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Recently Released Market Study: Vietnam Power Report Q1 2013

New Energy market report from Business Monitor International: "Vietnam Power Report Q1 2013"


Boston, MA -- (SBWIRE) -- 03/08/2013 -- BMI View: Acceleration in real GDP growth in the second half of 2012 reinforces our belief that electricity consumption is poised for a stronger performance as we head into 2013. Similarly, we hold a relatively constructive view for the expansion of the country's power infrastructure on the back of the official launch of Vietnam's competitive generation market. Nonetheless, we reiterate that low tariffs, rising dependence on imported fuel (namely coal) and lack of regulatory clarity remain key downside risks

In previous quarter, we had highlighted that adverse domestic and global macroeconomic trends would have likely resulted in weaker growth in electricity consumption over 2012 (especially as businesses and households cut back on spending and investment). Yet, we had maintained a more positive stance with regard to the longer term outlook; a position validated and strengthened by recent developments, which saw Vietnam's real GDP growth accelerating from 4.7% year-on-year (y-o-y) in Q212 to 5.4% in Q312 and expectations for a decline in lending rates over the coming months creating scope for a robust rebound in private sector investment.

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Our relatively bullish long-term outlook for Vietnam's power sector, predicated on our view that the country will see strong and prolonged economic growth, thus remains fully in place, and substantial revisions in our historical data series and the availability of new information have actually prompted a further upwards revision of our short and long term forecasts across the power sector. Hikes in power generating capacity and significant improvements in the transmission and distribution (T&D) segment are a recognised necessity, with Vietnam's Master Plan VII predicting that the country will need 75,000MW of installed capacity by 2020. In addition, the launch of Vietnam's new competitive generation market (CGM) on July 1 2012 is certainly a step in the right direction, with an increasing number of international actors having showed interests in the market recently (as illustrated by the projects in the pipeline for development after 2015).

That said, a number of pertinent risks remain prominent, leading us to believe that a discrepancy will certainly emerge between planned and realised capacity. Most notably:

- Regulatory uncertainty remains high. For instance, the cancellations of nine small- to mediumcapacity hydropower plants in October 2012 highlighted an increasing lack of opportunities for small-scale hydropower generation, due to growing environmental concerns. However, we believe that the cancellations also displayed a disparity between provincial and federal level planning.
- Low tariffs and dependence on imported fuel (namely coal) as a key impediment to the power sector's growth potential, and news that theft of electricity is on the rise are certainly worrying.

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