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Vietnam Power Report Q1 2012
Business Monitor International, Jan 2012, Pages: 59
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: With Vietnam's GDP expected to grow at an average of 7.36% between 2011 and 2021 it will be a substantial challenge to generate adequate power to support economic expansion. Vietnam has announced a surge in construction activity in an effort to bring new coal and even nuclear-based capacity online. Yet, BMI maintains that the risk of persistent electricity shortages in the country is very real, as Electricity of Vietnam (EVN)'s negative financial performance and a weak business environment are likely to hinder project development.
BMI has long highlighted that power consumption in Vietnam is expected to increase sharply in the coming decade, sustained by solid economic and demographic growth. Some new data from Vietnam's national utility, coupled with several announcements concerning the development of new projects, have prompted BMI to further revise its forecasts upward, with total consumption now expected to reach 246TWh in 2021 and total power generation growing to 268TWh by the same year to meet soaring demand. BMI notes that its previous long-term forecast anticipated consumption reaching only 194.85TWh by 2020, constrained by lower levels of available supply.
In spite of this upward revision and bullish outlook, BMI notes, however, that it has taken a more conservative stance than EVN, as it believes that financial constraints and impediments related to the business environment (poor institutions, high level of corruptions, red tape) are likely to prove an obstacle to project development, imposing substantial delays and possibly derailing some of the projects, especially those in the nuclear segment.
Taking into consideration the trends highlighted above, key themes and developments inVietnam’s power sector this quarter include:
- In open contradiction to the global anti-nuclear sentiment that has emerged in the wake of the Fukushima nuclear crisis in Japan, Vietnam signed two key agreements – loan and consultancy agreements – with Russia in November 2011 for the construction of its first nuclear power plant, the 2,000 megawatt (MW) Ninh Thuan 1 nuclear project. BMI notes, however, that the Ninh Thuan 1 project is likely to face implementation delays due to Vietnam's lack of institutional capacity.
- In October 2011, Vietnam's Development Bank signed a letter of credit worth US$1bn with the US Export-Import Bank to fund the development of wind farms in the country. BMI also notes that the move will provide a major boost for the emerging Vietnamese wind sector. The US Export- Import Bank will provide loans to build a number of new wind-power plants in the provinces of Bac Lieu, Soc Trang and Kien Giang in the Mekong Delta area. According to official announcements, the bank will also act as a guarantor when the Vietnam Development Bank accesses finance from other international banks.
- In November 2011, the Vietnamese government announced that ENV was likely to remain in the red in FY2011 and Minister of Finance Vuong Dinh Hue confirmed that power prices in 2012 would increase at controlled rate. Power prices for low-income earners will be maintained at the current level. BMI stresses that Vietnam's Deputy Prime Minister Hoang Trung Hai confirmed that Vietnam's average power price is VND0.056 while the real price should be VND0.096.
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