Boston, MA -- (SBWIRE) -- 06/14/2013 -- BMI View: Whilst revisions in historical data have prompted some numerical changes in our forecasts, our overall outlook for Vietnam's power sector remains unchanged. Acceleration in real GDP growth in the second half of 2012 reinforces our belief that electricity consumption is poised for a stronger performance in 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.

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, remains fully in place, and 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.

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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).

For instance, it is of interest to note that Japanese company Sumitomo Corporation has lodged an application to secure an investment licence for the construction of a 1,320MW coal-fired thermoelectric plant in Khanh Hoa in February 2013. The plant, which is scheduled to be constructed under a buildoperate- transfer scheme, is likely to be erected in the Van Phong Economic Zone in Ninh Hoa Town and is expected to become the largest facility of its kind in the country.

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 and delays remain significant. For instance, the cancellations of nine small- to medium-capacity 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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