Thermal Power Sector Update - Sufficient power supply in 2024F to weigh on gas-fired volume

We trim our 2023/24F electricity consumption growth forecasts from 5.0%/8.4% to 4.8% and 7.7%, respectively. Vietnam Electricity (EVN) reported 11M 2023 electricity production volume of 257 billion kWh (+4% YoY). Based on this, we estimate 11M electricity consumption growth of 4% YoY and forecast 2023F power consumption to grow 4.8% YoY. In addition, we lower our forecast for Vietnam’s 2024F electricity consumption growth rate to 7.7% from 8.4% previously. Our macro team forecasts Vietnam’s GDP to expand 7.0% YoY in 2024 (see our Macro update report, December 7, 2023). However, we reduce our assumption for the elasticity ratio between GDP growth and electricity consumption growth to 1.1x from 1.2x previously (following our estimated elasticity ratio of 1.0x in 2023) due to recent weak PMI readings, which results in lower projected electricity consumption growth of 7.7% in 2024.

We forecast sufficient power supply for 2024 vs a power shortage in 2023. In early December 2023, the Ministry of Industry & Trade (MoIT) issued Decision 3110. This guides for power supply of 306 billion kWh for 2024, which we estimate represents an increase of 6%-9% vs 2023.  We believe this should be sufficient to meet power demand in 2024, which we forecast to grow by 7.7% YoY. In the worst-case scenario, EVN forecasts a power shortage in the North of 420-1,770 MW (one third of the power shortage in Q2 2023). We also understand that the MOIT plans to mobilize significantly higher volume from coal-fired power plants (+25% YoY) while it expects lower mobilization from gas-fired power (-14% YoY) and hydropower (-1% YoY), and roughly flat volume from renewable power. 

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