VIETNAM ELECTRICITY INDUSTRY REPORT Q1/2018 · Market development and renewable energy industry in 2016 Hydroelectricity Wind electricity Photovoltaic (PV) Concentrated solar power(CSP)

VIETNAM ELECTRICITY INDUSTRY REPORT Q1/2018

Executive Summary 4

1. Business environment 6

1.1 Macroeconomic situation 7

1.2 Legal framework 10

2. Industry overview 19

2.1 Situation of global electricity industry 20

2.1.1 Demand and supply for electricity 20

2.2 Situation of Vietnam electricity industry 29

2.2.1 History of Vietnam electricity industry 30

2.2.2 Value chain of the industry 34

2.2.3 Electricity generation 35

Nội dung

2.2.4 Electricity consumption 45

2.2.5 Electricity price 51

2.3 Issues in energy industries development 55

2.3.1 Existing 56

2.3.2 Challenges 57

2.4 Planning and forecasting 60

3. Business analysis 63

3.1 Typical companies of electricity industry 65

3.2 Business performance indicators 75

3.3 Financial indicators 80

3.4 Payment indicators 85

2

ERAV Electricity Regulatory Authority of Vietnam

EVFTA Vietnam-EU Free Trade Agreement

EVN Vietnam Electricity Corporation

FDI Foreign Direct Investment

FTA Free Trade Agreement

GSO General Statistics Office

MAIFI Momentary Average Interruption Frequency Index

MOIT Ministry of Industry and Trade

NLDC National Load Dispatch Center

PVN Vietnam Oil and Gas Group

SAIDI System Average Interruption Duration Index

SAIFI System Average Interruption Frequency Index

TPP Trans-Pacific Partnership Agreement

VCGM Vietnam Competitive Generation Market

Vinacomin Vietnam National Coal - Mineral Industries Group

VIRAC VIRAC Joint Stock Company

VWEM Vietnam Wholesale Electricity Market

WTO World Trade Organization

Abbreviations

3

Summary

Currently, China and the United States are the

two countries with the highest electricity

consumption in the world in 2016. The

average increase in world electricity price in

2011-2015 was

Currently, EVN still has a monopoly on the

segments of regulation, electricity

wholesaling, transmission and distribution or

retailing..

Import proportion of electricity is gradually

stabilizing over the years.

4

Content is intentionally removed for demo purpose

Summary

Vietnam is approaching the top four ASEAN

in SAIDI and SAIFI index. Viet Nam's access to

electricity index has increased by 5 folds

compared to that in 2015 - WB.

Electricity price in Vietnam is quite low

compared to other countries in the Asia-

Pacific region.

Net revenue of electricity distribution and

retail businesses is much higher than that of

the electricity generation enterprises.

5


1. Business environment

1.1 Macroeconomic situation

1.2 Legal framework

Content

6

The Government's 2018 GDP growth target of

Consumer price index (CPI) in 2017 has a lot of changes.

CPI increases due to:

7

GDP growth rate by quarter, 2015-2017

Sources: VIRAC, GSO

%

Monthly CPI fluctuations, 2014 - 2017

Sources: VIRAC, GSO




Many new projects in the field of electricity production and distribution are

licensed in 2017.

The stable exchange rate will help the electricity producers to be

more active in calculating input costs due to their dependence on

imported coal.

8

Sources: VIRAC, FIA

FDI attraction by industry, 2017

VND/USD exchange rates, 2013-2017

Sources: VIRAC, SBV




The electricity sector is estimated to have a relatively high and stable growth rate in industrial production.

The electricity industry plays an important role in supporting the

development of all sectors of the economy.

9

Sources: VIRAC collected

Contribution to electricity production and distribution in GDP,

2012 – 2017e






1.2 Legal framework

Content

10


1.2 Legal framework

Source: VIRAC

11


Electricity Law 2004

Amended Electricity Law 2012:


1.2 Legal framework

12


Decree No. 137/2013 / ND-CP guided the Electricity Law and the amended Electricity Law.

• Together with raising the business production efficiency of enterprises, the electricity sector has also restructured to ensure cost transparency and increase

competitiveness in the electricity market..

13


1.2 Legal framework



1.2 Legal framework

Source: VIRAC

Source: VIRAC

14



1.2 Legal framework

15


On 12 March 2015, the Ministry of Industry and Commerce issued Decision No . 2256 / QD-BCT regulating the electricity price.


1.2 Legal framework

16


Decision No . 24/2017 / QD-Nog dated 6/30/2017 of the Prime Minister regulating the mechanism for adjusting the average retail price of electricity

(replacing Decision 69/2013 / QD-Nog) and took effect on 8/15/2017.

The application of advanced technologies, digitization-based technology and the linkage to create high-tech agricultural

models, and smart agriculture are few.

17


1.2 Legal framework



1.2 Legal framework

18


There are also some circulars about the electricity sector:

Content

2. Industry overview

2.1 Situation of global electricity industry

2.2 Situation of Vietnam electricity industry

2.3 Issues in energy industries development

2.4 Planning and forecasting

19


2.1 Situation of global electricity industry – 2.1.1 Demand and supply for electricity

TWh World electricity volume, 1985-2016

Sources: VIRAC, Statsreview.bp.com

20

Structure of world electricity volume, 2016

Sources: VIRAC, REN21

Significant change in the contribution of electricity production between Europe

and Asia-Pacific.

In recent years, many countries

have shifted dramatically from fossil fuel energy to renewable energy sources.


21

The structure of renewable electricity production worldwide, 2016



Renewable electricity capacity * in the world by country, 2016

GW

•

China is the leading country in renewable

energy development,


Global renewable electricity capacity, 2015-2016




22

Market development and renewable energy industry in 2016

Hydroelectricity

Wind electricity

Photovoltaic

(PV)

Concentrated

solar

power(CSP)

Bioelectricity

Geothermal




KWh

Average per capita electricity in the world, 1985 - 2016

Source: VIRAC, Statsreview.bp.com

23


Change in the contribution structure of the world electricity generation sector in the period 2000-2005 had a direct impact on the per capita electricity

consumption of the regions.



TWh

World's top largest electricity producing countries, 2015 - 2016


Contribution structure of world electricity production, 2016


24




Source: VIRAC, IEA

25


Electricity production volume in some countries, 2006 - 2016

Unit: TWh



TWhElectricity consumption by region, 2006 -

2016

Source: VIRAC, Ener Data

26


World's electricity consumption was constantly increasing in the period of 2006-2016e with a CAGR of



Source: VIRAC, Ener Data

TWh

China and the United States continued to be the two largest electricity

consuming countries in the world in 2016

Top 10 most electricity consuming countries in 2016

27




BIllion USDWorld electricity exports, 1985-2016e

Sources: VIRAC, Worldstopexports

Top 11 countries contributed of total world electricity exports in 2016

with the leading countries being Germany, Canada and France.

Top largest electricity exporters, 2016

Sources: VIRAC, worldstopexports

28




Content






29

Overview of Vietnam Electricity Industry


2.2 Situation of Vietnam electricity industry - 2.2.1 History of Vietnam electricity industry

30


31




32




33




Electricity is a special commodity,

Electricity industry of Vietnam also has a similar value chain with other countries in the world

Fuel Production Distribution and consumption


2.2 Situation of Vietnam electricity industry - 2.2.2 Value chain of the industry

34


Sources: VIRAC, EVN, GSO, MOIT

Total supply of electricity, 2010 – 2017e

Million kWh

Sources: VIRAC, IEA

Million kWh

Electricity production of Vietnam and some other

countries, 2016

35

In 2017, the supply of electricity also increased, as over 196 works were started in

the year, which 180 electrical grid works from 110 kV to 500 kV are completed and

put into operation


2.2 Situation of Vietnam electricity industry - 2.2.3 Electricity generation


Proportion of electricity generation by supplier, 2016

Sources: VIRAC, EVN

Electricity generation is the only segment with the participation of units

outside EVN due to the specific requirements of capital investment.

36




Renewable energy has not been widely used for electric development,

37

Structure of electricity production by source of materials, 2012 – Q3/2017

Sources: VIRAC, EVN, MOIT

The main sources of electricity are Hydroelectricity, Coal Thermoelectricity

and Gas Thermoelectricity, accounting for 98.7% of total electricity

generation capacity in 2017

Hydroelectricity accounts for a large proportion of total electricity

production




Most of the machinery and equipment of Vietnam 's hydropower plants are imported from overseas.

Characteristics of power plants by source of fuel

Hydropower

Thermal power

38



2.2 Situation of Vietnam electricity industry - 2.2.3 Electricity generation – Characteristics of electricity generation sources

Compare the advantages and disadvantages of hydroelectricity and thermal electricity

39




Electricity generating technology from coal (Thermal power)

40




Wind power

Nuclear power

Electricity produced from renewable energy

41




Distribution of main power plants

42


At present, the installation location of power plants is heavily

dependent on the distribution of natural resources, so there is a clear

distinction between regions.



Billion kWh

Source: VIRAC, EVN

Billion

kWh

Cent/kWh

Vietnam imports electricity mainly from China:

43

Import of electricity, 2010 - 2017

Import of electricity from China, 2010 - 2016e




Current situation of selling electricity to Laos:

Situation of electricity import from Laos:

44




Source: VIRAC, EVN, MOIT

Commercial electricity, 2012 – 9M/2017e

Million kWh

Commercial electricity according to the distribution companies (Million kWh), 2015 – 2017

Source: VIRAC, EVN

45



2.2 Situation of Vietnam electricity industry - 2.2.4 Electricity consumption

Vietnam is one of the most inefficiently electricity using countries in the world.

Electricity intensity by region in the world (kwh / USD)



46


Source: VIRAC

KWh

Source: VIRAC, MOIT

Source: VIRAC

47

Electricity consumption structure, 2017

Electricity consumption per capita of Vietnam, 2000-2016




Source: VIRAC, GSO, EVN

48

Elastic electricity factor/GDP, 2010 - 2017e


Electrical efficiency in Vietnam from the perspective of coefficient of

electricity elasticity/GDP.

Coefficient of electricity elasticity/GDP depends on each stage of

development of each country.



Source: VIRAC, NLDC

Electricity supply reliability criteria for 2017

Source: VIRAC, EVN

49

Electricity outage, 2012 – 2017eElectricity outage




Vietnam’s getting electricity indicator, 2012 - 2016

Source: VIRAC, World Bank, EVN

50




Source: VIRAC, Decision No 5106/QĐ-BCT

Avoided cost tariff applied to small and medium-sized hydroelectric plants in 2017

Source: VIRAC, EVN, MOIT

VND/kWh

Electricity generating price


2.2 Situation of Vietnam electricity industry - 2.2.5 Electricity price

51

Average electricity purchase price of EVN, 1/2015 - 10/2017


Source: VIRAC, Decision No 1797/QĐ-BCT

Average electricity wholesale price of EVN for other electricity corporations in 2016Wholesale price of electricity

Retail price of electricity

52




53

Electricity price in Vietnam is quite low compared to other countries in

the Asia-Pacific region.

Price of input material, January/2014 – October/2017

Sources: VIRAC, MOIT

Sources: VIRAC, MOIT

Average electricity price, July/2007 – December /2017

VND/ kWh




Content






54

Existing problems affecting the development of Vietnam's energy industry


2.3 Issues in energy industries development – 2.3.1 Existing

55


In addition, Vietnam is facing many challenges such as:

Sources: VIRAC, ERAV

56

Structure of electricity production by primary energy source


2.3 Issues in energy industries development – 2.3.2 Challenges


Vietnam currently ranks 20th in the world among the countries with the

most coal thermal power plants in the world.

The development of coal electricity in Vietnam is against the world

trend.

Sources: VIRAC, GreenID

57

Average per capita consumption of coal and and CO₂




Huge investment capital.

Source: VIRAC

Energy using efficiency and awareness are low.

Sources: VIRAC, GDVC

58

Investment capital of power plants

Million USD/MW

Million USD

Import of electrical wires and cables, 2011 - 2017e




Content






59


2.4 Planning and forecasting -2.4.1 Planning

60


Decision No. 428 / QD-Nog approving the adjustment of zoning for national electricity development in 2011-2020, with a vision to 2030

1. National electric power development planning:

61


2. Electricity grid development planning:

Volume of transmission grids shall be elaborated in stages, as follows:

3. Solutions to industry zoning



Solution to electricity price

62




3. Business analysis

3.1 Typical companies of electricity industry

3.2 Business performance indicators

3.3 Financial indicators

3.4 Payment indicators

Content

63

Source: VIRAC

3. Enterprise analysis


Electricity generating enterprises.

64


Enterprises in electricity industry are divided into three groups:

Source: VIRAC

Electricity regulation and transmission companies.

Electricity distribution and retail companies.

Source: VIRAC

* By the end of August 2017 EVNNPC has not yet published its financial statements

65




Hai Phong Thermal Power Joint Stock Company


3.1 Typical companies of electricity industry– 3.1.1. Electricity generation companies– Thermal Coal

66


Quang Ninh Thermal Power Joint Stock Company


3.1 Typical companies of electricity industry– 3.1.1. Electricity generation companies– Thermal Coal

67



3.1 Typical companies of electricity industry– 3.1.1. Electricity generation companies- Hydropower

Pha Lai Thermal Power Joint Stock Company

68



3.1 Typical companies of electricity industry– 3.1.1. Electricity generation companies– Petroleum power

BOT Phy My 3 Power Company Limited

69


Mekong Energy Company


3.1 Typical companies of electricity industry– 3.1.1. Electricity generation companies– Hydropower

70



3.1 Typical companies of electricity industry– 3.1.2. Electricity regulation and transmission companies.

71



3.1 Typical companies of electricity industry– 3.1.3. Electricity distribution and retail companies.

Northern Power Corporation - EVNNPC

72




Hanoi Power Company - HNPC

73


Central Power Corporation - EVNCPC

74









Content

75

Source: VIRAC

VND

Billion



Net revenue, 2015 - 2016

76


Net revenue of electricity distribution and retail businesses is much higher than that of electricity generation enterprises.

Source: VIRAC

VND Billion



77

Profit indicator, 2015 - 2016


While the net revenue of the 5 electricity distribution and retail businesses is much higher than that of some companies in the electricity generation

business group, the gross profit is not clear.

In the group of electricity generation enterprises, gross profit of the gas power businesses is lower than that of the thermal enterprises.

Source: VIRAC

VND Billion



78

Financial cost, 2015 - 2016


Financial cost of thermal coal businesses is usually larger than that of electricity generation enterprises,

Source: VIRAC



79

Self-financing rate, 2015 - 2016







Content

80

VND

Billion



Total asset, 2015 - 2016

Source: VIRAC

81


• Gas power enterprises have higher total asset turnover than coal power companies. Because in 2016, world oil price continued to decrease, which

made gas power enterprises' price lower, thereby increasing the price advantage.

Sources: VIRAC

Days

Average days of receivables, 2016

82




Source: VIRAC



Profit indicators, 2016

83


Profitability of electricity generation enterprises is relatively high compared to other companies in the electricity distribution and distribution group.

Source: VIRAC



Days

84

Days in inventory, 2016


In general, the average days in inventory in the industry is very low compared to other manufacturing sectors, the average number of days in inventory is

only 36 days.






Content

85



Source: VIRAC

86

Solvency, 2015 - 2016


Current ratio of most enterprises is much higher than quick ratio.

REPORT DISCLAIMER

87

Report Disclaimer:

This document has been prepared in good faith on the basis of information available at the date of publication without any independent verification. VIRAC has

produced this report for private circulation to professional clients only. All information and statistical data herein have been obtained from sources we believe to

be reliable and made to ensure the accuracy of the contents of the pages of the report at the time of preparation. Such information has not been independently

verified and VIRAC makes no representation or warranty, whether express or implied, of any kind with respect to the document and its contents, information and

materials. The content found in this report is proprietary to VIRAC and is provided solely for your personal and non-commercial use. You agree that you will not

use this report for any purpose that is unlawful and that you will not reproduce the report or redistribute it outside your organisation, or place it on a website for

public access without the express written permission of VIRAC.

SHOULD YOU NEED ANY ASSISTANCE, PLEASE CONTACT US:

VIETNAM INDUSTRY RESEARCH AND CONSULTANT (VIRAC JSC.,)

6 th Floor, Anh Minh Building, 36 Hoang Cau, O Cho Dua, Dong Da, Hanoi, Vietnam

Website: http://virac.com.vn/

Email: [email protected] | Tel: +84 463289520

Thank you !

Documents

VIETNAM ELECTRICITY INDUSTRY REPORT Q1/2018 · Market development and renewable energy industry in 2016 Hydroelectricity Wind electricity Photovoltaic (PV) Concentrated solar power(CSP)