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Vietnam: Impressive profit return for sustainable energy investors

Vietnam is considered to be a country with a potential year for renewable energy development and many real estate businesses have experienced a higher level of profitability from investing in the development of renewable energy projects.

The Prime Minister has just signed a decision approving the Electricity Development Master Plan VIII for the period 2021-2030 with a vision to 2050, in which, for equitable energy transition, the Power Master Plan VIII aims to strongly develop renewable energy for electricity production up to 67.5 - 71.5%. This decision has brought significant positive impacts on many firms whose energy investment is not the prime business focus.

For example, Ha Do Group is a company specialising in real estate, but has also poured trillions of VND into renewable energy and is recording great revenue. Since 2006, Ha Do has entered the energy sector when it started to invest in Za Hung hydropower plant. Up to now, the enterprise has invested in and owned and operated 5 hydroelectric power plants, 2 solar power plants, 1 wind power plant with a total capacity of nearly 500 MW. According to the financial statements of the first quarter of 2023, energy (hydroelectricity and solar power) is Ha Do's core business and contributes nearly 57% to the company's gross profit when bringing in 543 billion. Compared to the same period last year, revenue from the electricity sector of this enterprise increased by more than 65 billion dong. Previously, Ha Do's 2022 financial statements also showed that revenue from the electricity sector reached more than VND 2,115.6 billion, an increase of more than 65% compared to 2021 and also accounting for nearly 60% of the company's total revenue. On average, Ha Do earns more than VND 176 billion per month from electricity production and trading, higher than the revenue from the traditional business of real estate. VNDirect Securities forecasts that Ha Do's estimated revenue in 2023 will reach VND 4,466 billion, up 18% compared to the plan in 2022 and gross profit will reach VND 3,015 billion, equivalent to an increase of 15% compared to 2022.

Similarly, Sao Mai Group Joint Stock Company is known for its solar power projects including Sao Mai Solar Power Plant (An Giang); Solar power plant (Dak Lak); Solar power plant (Dak Nong). The investment in renewable energy projects has contributed significantly to the overall revenue of ASM. Specifically, in the first quarter of 2023, the total revenue of the enterprise reached VND 3,050 billion, of which revenue from solar power reached VND 196 billion, up more than 27% over the same period. Meanwhile, revenue from real estate segment of ASM only reached 32 billion dong, lower by more than 71% over the same period. ASM's main revenue still lies in export, fish feed and trade, however, the results from renewable energy projects are showing positive signs. In 2022, the two solar power projects in An Giang and Long An also brought ASM 599 billion in revenue. Specifically, Sao Mai Solar Power Plant Projects, An Hao Commune, Tinh Bien District 210Mwp (441 billion VND) and Europlast Long An Solar Power Plant Project in My Thanh Bac Commune, Duc Hue District, Long An Province 50Mwp (158 billion dong).

Ha Do Group Joint Stock Company, a large enterprise in the field of real estate, since 2006, started to invest into the field of renewable energy. Up to now, HDG has had 2 solar power projects, 1 wind power project and 4 hydropower projects. In the first quarter of 2023, HDG's net revenue reached VND 956 billion, up nearly 40% over the same period and profit after tax reached more than VND 357 billion, up 21% over the same period last year. Notably, the main contributor to this result was the energy segment with revenue of VND 543 billion, up 13.7% compared to the same period in 2022.

Another large firm in Vietnam, Bamboo Capital, aims to become a leading renewable energy group in Vietnam besides real estate and financial services. In 2022, the company's revenue reached VND 4,531 billion, an increase of 75% compared to 2021, of which revenue from the renewable energy segment contributed 23.5%, equivalent to more than VND trillion, an increase of VND 300 billion compared to the same period last year. Bamboo Capital said that since restructuring and consolidating its investment portfolios, focusing on key industries such as renewable energy, real estate, financial services, etc. BCG has gradually reduced its dependence on revenue from construction and exploitation of infrastructure. Among the businesses on the stock market, Bamboo Capital currently has the largest scale and accounts for 2.2% of the wind and solar power market share in 2022 as reported by VnDirect.

The future of renewable energy development in Vietnam

Electricity Development Master Plan VIII prioritises the development of renewable energy, in which wind power is strongly promoted. The proportion of wind power in the power generation structure will increase from 5% in 2022 to 18% in 2030 and 29% in 2050. The total wind power capacity is expected to reach 27,880 MW in 2030 and 130,050 MW - 168,550 MW in 2050, meaning about 23,213 MW is expected to be developed between 2023 - 2030.

For electrification, it is expected that gas electrification will be the key source of power in the period 2021-2030 with a compound growth rate of 26%, the highest among major power sources and accounting for 27% of total power capacity. In the period 2030-2050, the compound growth of electrification will slow down to 4%, accounting for 15% of total capacity. Notably, in order to accelerate the progress of emission reduction, electrification will have to convert part of the input fuel to combustion with hydrogen after 20 years of operation.

Meanwhile, after the massive development period of solar power from 2020 to 2021, the growth of solar power capacity is expected to slow down from now to 2030. However, the plant still encourages unlimited development of solar power for self-consumption. Accordingly, solar power capacity is expected to grow modestly in the 2021-2030 period and rebound strongly by 15% from 2030 onwards, and account for 33% of total power capacity in 2050.

However, during extremely hot weather time in the summer in 2023, the lack of electricity has been affecting millions of people lives across Vietnam. Demand for electricity in the North is in the peak period, possibly up to 23,500-24,000 MW in the coming hot days. The Northern electricity system will be short of about 4,350 MW with an average daily output of about 30.9 million kWh, the highest day can be up to 50. 8 million kWh. The Northern electricity system faces the risk of lack of capacity at most hours of the day. As of June 7, there were 56/85 transitional renewable energy projects with a total capacity of 3,087.6 MW, which proposed a temporary price equal to 50% of the ceiling price of the price bracket, of which 9 projects/parts of projects with the total capacity of 472.6 MW has completed the procedures for recognising the COD commercial operation date, officially being commercialised on the grid. At this stage, as there is little wind, even though nearly 4,000 MW of wind power is transitioned to the grid, the actual generating capacity is only about 10-15%, equivalent to less than 1,000 MW. This number can hardly support the electricity shortage in the North, but it can make up for it to some extent. The problem of electricity shortage in the North was warned two years ago because in the period 2016 - 2022, as the North did not have any new power sources, while the conditions for renewable energy development were less attractive than the South.

Source: the Internet



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