Power – Thermal power rise to swap out hydropower

• The new PDP8 favors toward gas-fired and wind power over 2021-30F period, after focusing on RE power from 2031F onward.
• We see gas-fired and coal-fired power using domestic coal to enjoy higher output mobilization under the weakening of hydropower in 2023F.
• We see the return of thermal power and the new RE development phase to be the main sector’s theme in 2023-24F, thus, we choose PC1 and POW.

Power consumption growth will stay below PDP8’s forecast in 2023F
For 2023F, we expect a more conservative power consumption growth of 6% yoy, 28% lower than the PDP8’s low-case scenario amid weak national industrial activities. However, we find expectations of a hotter summer will drive higher power consumption from residential sector during summer days. In 2024-30F period, we see Vietnam’s total power consumption will continue to grow in accordance with the base-case scenario of 8.4% CAGR in the PDP8 draft.
Although retail prices have risen since May-23, we see a significant improvement may be premature due to anchored high input price. EVN proposed another 3% rise, if it is approved, it will greatly support EVN financial position in term of full cash flow to make payment for power plants. About the recent power shortage in the North, we do not see a possible short-term solution. In long-term, replenishing new power plants in the North and transmission system is an urgent task.
Thermal power output will rise thanks to the weakening of hydropower in 2023F
In 2023-24F, we see gas-fired power output to improve thanks to 1) The weakening of hydropower will leave larger space for other power sources; 2) The excessive RE capacity in the South to be gradually absorbed amid slow new capacity development when Vietnam industrial activities return to growth status from 2024F. For coal-fired power, we see the coal-fired power plants that using domestic coal, especially in the North will be benefited thanks to low price and stable coal input volume. Besides, we expect hotter weather in this region to be the primary factor, supporting these plants to record a positive output mobilization in 2023F.
We like POW, and PC1 while QTP, GEG, BCG, NT2 is in our watchlist
In 2023F, we expect POW – leading gas-fired power firm to enjoy positive results thanks to brighter outlook of gas-fired power sector. On the other hand, although there are uncertainties in the new development phase of RE power amid the sector’s policy bottlenecks, we are still putting our faith in an official price mechanism to be carried out in this year. Thus, when everything is settled down, we see RE construction segment including power plants EPC and transmission grid build to rise soonest. Therefore, we see PC1 – the leading EPC wind power contractors will be the first enterprise to ride on this trend.

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