Power sector – Power development plan 8 – a turning point for the industry

• In 15 May 2023, the Power Development Plan 8 (PDP8) was officially approved, opening up a new chapter for Vietnam power sector.
• Under the strong energy transition scenario, large financial pressure to meet demand for power development.
• We see M&E and RE EPC contractors to be benefited soonest under the PDP8, following by wind power and gas-fired power plants developers.

In May 15, 2023, the Prime Minister has officially approved the PDP 8, opening up a new chapter for Vietnam power sector

After the strong commitment in the COP26, and the recent COP27, targeting “net-zero” goal in 2050, Vietnam government has shifted its view from PDP7 revise to a more intense green transition in the PDP8:
• For coal-fired power, the official PDP8 finally remove total 13,220MW, putting an end for the coal-fired era. Coal-fired power will increase 2% CAGR over 2023-30F then decrease -1% CAGR over 2030-50F, accounting for 19% and 4% in 2030-50F, respectively.
• For gas-fired power, the energy sources will become the major spearhead over 2021-30 period with CAGR of 26%, accounting for 27% total capacity. From 2030-50 period, gas-fired power development will slow down at 4% CAGR and accounting for total 15% in 2050F.
• For wind power, this energy sources will become the main target in both short and long term. Onshore wind power will grow at 25% CAGR over 2021-30F and 6% CAGR in 2030-50F, accounting for 14% and 13% total capacity in 2030-50F, respectively. On the other hand, there will be the first 6,000MW offshore wind power on board in 2030F, before surging 15% CAGR in 2030-50F, accounting for 16% total capacity.
• For solar power, the energy sources will postpone under excessive growth over 2020-21 period. However, the PDP8 still encourage unlimited growth of solar power for self-use purposes. Therefore, solar power will grow modestly over 2021-30F then thriving at 12% CAGR from 2030F onward, accounting for 33% total capacity in 2050F.

Higher capital requirement in order to actualize green ambition

Capital demand for power capacity reach US$114bn in 2021-30 period, allocating majorly on gas-fired and onshore wind power with 30% and 35% total capital need, respectively. In 2031-50 period, total capital for capacity development will reach US$495bn, with wind power require the most of 63% total capital, follow by the comeback of solar power (18%). Capital needs for power grid development accounting for about 11%-7% of the total power sector investment in 2021-30F and 2031-50F period, respectively. In our perspective, the PDP8 has concluded a “sufficient and green” plan, but it may be more difficult to implement than the amended PDP7 with strong emergence of gas-fired and RE power, while hydrogen, ammonia technologies for thermal plants are still being explore and not yet marketed.

We name some of the players who will benefit from PDP8

We see PC1, FCN, TV2 – listed outstanding M&E and RE contractors to benefit soonest thanks to the high workload under the PDP8. PVS is another heavyweight contestant in long-term thanks to its participation in offshore wind power construction. Gas-fired power plant developers that own project included in the PDP8 will have brighter outlook such as Nhon Trach 3&4 (POW), LNG Long Son (PGV, TV2) and O Mon III, IV (Genco 2). GAS is also a key beneficiary in the LNG-to-power transition with the LNG terminals projects. As the PDP8 favour for wind power, it is the opportunity for top RE players such as Trung Nam, BCG, REE, GEG enlarge their portfolio. However, we see the major affection on the RE outlook will come from new price framework, which has not yet to be cleared up. Besides, we expect PDP8 approval to boost long-stalled, multibillion-dollar gas field projects like Block B and Blue Whale in coming years.

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