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Vietnam Power Report Q4 2011
Business Monitor International, Sep 2011, Pages: 58
Business Monitor International's Vietnam Power Report provides industry professionals and strategists, corporate analysts, power associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's power industry.
BMI View:
BMi's Vietnam power industry forecasts have been revised this quarter following the release of new historical data by two of BMI's main reference sources. BMI has also incorporated changes related to the power mix, as new projects show a surge in construction activity to bring coal-based capacity online. However, BMI maintains that Vietnam's power generation and consumption are both expected to rise sharply in the coming years, with a real risk of persistent electricity shortages if the power industry cannot deliver adequate new capacity as demand soars.
In light of Vietnam's economic and demographic growth, power consumption is expected to increase from an estimated 84.56 terawatt hours (TWh) in 2010 to 194.85TWh in 2020. Vietnam will therefore need to step up its power generation to meet growing demand, and according to BMI's forecasts electricity supply will increase from an estimated 97.71TWh in 2010 to 207.93TWh by 2020. Power shortages are, however, expected to continue during this period unless adequate measures are taken to increase the power supply.
The country's draft Master Plan VII for 2010-2020 estimates that an additional capacity of 4,100MW will be required per year on average during the 2011-2015 time period to meet rapidly growing demand in Vietnam. In line with it, the government and its state-owned monopoly Electricity of Vietnam (EVN) have presented ambitious plans to construct numerous thermal, hydro and even nuclear power plants in the coming years. Vietnam's power generation system relies mainly on thermal power and hydropower, and according to BMI's forecasts these two resources will play an increasingly important role in the medium to long term. Yet, so far, the country has showed a limited ability to attract foreign investment in order to fund improvements to its power infrastructure, especially due to artificially capped prices.
Key themes and developments for Vietnam's power sector this quarter include:
- Following a hike in electricity prices in March 2011, retail electricity prices were then left unchanged over the rest of H1 2011, as part of a government plan to curb inflation. New changes were eventually announced in September 2011, owing to dire plight of ENV and the country's power sector. According to the new legislation, ENV will now be able to adjust monthly pricing so it is in line with fluctuations in the US$ exchange rate, fuel prices and the power output levels. BMI believes that the decision has the potential to improve ENV's situation and incentivise investment; however, the real effects will depend strongly on the government's decision-making processes.
- The country is proceeding with the construction of various coal-fired plants. Among the most significant developments, Vietnamese state-run oil and gas company Vietnam National Oil and Gas Group (PetroVietnam) awarded its subsidiary Petrovietnam Technical Services Corporation (PTSC) the contract to develop the 1,200MW Song Hua 1 coal-based power plant in the Hau Giang. Furthermore, AES Corporation closed on its US$1.5bn long-term construction financing for the 1,200MW Mong Duong II coal-fired power plant located in Quang Ninh Province.
- PV Power, a subsidiary of oil and gas company PetroVietnam completed a VND400bn (US$19.4mn) loan agreement with two banks for the construction of the Phu Quy wind power plant in May 2011. BMI believes that Vietnam remains one of the largest potential markets for wind power generation in Asia, but delays in passing an incentive policy for wind farms remains a pertinent downside risk.
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