal Factors Evaluation Matrix –IFE

Excluding the matrix elements within how many factors, total important score can

be classified from the lowest 1.0 to highest 4.0 and the average score is 2.5 Total important score less than 2.5 for companies that weak internal and higher than 2.5 for the company showed strong internal

1.1.3.3 Construction and Selection Strategy – SWOT Matrix:

SWOT matrix is an important tool in combination can help managers develop four types

of the following strategies:

The combination of important elements inside and outside is the most difficult task of developing a SWOT matrix, it requires a good judge, and will not be a best combination

 SO strategies use the strengths within the enterprise to take advantage of external opportunities the organization usually pursue WO strategies, ST or

WT to hold can be in the position where they can apply the SO strategy

 WO strategies improve internal weaknesses by taking advantage of external opportunities Sometimes, great external opportunities exist but the enterprise have internal weaknesses which prevents exploitation of these opportunities

 ST strategies use a strengths to avoid or reduce the impact of external threats

 WT strategies are defensive strategy aimed at reducing internal weaknesses and avoid external threats

SWOT matrix chart consists of 9 boxes containing: 4 important elements boxes (S, W, O, T), 4 strategy boxes (SO, ST, WO, WT), a box is always empty in the top right

Empty Box

O: external opportunities

- List of opportunities (3)

T: Threats

- List of threats (4)

ST strategies

- Overcome these uncertainties by utilizing the strengths

WT strategies

- Minimize weaknesses and avoid threats

1.2 THE ROLE OF THE PETROLEUM SECTOR IN VIETNAM ELECTRICITY DEVELOPMENT

1.2.1 General about Vietnam electricity:

Power is one of the main resources to promote economic development and are indispensable in the daily life of society

In Vietnam, the electricity industry is one of the key sectors and get the attention of the State Vietnam is a developing country so demand for electricity is increasing, most power plant is operating at full capacity now, but power shortages for living and production continues Producing electrical output of the whole country for 9 months in

2010 (according to EVN) - commercial electricity demand was 63.2 billion kWh, up 14.8% over the same period and more than 2 times higher than GDP growth By the end

of 2010, electricity production and purchase of EVN is 72.031 billion kWh, including

electricity production was 44.0 billion kWh, electricity is bought 28.03 billion kWh

(purchased from China 4.06 million kWh)

Vietnam's power sector is considered monopolistic industries with high position of Electricity of Vietnam (EVN) EVN has important role in the production stage,

transmission and distribution

Currently a series of power plants, electricity transmission networks and distribution of advanced and modern are being built, with the participation of investment

of foreign investors (BOT Phu My 2 power company and Phu My 3) or investors in countries such as PetroVietnam (PVN), Coal and Mineral Group of Vietnam (TKV), General Vietnam Machinery Installation Corporation (Lilama)

Production process of the electricity industry:

Figure 1.2: Production process of the electricity industry - (Source EVN)

Restructuring the electricity industry: (Source EVN)

Figure 1.3: Figure 1.4:

source structure according to capacity source structure according to output

- (Source EVN) - (Source EVN)

Source structure according to the owner: (Source EVN)

Figure 1.5 Source structure according to the owner- (Source EVN)

Structural power consumption 2001-2009 (Source: Energy Institute)

Figure 1.6 Structural power consumption 2001-2009- (Source Energy Institute)

1.2.2 The Role Of The Petroleum Sector In Vietnam Electricity Development:

Currently, the structure of the electricity industry is being held in the model of vertical integration, including power generation, transmission, distribution, purchasing power and operating system This does not create transparent environment for attracting investment in new power sources

Although no longer exclusive power, EVN has the dominant portion of total generation capacity (about 65%), and hold the rest of the stages of transmission, distribution To address the lack of capital, power works behind schedule, leading to power shortages, power cuts of constant rotation Therefore it was time to restructure the power sector should soon be studied seriously and implemented soon

In recent years the electricity industry has seen strong growth contributes to our economic growth In particular, an important contribution to the achievement, Vietnam

Oil and Gas Corporation former and PetroVietnam (PVN) now is played an important role in supplying gas for about 4,500 megawatts (representing over one third of total national power generating capacity) gas fired power plants in the South In the next period, Vietnam's economy is forecast to continue rapid growth and stability Therefore, the power supply stability and reliability to ensure sufficient energy for development needs become more urgent and necessary

1.2.3 The Need Of The Petroleum Sector In Vietnam Electricity Development:

To implement the policy of developing the State's power industry of Vietnam are specified by the mentioned electricity development plan, has prompted many industries

to invest power development to diversify investment strengthen the competitiveness and efficiency of electricity production

PVN is constructing nearly 2,000 MW in Nhon Trach and Ca Mau, and is preparing to continue investment in thermal power and hydropower By the end of 2010, electricity production of PVN accounts for 10% in capacity and 15% in output about of national electricity production, it will contribute to overcoming the critical shortage of power, ensuring growth of the national economy in the ahead years

Policy to diversify investment in building power supplies, a growing number of branches and units outside EVN join to construct power company By 2010, the power structure has changed significantly With investment participation increasing by many other components, from almost the entire ownership of power plants, now EVN owns and holds stakes in about 65% of the total power capacity

Before, many people think the petroleum industry is simply the exploitation of natural resources industry, specializing in smoking oil sent for export, but it has become extremely outdated nowadays The petroleum industry is shouldering an enormous mission Not only is the backbone, as the leader of the economy, a model for state enterprises to follow, the petroleum industry is also assuming the role of macro-regulation instruments of the Government, efforts to ensure the program of energy security, food security and social security in the whole country

Besides mining tasks, oil exports, oil and gas industry is now trying to do the conversion efficiency, resource exploitation and processing of petroleum products was

into gas, into electricity, into fertilizer to serve the country's economy, contributing to improving people's lives

In the context of lack of electricity for social economic development in 2011 and future years, the role of a leading economic group, PetroVietnam is focusing all resources, investment in downstream, including the key projects of urgent national power

is a major effort The role of the oil industry in the development of electricity in Vietnam

is not only significant contribution of infrastructure on economic importance of energy for the country, overcoming the power shortage, but also contribute directly to development - economic development of local society, promote industrial production in the area, creating an economic restructuring toward industrialization, create large revenues to the budget Along with the investment projects producing power of large scale has been developed, forming a large power center in the region in the country, PetroVietnam and PetroVietnam Power Corporation are implementing effective programs of national energy security

1.3 THE NEED OF STRATEGIC PLANNING OF PETROVIETNAM POWER CORPORATION

With the development objectives of PetroVietnam (PVN) in the direction of diversification of industry, PV Power under PetroVietnam was established with the objective to participate in building and development power supply, power production and business purpose, striving always to stand in second place (after EVN) in all groups/total production companies - trading electricity, accounting for about 16% of the national electricity market in 2015, and about 30% in 2020 Therefore, we required to build a

"Power development strategy and power production business of PetroVietnam Power Corporation to 2015 and orientation to 2025", set out specific targets, assess the

opportunities and challenges, and outlines potential areas, the steps along with the implemented solutions, is an objective urgent requirement Business strategy of PetroVietnam Power Corporation will be the basis for formulation of detailed plans for the construction of thermal power and gas, coal, hydro, renewable energy, including nuclear power, building distribution power networks in the immediate short-term and

involved the construction of transmission power in the long term On that basis, timely construction of facilities business management, building a team of technical experts, specialized and synchronized labor to meet the target

Rational development based on a proper strategy, although PetroVietnam Power Corporation is a newly formed corporation, but PV Power will definitely help build PetroVietnam on a development and contribute more firstly to develop the industry, then

to the industrialization and modernization of the country

CHAPTER 2:

BUSINESS DEVELOPMENT STRATEGIC PLANNING OF

PETROVIETNAM POWER CORPORATION

2.1 INTRODUCTION ABOUT PETROVIETNAM POWER CORP

2.1.1 The Formation and Development:

With the permission of the Prime Minister at Document No.2259/TTg-DMDN 02/05/2007 approves the project on establishment of the PetroVietnam Power Corporation, dated 17/05/2007, the Board of PetroVietnam (PVN) has decided on the establishment of 1468/QD-DKVN PetroVietnam Power Corporation (PV Power) with the charter capital of 7,600 billion VND

PetroVietnam Power Corporation (PV Power) was founded with the goal of participating in construction and power development, power production, striving to account for 25-30% of national electricity markets 2025 PV Power was born in the early stages when the PVN is implementing the development strategy of the petroleum industry in Vietnam until 2015 and orientation until 2025, and a phase transfer PVN changing patterns of activity from the Corporation model to economic group model In the strategic developing direction, PVN has the potential to promote his new field of oil and gas industry: production and electricity trade, based on the advantage of abundant natural gas resources are exploited

PetroVietnam Power Corporation is a unit member's 100% owned PetroVietnam, organized by business type Limited Company, is assigned to manage and operate projects investment in manufacturing and trading, continuing to invest in power projects

at home and abroad

 Transaction name in English: PETROVIETNAM POWER CORPORATION

 Abbreviation in English: PV POWER

 Head Office: Floors 8, 9 Petroleum Institute Building , Trung Kính, Yên Hòa, Cầu Giấy, Hà Nội City

 By the end of 2010, the charter capital is 10,738,000,000,000 VND

Functions and duties of PetroVietnam Power Corporation:

training, operation, operation of power plants BOO, IPP, BOT

 Provide power consulting services: design consultancy, supervision consultants, technology transfer, consulting investment

plants, transmission systems and distribution

 The sector of trade, investment and join the real estate business: This is the area of support for business activities of corporations, regulated the development of market demand

The unit members of PetroVietnam Power Corporation include:

 Units:

 1 subsidiary company has 100% the charter capital of PV Power:

PetroVietnam Power Renewable Energy Limited Company (Capital 150 billion VND) Business lines:

of clean energy projects, renewable energy (wind power, geothermal, biomass );

 Manufacture and sale of electricity;

 7 Joint stock companies held by the PV Power the right to govern:

 PV Power Consulting joint stock company – PVPE (corporations contributed 10.2 billion VND equivalent to 51% of charter capital)

 PV Power Services joint stock company – PVPS (corporations contributed 76.5 billion VND equivalent to 51% of charter capital)

 PV Power Nhon Trach 2 joint stock company (corporations contributed 1.326, billion VND equivalent to 51,8% of charter capital)

contributed 703.08 billion VND equivalent to 75.6% of charter capital)

contributed 997.884 billion VND equivalent to 55.438% of charter capital)

56.772 billion VND equivalent to 66.61% of charter capital)

19.6 billion VND equivalent to 49% of charter capital)

 14 Affiliates

billion VND equivalent to 33,068% of charter capital)

billion VND equivalent to 11% of charter capital)

15 billion VND equivalent to 10% of charter capital)

(corporations contributed 26,8 billion VND equivalent to 8,93% of charter capital)

 Hong river Energy joint stock company (corporations contributed 30,695 billion VND equivalent to 43,85% of charter capital)

billion VND equivalent to 35% of charter capital)

 Viet-Lao Power joint stock company (corporations contributed 1.113 billion VND equivalent to 21% of charter capital)

1,2288 billion VND equivalent to 0,48% of charter capital)

 International EVN joint stock company (corporations contributed 28,8 billion VND equivalent to 1,2% of charter capital)

billion VND equivalent to 20% of charter capital)

(corporations contributed 11 billion VND equivalent to 20% of charter capital)

VND equivalent to 10% of charter capital)

 Asia Pacific Energy joint stock company (corporations contributed 19,25 billion VND equivalent to 35% of charter capital)

 Petroleum Engineering joint stock company (corporations contributed 01 billion VND equivalent to 10% of charter capital)

Organizational structure:

Figure 2.1 Organizational Chart of PetroVietnam Power Corporation – (Source PV

Power)

Figure 2.1 Organizational Chart of PetroVietnam Power Corporation (Source PV

Power)

2.1.2 The Position and Role of PetroVietnam Power Corporation:

PVN established PV Power on the basis of consolidated subsidiaries and affiliated members as above, PV Power become the largest member of the PVN in the field of electricity production So the next time, PV Power will act as key focal points of the PVN and in business development and production of electricity Along with the development of PV Power as well as meet the needs of capital to implement projects to build power plants, PV Power in the near future will become one of the member units with the largest scale PVN in terms of capital, revenue and profits from business activities Striving to 2015, PV Power will be the member unit has sales of 3 units and profitability in the top five leading units of PVN

PV Power will bring many positive effects to the overall economic efficiency of power plant projects of the PVN, in particular:

 Empowerment and the role of PVN in the field of production and business activities of electricity, PVN becomes a No.2 power manufacturer and trading in the power industry after the Electricity of Vietnam (EVN)

 The participation in the electricity market will help the PV Power in particular and PVN generally summarize the valuable experience in many business processes Since then, the proposed strategy, suitable for development could become an important part of trading markets, in line with the strategic direction and development of innovative energy sector of the economy national construction and development of Vietnam's power market in fact, stable, rich and strong

international market by continuing to plant, power company members came into operation

implementation of technical services, specialized training, first of all to provide these services in manufacturing enterprise business power of PVN to improve operational efficiency and cost savings Orientation at the same time providing these services outside the Group

produced by the goal of becoming an economic group to develop a comprehensive, multi-sectoral activities

Therefore, the establishment of PV Power is not merely the creation of a unit member of PVN has great potential in the business sector and electricity production, are expected to contribute much on the business tasks of the PVN, enhanced the development of the petroleum industry in Vietnam but also in addition to Vietnam's power industry a large-scale enterprise strong (ranking second after EVN), contributed no small part to help the industry in performing its tasks of social-economic development, security and national energy

2.1.3 The Basic Business Indicator Has Achieved In Recent Years:

 The Production

PV Power has made significant contributions in addressing the power shortage during the dry season of the national electricity grid with a total electricity output in three years nearly 30 billion kWh

 Financial Target

Total revenue from electricity production of PV Power increased annualy

No Content Unit

mentat ion

Imple-2009

Plan

2010

entation

Implem-2010

Completion- rate

/(1)

(5)=(3) /(2)

Corporation

Billion VND

Table 2.1: Results of operations for the period 2009-2010 PVPower

(Source: The Financial Accounting, PV Power)

 Safe Operation

The Corporation always monitor and ensure safe operation and efficiency, not to the incident at the power plant and in their participation in the hydropower project, a national thermal power

 The Effective Investment Implement

Currently, the Corporation is implementing the investment project to build 10 power plants, including major projects such as: PV Power Thái Bình 2 project (1200Mw), Nhơn Trạch 2 project (750Mw), LuangPraBang Hydropower projects (1410Mw) - is bringing large scale projects, significant political and economic importance of the cooperation agreement between the two Governments of Vietnam - Laos

 Development Of Renewable Energy Sources

Development of renewable energy sources, starting construction of wind power project in Phu Quy, Con Dao, Phu Quoc

 The Business-Consulting Services And Trade

Total revenue for the consulting services unit in the past year accounted for approximately 5,5% (833/15.242 billions) total revenue of the Corporation; profits remitted to the Corporation 7,7 billions, but it’s not high but this is something that should

be recorded encouraging

2.1.4 The Existence And Causes:

 On Business And Operation

Power Ca Mau 1 & 2, the power plant to be operated by DO in times of lack of gas, this makes a great influence to the production costs production On the other hand, constantly switch between gas and diesel have a large impact on machinery and equipment of PV Power Ca Mau 1 & 2, the risk of an unsafe, expensive to maintain, repair, giving rise to increased risk of accidents;

 The recovery of debts from EVN are difficult In June 2010, although the two leaders Group has reviewed comprehensive cooperation, but they have not much

 The negotiation of O & M of PV Power Nhon Trach 2 although there have been many rounds of talks but the progress is still slow

 Construction Investment

the schedule progress did not meet, delayed by the construction contractor and not focus all available resources, the executive apparatus is weak, a number of other projects due to objective conditions was slow progress such as Thái Bình (the compensation), Luang Prabang (changing water levels)

 For renewable energy projects is a new field so that the Corporation should not have much experience The project is located on the island, it’s difficult to transport equipment, construction so the project was behind schedule;

 The joint stock company which the Corporation contributes capital in the period

of investment Therefore, revenues and profits are very low

2.2 BUSINESS DEVELOPMENT STRATEGY OF PETROVIETNAM POWER CORPORATION TO 2015 AND ORIENTATION TO 2025

2.2.1 Business Strategies Building Context:

 Domestic

challenges, especially the impact of financial crisis and global economic downturn since late 2008 and early 2009 , the global cyclical downturn sparked demand for electricity is lower than expected growth

 The total demand of electricity in the globe in 2009-2010 of the entire national economy is about 83-95 billion kWh Compared with growth in electricity planning VI from 17%-21% (double the GDP growth), the growth rate of electricity in 2009-2010 is low

 However, besides the unfavorable factors, the country's economic period

2011-2015 has many advantages such as: the restoration and development of world

economic crisis will provide opportunities for national economic promote production, trade and attract foreign investment capital: economic restructuring after the crisis created new conditions for economic development; scale accumulation and economic potential of the country improved: after the period (2006-2010) in international economic integration extensive experience and prestige of Vietnam in the international arena has been confirmed and in stature, political stability - social development of the country

All these factors is the solid foundation, enabling the development of domestic enterprises in general and PetroVietnam Power Corporation in particular

 World

 According to the forecast period 2011-2015 is the recovery period and strong growth of major economies like U.S, EU, China, Japan financial crisis, economic decline from last year 2008 and 2009, investment demand, consumption and purchasing power of the market will rise will be good conditions for Vietnam enterprises to promote investment, innovation science and technology, promote import and export

Vietnamese enterprises having some difficulties such as fierce competition with the business/economic group of transnational by foreign competition (financial resources, technology, human resources, management experience .) of the enterprise or group has matured and grown stronger after the economic crisis …

2.2.2 Basis For Business Development Strategies Building:

period 2011-2015 national economic growth (GDP) increased on average 7-8% per year;

approved by the Prime Minister in Decision No.386/QD-TTg on 09/03/2006;

 Decision No.110/2007/QD-TTg approving the planning of national electricity development for 2006-2015 until 2025 (MP 6) and projected MP

7 (draft);

development strategy of national energy to 2020 and vision to 2050;

Power Corporation

2.2.3 Forecast 2011 - 2015:

was created for businesses in general and businesses operating in the electricity sector in particular, more conducive to market development, mobilization foreign funds for technology development, product development

is entering crucial development phase Power sector is facing a series of challenges and problems to be solved, such as backup power system is low, demand for electricity continues to grow at high rates lead to capital investment needs for development large power sector, lack of investment capital for power development to meet the load demand

 Plan diagram of national electricity development period 2006-2015 until 2025 (Electricity Planning VI), which was clearly defined: Development of electricity

to meet the needs of economic development - society of the country with annual GDP growth of about 8.5% - 9% in the period 2006 to 2010 and even higher: Forecast of electricity demand in the country increased from 17% a year to 20% year period from 2006 to 2015

 The interest and transfer of the Group, which the PV power owns facilities, technology of power plant PV Power will be responsible for managing and operating multiple mining power plant with total capacity of thousands of megawatts; The technology used in these factories are the leading technologies in the world, plants are equipped with automated systems, information systems under

DCS platforms, facilitating the operation and supervision of the plant These factors will make a great competitiveness in the electricity sector of PV Power

State have encouraged robust economic corporations to invest in water development in the field of energy production, and eventually to up an electricity market competitive are positive conditions for PV Power and participation in the development of strong industry of Vietnam

2.2.4 Capacity of PetroVietnam Power Corporation:

At the time of formulating strategies, PV Power has three attached units, seven stock company and 14 affiliates

joint-Management of PV Power Ca Mau 1 and 2, Nhon Trach 1 and 2 with a total capacity of

2700 MW was built in 2-2-1 configuration, including eight gas turbine units, power cycle about 250 MW/unit, the F-generation technology; 3 of unit steam turbine 250 MW capacity/unit This is the type of turbine design standards, proven by the fact, and have the following characteristics:

performance (thermal efficiency of electricity production cycle of 56%), low fuel consumption rate

PV Power is conducting to build new power plants to increase the total installed capacity

of the system:

when plant complete, it will air on national power grid with an average power output of 540 million kWh per year As planned, the plant will generate electricity

of a unit in September 2013 and generate units 2 at the end of 2013, then completed the project

operate power generation mix in the national network unit 1 in August 2011, unit

2 in December 2011

At the same time,company is preparing to receive a series of projects of PetroVietnam transfer for PV Power:

completed and generating power unit No 1 in the second quarter in 2014, units 2

in late 2014 Company will provide annual national grid than 6.7 billion kWh of electricity

7.8 billion kWh per year The plant is expected to be completed and power generation units No 1 in the third quarter of 2012, completed and power generation units 2 in the first quarter in 2013

generating power unit No 1 in 2014, unit 2 in early 2015, average annual electricity output of 7.2 billion kWh

 The project is in preparation stage investments PV Power Quang Trach 1 (1200

MW capacity), PV Power Song Hau 1 (1200 MW capacity)

2.2.5 Potential of PetroVietnam Power Corporation - Opportunities and

Challenges:

For industry and energy trading, the inputs and outputs for production is relatively different when compared with other businesses Input power is mainly produced fuel, in addition to the ancillary services such as maintenance and repair service factory PV Power is a great advantage for the other power units in the input stage by itself could provide some inputs Services such as maintenance and repair plant, PV Power has PV Power Services joint stock company (PVPS) as unit member so it should be able to save the cost of outsourcing, but whether the operation of PV power plants are mostly natural gas, the Group can assist

Early stage in the production of PV Power also has the advantage Forecast in the coming years, Vietnam will lack electricity, so by the law of supply and demand, energy products will be sold without requiring competitive

 Opportunities

Our country is in the process of developing competitive electricity markets, this is an opportunity for all businesses equal participation and strong growth Moreover, to ensure the energy needs for economic growth and national energy security, power development, the creation, operation and development of an electricity market is highly competitive and dynamic to achieve economic efficiency - the same high society is a necessity required Besides, oil has always been identified as a key economic sector Therefore the development of the PVN is always timely attention of the State of Vietnam and the establishment of PV Power as a member unit of the PVN is not only the implementation

of development policy into a PVN powerful economic groups, most industries, but also

of great significance in promoting the development of power sector in general

On the other hand, since its establishment, PV Power inherited from the PVN favorable conditions for capital, physical infrastructure, manpower, and especially the reputation and brand of the National Petroleum Corporation Vietnam South to develop a comprehensive and long-term stability

 Challenge

In a few short years, Vietnam is not a fully competitive electricity market so the price of electricity may not reflect actually cost PV Power as a unit of electricity production and trade will inevitably affect the very real benefits from this practice, in which factors are most adversely affected PV Power uncontrolled inputs (gas prices, fuel, .) and output (electricity price, method of operation, )

In the business sector and electricity generation, PV Power was born after the other electricity business productive enterprise Within the domestic market, the project has good economic efficiency and these enterprises have been invested Thus the search for investment opportunities for domestic PV Power will be difficult Meanwhile, for the study of potential foreign investors, PV Power also access the following units than other competing partners

In addition, PV Power will be confronted with the fierce competition for human resources among other electricity companies will be in Vietnam, especially in human resources with high qualifications It also arises from the major challenges of organizational ability to attract/develop key staff qualifications and capacity to complete assigned tasks, in order to help complete the task PV Power business Thus, it can be considered as one of the determinants of success as well as the stability and development

of PV Power

Moreover, PV Power is a newly formed corporation, in the early stages of development strategy (this period can last up to 3 ~ 4 years) PV Power mainly perform to the work of investment preparation and implemented the first phase of investment, with enormous costs Therefore, PV Power certainly not be able to "revenues for expenditure" in the first phase, which still needs to advance from the PVN This little lot will also affect the autonomy and flexibility in production and business activities of PV Power

to 2007 have increased over 8%

The Vietnam's inflation rate in 2007, 2008 is very high In 2008, the inflation rate is 23% In 2009 and 2010 showed that overall inflation has been controlled, it is clear that inflation has decreased significantly, in 2009 and only 6.9% in October/2010 was 7.58% compared with 12/2009 With forecast economic slowdown was under control, the target

set in 2010 GDP was 6.5%, higher than in 2009 Therefore, it is favorable conditions for enterprises of Vietnam in general and PV Power confidently invest in production and business activities

Unit: million USD

Target name 2005 2006 2007 2008 2009

GDP at current prices 43.036 49.962 58.652 76.156 85.046 GDP at constant prices 20.155 21.814 23.659 25.152 26.491

(2) The Cultural - Social Environment

Vietnam has a culture of rice agriculture, the Vietnam attaches importance to family tradition, hierarchy, order and require little change Most of Vietnam's lifestyle do not follow pragmatism and less consumption Vietnam rural today is slowly being urbanized and this requires the electricity industry struggles to meet demand for electricity For the electricity sector, in addition to the business of selling electricity must also factor in service, especially for rural areas Government asked to ensure 100% of communes have electricity until 2015 Along with the country's industrialization, agricultural mechanization is widely applied

The cultural factors makes the demand for electricity in Vietnam grew rapidly, especially in big cities, and provinces with strong economic development in the area south of rapid growth This is the opportunities and also challenges for the power sector

in ensuring adequate supply of both quantity and quality of electricity and meet the needs

of customers

(3) Legal, Political Environment

Vietnam was rated as the world political situation in countries with relatively high stability, legal system of Vietnam is gradually being improved and more closely With the advantage of national political stability in the region, Vietnam has many attractive foreign investment Investment sector in many industries are expanding production and services in the field of electricity production

For the electricity sector, Electricity Law promulgated by the Government with effect from 01/7/2005 The implementation of the above legal documents for PV Power has created a number of advantages, it creates transparency in the investment and trading,

to avoid negative phenomena Vietnam continues to maintain the momentum of structural reforms, continuing the commitment to liberalize trade, improve productivity and competitiveness in parallel with strengthening governance in the public sector and private

(4) Technology Environment

Thanks to the scientific, engineering technology, we are witnessing the rushing world economic development, especially from the late 20th century Many techniques, technologies, products and services are developed in advanced countries in the world to penetrate Vietnam's market including the power sector Many types of advanced equipment, high quality have been applied in Vietnam Typically, the EPC, built PV Power Nhon Trach 1, is a Vietnam Machinery Installation Corporation (Lilama) has completed the first construction phase of the plant during the period (calculated from the time of starting 24/3/2007 to turbine1 generate at the national electricity grid 22/05/2008)

is 14 months, set a new record in building a large-capacity power plant in Vietnam

Besides, information technology is also providing extensive application in the management of operational management, business, finance, are applying to be effective, timely and cost savings

(5) Industry Environment (Micro)

Vietnam has a source of hydropower and gas resources with large reserves, at present, most electricity production from hydropower (34.2%) the rest are mainly thermal power with the fuel gas, oil, and a part by coal Most of the heat source power

from PV Power Phu My Company, PV Power Ba Ria (Ba Ria - Vung Tau), Gas - Electrical - Thermal Power Ca Mau, mainly hydropower sources Da River Hydropower Plant (Hòa Bình), coming as the Son La Hydropower Plant with installed capacity of 2,400 MW plant, comprising six units, the average power of 9.429 billion kWh annually The elements of weather and climate greatly affect the power production from hydroelectric sources Dry season makes the lake water level below the permitted level, hydropower production can not meet the demand, more electricity to be cut down, affecting the production and living of the people In recent years, EVN has tried to exploit many different sources of electricity production, especially from gas fired power sources, build more power plants and has largely overcome the power shortage

(Source : website evn.com.vn)

(a) Client:

EVN is now the natural monopolies, but not the price of electricity Power users who have not chosen to sell electricity, no real competition in electricity sales process, all right through the regulation of EVN But now, the electricity industry in general are under great pressure of public opinion about the price of electricity to meet demand for electricity, and power quality Obstacles to slow the increase of electricity prices according to the schedule in recent years is the realization of customer pressure

(b) Supplier:

Contractors provide supplies and equipment reserve for major power plants in Vietnam is still the original manufacturers such as siemens, Alstom, GE Gas source for electricity production is gas from PetroVietnam Gas Corporation (PVGas) Fuel oil is supplied by PetroVietnam Oil Corporation (PV Oil) – PetroVietnam and some importers such as Petrolimex distribution, aviation fuel company

On the market today there are many companies can offer repair services for power plants in the form associated with the original manufacturer (OEM), but for power plants

in the petrol industry, only two companies providing this type of service that PV Power Service (PVPS) and PetroVietnam Technical Services Corporation (PTSC)