Vietnam's EVN stands out with a strong 2020 financial performance
Key Findings
Vietnam’s state utility Electricity of Vietnam (EVN) has come through 2020 in surprisingly good financial health compared to many Southeast Asian peers, as it optimized the diverse power mix.
Limited spending on grid expansion, which could be further constrained in the short term, may continue to be problematic for existing renewable energy assets.
Tariff increases will remain key to the sustained strengthening of EVN's financial position, but this is unlikely to happen in a post-pandemic recovery context.
Executive Summary
Vietnam’s state utility Electricity of Vietnam (EVN) has come through 2020 in surprisingly good financial health compared to many Southeast Asian peers. In a year when most regional power companies can be excused for reporting losses, EVN posted an overall improvement in its operating margins and gross profit despite the challenges posed by the COVID-19 pandemic. 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.
This positive swing is a reminder of the sensitivity of EVN’s financial profile to volatile hydropower sources.
In 2020, EVN benefited from a cost-friendly generation mix thanks to the better availability of inexpensive hydropower, a scenario that is welcomed but not guaranteed on a recurring basis. This positive swing is a reminder of the sensitivity of EVN’s financial profile to volatile hydropower sources. Nevertheless, EVN’s ability to benefit from a more cost-effective generation mix in 2020 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. As more variable renewables come 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—a strategy that means 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 own pipeline of large-scale generation projects, many of which are expected to break ground in 2021-2022, could further constrain funding for transmission projects in the near term.
Press release: EVN delivers strong 2020 financial performance by optimizing Vietnam’s dynamic generation mix
Press release in Vietnamese: EVN delivers strong 2020 financial performance by optimizing Vietnam’s dynamic generation mix
Report: Vietnam’s EVN Stands Out With a Strong 2020 Financial Performance
Report in Vietnamese: Vietnam’s EVN Stands Out With a Strong 2020 Financial Performance_VN
