What is Vietnam’s hydropower outlook?

Impressive business performance 

According to the National Oceanic and Atmospheric Administration (NOAA), its forecast shows a solid possibility of the La Nina phase continuing until 1Q22F. Besides, regarding the recently intense price increase in coal and gas, VNDirect believed hydropower would continue to be prioritized in terms of its cheaper price until gasfired, and coal-fired power prices cool down in 2022F. 

Meanwhile, revenue and net profit of hydropower companies increased sharply in 1H21 due to ideal weather conditions and low prices. It included impressive performances from several companies such as VSH, DNH, GEG, REE. Notably, VSH’s revenue and net profit in 1H21 surged 656% YoY and 75.4x YoY, respectively, and DNH’s revenue and net profit also rose 68% YoY, and 147% YoY, respectively in 1H21.

In addition, 1H21’s net profit of GEG increased 6% YoY with the contribution from 25% YoY increase in hydropower revenue. REE also record a 14% rise in 1H21’s revenue with a sharp rise in power segment revenue of 300% YoY, leading to a 38% YoY increase in net profit. 

Hydropower potential has been exhausted 

According to the national hydropower statistics of the Department of Electricity and Renewable Energy, the economic potential and technical potential of medium and large hydropower are about 75-80bn kWh, equivalent to about 20,000MW of install capacity. However, Vietnam’s total medium and large hydropower plants reached 18,200MW (91% of full potential capacity) in 2020. Besides, the total small hydropower capacity is currently about 3,200MW over 6,000MW potential capacity.

Basically, hydropower has been exploited to its full potential. In the long-term prospect, VNDirect expected its modest capacity growth of 0.9% CAGR in 2020-45F will limit  its long-term output growth. Furthermore, hydropower relies heavily on weather conditions, which could reduce the importance of this energy when Vietnam fully develops other energy sources with a more stable nature.