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IEEFA: EVN delivers strong 2020 financial performance by optimizing Vietnam’s dynamic generation mix

July 30, 2021

29 July 2021 (IEEFA Vietnam): Vietnam’s state utility Electricity of Vietnam (EVN) came through 2020 in surprisingly good financial health compared to many Southeast Asian peers, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA), which analyzed EVN’s recently released 2020 financial statements.

EVN’s improved financial position is due to a cost-friendly generation mix rather than a sustained strategic fix

“In a year when most regional power companies can be excused for reporting losses, EVN posted an improvement in its operating margins and gross profit despite the challenges posed by the COVID-19 pandemic,” says report author, IEEFA Energy Finance Analyst, Thu Vu.

“Faced with constrained revenue growth caused by slowing demand, lost revenue from tariff rebate programs, and a government-mandated tariff freeze, the improved profitability reflects EVN’s ability to optimize the system and keep operating costs in check.”

In 2020, favorable hydrological conditions in the monsoon season enabled EVN to work with a higher mix of low-cost hydropower which went up 10.2% versus the previous year and accounted for 30% of the generation mix. Increased dispatch of solar power also led to lower utilization of gas power plants (-18.4%) and costly oil-fired power stations (-44.0%). Coal power output rose slightly (+2.5%) and remained the dominant source, responsible for half of the generation mix.

Coal, gas, and oil-fired power stations are beginning to face new revenue risks and operational challenges

“EVN’s improved financial position is due to a cost-friendly generation mix thanks to the better availability of inexpensive hydropower, rather than a sustained strategic fix,” says Vu.

The COVID-19 pandemic depressed demand across all power markets, but for Vietnam, this deceleration helped spare the economy from the looming threat of power outages and gave EVN breathing room to better manage the operational risks that come with years of high growth.

“This is a positive scenario, and a vivid reminder of the sensitivity of EVN’s financial profile to volatile hydropower sources, but there are no guarantees that EVN will continue to be so fortunate,” says Vu.

“The key to a sustained strengthening of EVN’s financial position remains tariff increases. However, prospects for near-term tariff adjustments appear unlikely in Vietnam’s pandemic and post-pandemic recovery context.”

The report also highlights EVN’s ability to benefit from a more cost-effective generation mix with more renewable energy, including hydro and solar power, and less fossil-fuel based electricity, has strategic implications for the planning of Vietnam’s power system.

The 2020 energy generation mix signals the new competitive landscape facing fossil fuel players as non-hydro renewables begin to make inroads. Data shows that gas and oil-fired power stations were ramped down, with their output replaced by renewables.

“Coal, gas, and oil-fired power stations are beginning to face new revenue risks and operational challenges,” says Vu.

“With more variable renewables coming online, the role and dominance of coal and gas-fired power in the country’s energy mix faces inevitable adjustments.

“This shift will require a thorough review of the economic assumptions that have driven commitments to large-scale pipeline projects that cannot be dispatched flexibly.”

The one red flag in the 2020 results is that EVN held back on capital spending

Vu notes the one red flag in the 2020 results is that EVN held back on capital spending. This means that much-needed investment in grid infrastructure may continue to be a problem area, particularly for the renewable energy assets now facing curtailment risks.

Total borrowings continued to decline, while financing needs for EVN’s pipeline of large-scale generation projects, many expected to break ground in 2021-2022, could further constrain funding for transmission projects in the near term.

“EVN’s grid upgrading efforts continue to be scrutinized by incumbent renewable energy investors and will remain crucial to the sector’s future growth,” says Vu.

“While official announcements by EVN indicate urgency and a strong focus on upgrading substations, transmission and distribution lines in critical regions, it is difficult to gauge the full scale of the work in progress.”

Apart from financial constraints, pre-investment bureaucracy and complexity around land clearance and compensation have been critical barriers to EVN’s efficient build-out of grid infrastructure projects.

“Delayed grid upgrades pose near and long-term risks to the cost-effective integration of the growing renewables fleet,” says Vu.

Read the report (in English): Vietnam’s EVN Stands Out With a Strong 2020 Financial Performance

Read the report (in Vietnamese): Tập đoàn Điện lực Việt Nam tạo bất ngờ với tình hình tài chính cải thiện năm 2020

Read the press release in Vietnamese

Author contact: Thu Vu, Energy Finance Analyst ([email protected])

Media contact: Paige Nguyen ([email protected]) Ph: +61 433 048 877

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (

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